For most people, moving in together with their love partner is like a dream come true. When you decide to move in together into a new house, it’s like achieving a huge milestone. You can now spend valuable time together eating, chatting, going out to parties and concerts, and cuddling up in bed. But believe it or not, moving in is not just about doing all the right things collectively under one roof. You have to pay attention to one crucial aspect of life – your finances.
Knowing who will pay for groceries, house maintenance bills, or the check for a dinner outing is good. But when it comes to merging both your funds, things become slightly different. There may be significant discords between both of your incomes, and negotiating each one’s contribution towards a happy couple life is a separate ballgame. And anything that has to do with relationship and money is full of pitfalls.
More often than not, money is the foremost reason why married couples go for a divorce. But financial challenges can create tension between unmarried, living-together couples too. Sometimes, the friction is even more in the latter. That’s because both of you may be different as chalk and cheese and have varied expectations from each other. The hardest part is both of you are not legally bound to meet each other’s expectations.
Don’t be intimidated by that because, just like everything else, both of you can work your way out. But before anything else, you should know the probable financial mistakes that most couples can make while moving in together. Here goes the list:
1. Not Having a Clear Conversation
The foundational stone of any relationship, including that between two unmarried people, is communication. Both of you may come from distinct backgrounds, culturally and financially, but there has to be a point of incidence to keep dissimilarities away and stay together peacefully. It’s true that it’s your quirks and differences that make the other one love you, but things tend to be more challenging to accept when it comes to money.
The mistake that most couples make while moving in together isn’t the same as bringing these differences to the surface. They may brush everything about their finances under the carpet out of the fear that the other person will judge them or, at worst, leave them.
You may be somebody who survives from paycheck to paycheck, while your partner may be somebody who keeps aside a significant sum as monthly savings. It’s not wrong to have such bones of contention, but the key to keeping the relationship going lies in acknowledging the dispute and working a way out.
Hence, communication between each partner in a live-in relationship is vital. If you are sharing your bedroom space with your partner, you should be able to trust them with your financial matters too. There’s nothing to be ashamed of when it comes to a poor credit score or personal debts. You should instead be utterly honest about your financial woes and speak to your partner without concealing any facts.
Transparent and honest communication keeps arguments over financial matters at bay. Both of you will know each other’s financial problems better and probably help each other out. You will know how both of you look at money in general and also learn the positive money-management traits that both of you may have. Try to focus on what’s common rather than what’s different. It will make it easier for both of you to attain your relationship goals.
2. Ignoring a Relationship Agreement
A relationship flows smoothly when both of you are on the same page. While that may seem like it is too good to be true, there are many ways by which you can create that ideal relationship. A relationship is like a partnership; both of you agree on said or unsaid terms and give each other the space and opportunities to be yourselves. Most relationships fail because couples don’t clarify their terms and look at the whole affair of moving in together very casually.
A big mistake that most couples make while moving in is not having a relationship agreement in place. Those who plan to marry formulate a prenuptial agreement. It lays down essential terms and conditions that each partner in the relationship must agree with and accept. Couples who don’t have intentions to marry but just to move in together also need a similar agreement. It’s called a nonup. This agreement lays down how both of your assets and liabilities will be managed in case the relationship ends.
If you don’t have such an arrangement in place, it’s recommended that you have one as soon as possible. Your agreement should go beyond who will pay bills for what and who will be handling household chores. It should clearly outline aspects like what happens to your home, pets, and bank accounts if you both want to end the relationship or one of you needs to move to a new city for work, falls sick, or, at worse, dies.
So make sure you answer all the “what if” questions related to money while moving in with your partner. Since you both are unmarried, you may not get any legal protection. So it would be smart to write down key issues pertaining to money. This will keep stress away when you start living together and ensure your relationship goes smoothly.
3. Not Having a Budgeting and Spending Formula
Just like any household, you will have many expenses on a day-to-day basis. You will have to pay bills for your utilities, food, insurance, and so many other things. That can be a tricky business for sure. All these expenses can be a major drain on your financial resources, often leaving you with no savings at the end of the month.
Most couples who move in together make the mistake of not budgeting their expenses. There have been many cases where one partner pays for all expenses, while the other contributes meagerly towards the bulk. That is acceptable if your income is low or you are between jobs. But if that continues for an extended time, then the relationship tends to get sour. After all, handling money is challenging, and seeing it go away at a snap of a finger is utterly frustrating, to say the least.
Besides budgeting, couples also make the mistake of not having a division formula for household expenses. Most of them decide to split all bills by half – something that makes the calculation easier. But that may not be possible if there’s a significant disparity between both of your incomes.
So when you are moving in, you should create a proper spending plan and decide the percentages of expenses each of you must bear. You will have to discuss ways to budget, save, and prioritize debt. It’s a good idea to unite everything because managing money becomes more relaxed then. Try to work as a team to overcome challenges and reach your long-term financial goals.
