Have you talked about financial responsibility with your partner? There are many stages to a relationship, but one of the most complicated comes when you make the decision to move in together. It’s mostly a happy time of merging two unique styles and personalities into one home. However, there is one major talk to have before you take the plunge: finances.
Here are a few tips to help you navigate co-mingling financial responsibility with your partner.
An Even Split of Financial Responsibilities May Not Be Fair
There are two things to consider when talking about paying bills: bill fluctuations and your individual salaries. It’s time to be frank and honest.
Rent, utilities, and groceries pile up quickly. It’s all well and good to say that one person will always pay the electric bill, while the other will pay the grocery bills, but is that really a fair way to split financial responsibilities? Depending on where you live, electric bills fluctuate with the season. Personally, my bill can range anywhere from $60 to $250, thanks to the long winter snowy season.
Unless you both make the same amount, you won’t contribute evenly to rent. This is actually advice I received from a financial advisor. If you make $50,000 a year while your partner only makes $25,000, is it fair for them to pay the same amount in rent?
Sort out rent by percentage. Using the above figures, the person with the $50,000 income will be paying 75 percent of the rent.
Danger Zone: The Joint Account
You wouldn’t move in with someone you didn’t trust, so a joint checking account might seem like the most natural thing in the world. However, mingling your finances also puts your credit history at risk.
Did you know that a checking account can be force-closed by a bank? This happens when your account is overdrawn for an extended period of time. If this happens, you’ll be reported to a company called ChexSystems, a consumer-reporting agency, and you will be unable to open a checking account for five years. Plus, if your partner has been overdrawing the checking account, you’ll be equally responsible for the fines.
I stand by this advice for married couples just as much as roommates: Good people can also be financially irresponsible people. If you want to open a joint bank account, only transfer enough to pay bills. Financial responsibility can also mean keeping your personal finances separated.
The Roommate Agreement for Financial Responsibilities
If you’ve seen “The Big Bang Theory,” you’ll know Sheldon Cooper is a bit nutty, and his roommate agreement is extreme. He’s still on the right track as far as sharing financial responsibility goes, though. By renting or buying a home with your partner, you’re both financially at risk.
Even without the financial risk, what about your stuff? Who bought the flat-screen TV? What about the new pillow-top queen mattress?
Seriously consider outlining who will take responsibility for different costs, and keep detailed records of major purchases just in case you should separate. You can download a cohabitation agreement template from a variety of sources – just Google it!
Aruba Can Wait for Financial Responsibility: Planning Vacations and Large Purchases
I’ve been at both ends of this situation, the one making the big bucks and the one flat broke. Just because you’re ready for a destination vacation doesn’t mean your partner can afford one.
Outline major purchases well in advance so that you can set reasonable goals together. There’s nothing like assuming you’re all set to head to the Caribbean, only to learn you’ll be going alone. Or, even worse, that you’ll be paying your vacation off for the next year at a variable 15 percent interest rate.
Consider setting up a joint budget – try using Google spreadsheets for easy sharing – so that you can each stay on track with your spending goals. Or depending on where you live, a staycation might be just as tempting of an option for you both – all in the name of helping the environment and more importantly, your wallet.
Just a note: Financial responsibility isn’t about passing all your cash over to your partner. Even if you live happily ever after, what happens when you’re 80, your spouse passes away and you have no idea how to manage your finances? It’s happier to dream of Cancun, I know. It’s rough being responsible sometimes.
Keep an Open Financial Relationship
Just because you’ve had this talk once, prior to moving in, doesn’t mean you don’t ever have to revisit it. Tax season is a great annual reminder to talk about your finances, and it’s also just after the time that most of us have our annual review, so our budgets may have a little more wiggle room.
Now that you’re armed to the teeth with financial knowledge, go set up a date with your partner to discuss how you’ll have fun as financially responsible adults together. Make a date night out of it with pizza and reward yourself with a glass of wine when it’s over.
Want more tips on how to have financial conversations with your partner, spouse, fiance, or roommate? In her recent book, Erin Lowry shares financial responsibility tips and scripts to have better money convos with your significant others. Get your copy of Broke Millennial Talks Money in paperback or Audible.