Living with a romantic partner is a big step emotionally, legally, and financially. No matter if you just moved in together, got engaged, or married, money is a leading cause of disagreement for couples.
In this post, I’ll help you set important expectations and avoid common financial mistakes that could trip up your relationship. Use these four tips to figure out important questions, such as how to split bills, whether you should you combine finances, and if you need a relationship agreement.
4 Financial Mistakes Couples Make When Moving In Together
- Not having a relationship agreement.
- Not creating a spending plan.
- Not communicating about finances on a regular basis.
- Not setting financial goals together.
Communication is the cornerstone of a successful relationship. But when it comes to money, many couples don’t talk about it until after they’re in financial trouble or have serious gripes.
Here are the details about four major financial mistakes that couples should avoid.
1. Not Having a Relationship Agreement.
While it may not seem very romantic, having a formal relationship or cohabitation agreement can be the best way to make sure you and your partner are on the same page.
If you don’t take the time to discuss the day-to-day issues of living together, it’s a missed opportunity to make sure moving in together is a good idea in the first place and to set up your relationship for success.
Couples who plan to marry can create a prenuptial agreement, or prenup for short. Many couples who don’t plan to get married opt for a nonup. It’s a similar document that explains how your assets and debts will be handled if your union ends.
But prenups and nonups can include a variety of issues like who will pay what bills and be responsible for certain household chores. They should also outline what will happen to your home, leases, pets, and financial accounts if you break up, or if one of you needs to relocate for work, or gets sick or dies.
Having clarity on these “what if” questions and potential future financial and legal issues is especially important when you’re not married and you buy a home together or plan to have kids together. Unmarried couples don’t get as many legal protections as married couples. So, it’s even more important to have key issues in writing, including a simple will and estate plan, when you don’t plan to tie the knot.
If you don’t take the time to discuss the day-to-day issues of living together, it’s a missed opportunity to make sure moving in together is a good idea in the first place and to set up your relationship for success. And if you do end up parting ways, having an upfront agreement allows you to break up in a thoughtful and caring way.
Having formal agreements may seem like a lot of work right now, but they can avoid a lot of stress in the future. You can create a relationship agreement from scratch or use a template at a DIY legal site like LegalZoom or Rocket Lawyer.
Also see: 6 Tips to Manage Money as a New Couple
2. Not Creating a Spending Plan.
How you’re going to share expenses, such as housing, utilities, insurance, and food, can be tricky. It might seem like splitting all costs down the middle is the best option. But dividing what you pay by percentages may be fairer if one person earns significantly less than the other.
Couples also need to consider if they should merge their personal finances by creating joint accounts, such as checking, savings, and credit cards. Mingling money is a big step because it has far-reaching legal consequences and affects both of your credit scores.