4. Not Having Individual Accounts
As mentioned in the point above, clubbing both of your finances makes it easier to manage your expenses and debts. But do you think that’s possible in all instances? The answer is no. Joining all financial accounts indeed eliminates time-consuming administrative tasks. But that also has its own set of disadvantages.
Some people in a live-in relationship tend to develop unhealthy codependency on their partner when it comes to money. For them, the financial knot becomes a comfort zone. They tend to have joint credit cards, mortgages, and bank accounts. They feel that, if they don’t pay for something, the other will. That leads to the development of some toxicity in the relationship, often causing it to fail after a while.
When such unhealthy dependencies arise, it’s natural for frequent fights to occur between the two of you. Sometimes, the arguments become so heated and intense that you will feel like breaking away from it. Imagine that nightmare coming true while all your finances are stuck with that of your partner’s. That won’t be a pleasant situation, right?
So don’t always depend on your partner for all your financial needs. The key to avoiding any money-related unpleasantness in your relationship is to separate your occasional splurges from your mutual expenses. It’s good to have a joint bank account and credit card for your household or common expenses. But meeting your individual spending whims from that account may not be acceptable to your partner. So make sure you set clear boundaries as to how much each of you can spend on your own.
5. Not Having Insurance
We live in an extremely volatile world. Nothing is guaranteed, and nothing is permanent. While you may think that everything is going perfect, life might throw a challenge that may throw your relationship upside down. Fret not because that’s the case with every relationship, whether one is married or unmarried.
When deciding to move in with your partner, you perhaps assume that you both would always lie on a bed of roses. You may completely disregard sudden changes and challenges, often plunging you into a stressful situation when they finally arise. You may think that you will have your job, and money will keep flowing in. But that’s not always the case.
Imagine a situation when you or your partner loses employment. That can happen due to many reasons. Then how do you pay your bills? How do you meet your savings goals? That’s undoubtedly going to be challenging. The key to overcoming such a challenge lies in getting an insurance coverage. There are many disability insurance or unemployment benefit schemes that come as a resort to your woes. For example, a disability insurance policy can compensate for a part of your income in case an accident or illness prevents you from working.
Always remember that emergencies come uninvited at the most unexpected times. You should prepare yourself to face them. Research different insurance policies that are available these days, and keep aside a part of your income to pay the premium. That’s surely going to help you in times of crisis. Know that insurance is not just for you. It’s also for your partner. You certainly don’t want your partner to bear the brunt when you are disabled or unemployed, right?
6. Not Having a Cohabitation Agreement
When you decide to move in with your partner, you may be either considering buying a property or leasing one together. The whole point of moving in together is enjoying your own space as a couple and not having family around at all times. That’s a great idea because that’s how both of you will get to know each other better.
But most couples tend to make a mistake of jumping to the conclusion that living together will be a smooth affair. The facades of your partner that weren’t evident when you both lived separately may surface within the closed doors of your bedroom. These sides may not always be pleasant for you to face. But when you move in together into the same house, it’s often too late to back out.
This is where you need to have a cohabitation agreement, just like a relationship agreement. Whenever you invest in or lease a property, your contract should have your name on it too. If only your partner’s name is listed, you leave yourself vulnerable to be thrown out of the house at a moment’s notice. That, of course, is common when the relationship goes downhill, and living together becomes close to impossible.
Draft a cohabitation agreement that clearly puts down all the living arrangements that you have agreed to. Putting it down in writing will help you defend yourself in case you both decide to break up. After all, you have put in your money in the house too!
7. Not Having Shared Financial Goals
Lastly, you should know that your relationship is a journey that’s taking you towards a goal. But sadly, most couples who are moving in together tend to forget this aspect of their bond. They ignore the fact that there must be synergy between them, the lack of which can lead to serious misunderstandings, especially when it comes to money-related matters.
Both of you may be in a committed relationship and love each other unconditionally. But that doesn’t mean both of you will have the same goals in life. So just like how you need to talk about your personal finances before moving in, you must also discuss your financial goals.
For instance, you may want to retire early and trot around the globe. But that may not be the case with your partner. They may want to get married, have kids, and work longer to give them a good life. Such differences between people in a relationship are common. But the key to keeping it going smoothly lies in having shared financial goals. Disputes should be reconciled before they turn into debilitating burdens.
For example, if you want to save $30,000 on down payment for a house over the next five years, then you will need to keep aside a sum of $6,000 every year. You may also choose to save $500 every month. Also, if you wish to retire in the next 30 years with a worth of $1 million, then you will have to invest about $800 per month.
Knowing what and why you are working and saving money will help keep yourself motivated to go in the right direction. You may have the tendency to spend your money impulsively. But when you have another life (your partner’s) associated with yours, you need to break old habits. If you need help with financial goal-setting as a couple, you shouldn’t hesitate to approach a professional financial advisor. They will help you strategize everything smartly and organize your finances in unison.
Having financial success as a couple boils down to being supremely focused on your long-term goals. You might have to make a number of sacrifices today, but remember that these will reap you handsome returns in the future. By following the tips above, you should be able to secure your relationship financially and lead a smoother and happier life with your partner.