It’s Pride season and the summer of love is in full swing. You’ve met that special guy or gal. There’s even the possibility of moving in together. That’s amazing and exciting! However, don’t be too quick about shacking up when starting a new relationship. It could do more damage than good if you don’t first clear up some financial ground rules.
Here are my top five questions every couple should ask each other before moving in together.
How much can we afford for housing?
Rent or mortgage payments will be your biggest expense. Figure out how much you can afford before looking for a place. Housing costs typically take up about 30 percent of your incomes. Add up your total monthly paychecks and divide by three. That’ll give you a target for how much to spend on housing.
What do we have for our new place?
Take an inventory of what each of you are bringing to the household. Don’t keep two of anything. Post extra items on Craigslist and use the money to buy things neither of you have but need. Be sure to speak up if something is important to you.
Definitely avoid buying a bunch of stuff you can’t afford. Live together without taking on credit card debt. Also write down who owns what.
What’s our spending plan?
Budgets are a horrendous creation and not effective for most people. I prefer a simple spending plan. Read details about it in a previous article called “A Simple & Easy Spending Plan”. In a nutshell, save at least 15 percent and keep food costs around 15 percent to 20 percent of your combined incomes.
Don’t make this a complex exercise. What I really want couples to do is talk about their income, retirement savings and debt payments like car and student loans.
Who’s paying the bills?
Decide how the two of you will do this. Have one person be in charge of paying all the bills and the other write a check for their amount. Or each person is responsible for paying different bills. You can even open a joint account with each of you contributing your portion of the household expenses. There is no “right way” other than whatever way works for your relationship. Definitely do not combine any other assets or debts at this stage of the relationship.
What happens if this doesn’t work out?
Don’t skip this one! If you break up, there will be lots of emotions going on. It’s not the best mental state to be figuring out who gets to stay and who gets the Ethan Allen sofa. Figure it out while things are good. Whatever you agree to, put it in writing so you don’t forget.
Talking about money isn’t easy. But if you can talk through these five questions, your relationship will be set up for success and continue to grow.
Steve Doster is a Certified Financial Planner™ professional providing commission-free financial advice for do-it-yourself investors. You can reach Steve at Doster Financial Planning by phone 619-688-1192 or email steve@dosterfinancialplanning.com. You can also follow Steve on Facebook, Linked In, Twitter, or his blog to get more personal finance advice and tips.
