CRUNCHEd: a blog about people and numbers

25 Essential Personal Finance Tips for Cohabitators

Motivated by changing social mores and economic concerns, more than eight million unmarried couples, both same-sex and opposite-sex, live together today, making this kind of arrangement more common in 2012 than it has been at any other point in American history. While books, magazines, and websites are often full of financial advice for those who are engaged or married, little exists to advise those who are living together before marriage or who don’t plan to marry. If you’re among the millions of couples cohabitating, you deserve some sound financial advice, too. Here are a few personal finance tips that will help you to better manage your own financial interests and to establish a sound financial future for you as a couple.

  1. Be open about your income and expenses.

    Money is one of the biggest things couples argue about, so if you want to avoid some big fights in the future, it’s better to be honest and open before you move in together and start sharing expenses. That includes communicating with your partner about what you make and spend each month. Once you’ve shared that information, the two of you can start working out a budget and will be better able to figure out how to divide up expenses and what you can afford as a couple and individually.

  2. Draft a cohabitation agreement.

    Many financial experts advise couples to draw up a cohabitation agreement before moving in together. These agreements lay out important details like who gets the apartment if you should break up and what financial obligations each person will have. It may not be fun to think about these things while you’re feeling good enough about your relationship to take it to the next level, but these kinds of agreements can save you big headaches, not to mention money, down the road.

  3. Don’t share a bank account.

    There’s one thing that nearly every financial advisor will tell you when you’re living with a significant other: don’t put your money in a shared account. At least not all of it, anyway. In some cases, it may be useful to have a shared account for household expenses, but in the interest of protecting yourself, always keep a separate account that holds the bulk of your income.

  4. Keep credit cards separate, too.

    Even if your significant other is frugal, it’s smart to keep credit cards separate for the time being. When you have shared costs, simply write each other a check or alternate who pays, rather than having a shared card in both of your names. Sometimes, even those who seem financially together can have very expensive guilty pleasures or bad habits, which could leave your credit score damaged for years if you share a card.

  5. Talk about your financial goals.

    Moving in together is a big step in a relationship, one that calls for more than just a discussion of who will be responsible for washing the dishes. It’s also a smart time to start talking about your financial goals for the future. Do you want to start saving for a house? A wedding? An amazing trip to Europe? Figure out what it is you want, and ensure both of you are working toward a common goal.

  6. Decide who will be responsible for what.

    In order to ensure that you both know what will be expected of you financially when you move in together, sit down and figure out each person’s sphere of responsibility. You may want to designate a person to pay the bills or assign certain costs to each of you. Different things will work best for each couple, and as long as things are fair, there’s no wrong way to do it.

  7. Split costs fairly.

    Many cohabitators choose to split costs right down the middle, but the 50/50 model sometimes doesn’t work if one person makes significantly more than the other, or in situations where one person is temporarily making less or nothing at all, whether because of a loss of a job, a baby, or going to school full time. In these cases, it can be smart to adjust responsibility according to income, meaning some couples will divide things up more along the lines of 60/40 or in some cases even 90/10.

  8. Determine your marriage plans.

    Is cohabitation a path to marriage for you or a means to an end in itself? If you plan to marry (or are legally allowed to, as some same-sex couples may not have the option), your financial plans may be a bit different than those who don’t intend to marry. You’ll not only need to budget for future wedding expenses, but can also plan to enjoy some future benefits that non-married couples do not.

  9. Document all of your major purchases.

    During your time living together, you may want to make some major purchases as a couple. In some ways, this can be smart, as your pooled incomes allow you to increase your purchasing power. Yet it can get complicated if things don’t work out between you. Anytime you make a purchase, keep a record of how much each of you contributed to buying it. That way, you’ll know how to divvy things up later, if things should go awry.

  10. Don’t contribute money to things your name isn’t on.

    If you and your significant other decide to buy something really big, like a car, make sure that both of your names are on the title if you’ll both be contributing financially. If you don’t, you could be paying toward something that you’ll have no claim to if you should break up, which could leave you thousands of dollars in the hole.

  11. Remember your own financial goals.

    When you’re caught up in the wonderful glow of couplehood and cohabitation, your personal financial goals can sometimes get sidelined. Make sure you’re not letting your own financial ambitions (like, say, paying off your loans or saving up for something big) get lost in all the financial obligations of living together.

  12. Talk about money on a regular basis.

    Talking about money is rarely ever a fun discussion, but it should be one that you and your significant other have on a regular basis. Every few months, sit down and reassess your situation. You may have new bills, responsibilities, or even income that changes your goals, your budget, and how you want to divide up your bills.

  13. Know your legal rights as a cohabiting couple.

    Do you know what legal rights you enjoy as a cohabiting couple? Probably not, at least not entirely. There aren’t usually many legal protections, but there are some. Do a little research on the laws in your state to find out what protections, rights, and assurances you can rely on after you move in together, especially if you don’t plan to marry.

  14. Be careful about becoming financially dependent on your partner.

    While you might want your relationship to last for the rest of your lives, there’s always a chance that it won’t. Knowing that, be very careful not to become too financially dependent on your partner, as it can leave you in serious trouble if you should break up and with few legal options to get support or help. On the flip side, if you are the one doing the supporting, make sure you’re really OK with providing that much financial assistance to your partner. If you’re not, bitterness and resentment could arise and eat away at your relationship.

  15. Learn about your options for buying a home.

    Things can change quite a bit if you and your partner decide to go from renting to buying. There are some tricky legal issues with regard to ownership for those who aren’t married but want to buy a home together. These things can work out well for some, but may prove troubling to others, so make sure you know all of your options before taking the plunge to ensure both you and your partner will be financially protected.

  16. Know your credit scores.

    Knowing your credit score is kind of a big deal, especially if you want to get a nice place, open a credit card, or even buy a home. What’s more, when you partner up with someone, suddenly your score isn’t the only one that matters. Before taking the leap to cohabitation, do a check on both your credit reports and, if possible, find out your credit scores. If either of you have a low score, you can work together to help raise it so you can both benefit from better credit in the future.

  17. Be willing to adapt as things change.

    If there’s one sure thing about life, it’s that it changes. In financial terms, that can mean that you could be dealing with some different issues six months from now than you are right now, which could invalidate or sideline many of the plans you’re currently making. Don’t get frustrated; instead, be willing to adapt and figure out new ways to work with your partner to pay the bills and meet your financial goals as a couple and individually.

  18. Figure out insurance.

    There are a number of financial considerations with respect to insurance that need to be addressed if you’re going to be living together for the long haul. For instance, you could both save money by combining your auto insurance policies. Or if one of you has insurance and the other doesn’t, you may be able to extend benefits to your partner, too, though there are some serious tax issues to consider.

  19. Know your partner’s financial pitfalls.

    Living together means signing on to share much more than space. You’re also sharing financial obligations. If your significant other has serious credit card debt, gambling problems, or other financial issues, these can become major stumbling blocks in everything from finding an apartment to building a stable financial future together. While you may be able to cope with some kinds of financial pitfalls, make sure you know what you’re getting into first.

  20. Know the emotional impact of financial decisions.

    Money is hard to talk about for many people, not only because it’s stressful, but because there are so many emotions attached to it. Financial decisions are often made not by logic, but by emotion. Whether this is smart or not is up for debate, but the impact is true regardless, so before you announce any financial plans to your partner, consider the emotional impact. It’s not all about you, especially when you’re sharing space and a potential future with someone.

  21. Review all joint bills.

    Every month, you and your partner should sit down and look over all your bills. Why? To make sure that you aren’t the victims of unjust charges or mistakes, and to make sure one person isn’t adding charges another didn’t approve. It happens more than you think, and unless you double-check, you could be paying for things you didn’t use or want in the first place.

  22. Avoid helping a cash-strapped partner live outside their means.

    What happens when your partner can’t afford some object of desire, but you can? Ideally, nothing (unless it’s an essential … or a birthday’s coming up). You aren’t doing yourself or your romantic roomie any favors by lending money to finance something that he or she can’t afford. Both of you should live within your means, not outside them.

  23. Don’t wait for problems to arise to deal with money issues.

    It’s incredibly tempting to avoid talking about finances until you absolutely have to, but that may not be the way to go if you’re looking to live in harmony. If you sense there are issues that could pose a problem later on, sit down and talk about them before they’ve done any damage, not after.

  24. Designate a bill payer.

    It can often be much easier to make sure that all the bills are paid each month and that finances are shared equally if you designate one person to do the dirty work. He or she can write the checks or set up automatic billing for all of your monthly expenses. Then, all the other person needs to do is write a check for whatever portion he or she owes (if any).

  25. Don’t try to manage your partner’s money.

    While you may cringe at your partner’s spendthrift ways, you might create more problems than you solve if you try to control his or her spending, especially if that discretionary income is sitting in his or her own account. So long as your partner is able to pay the bills and isn’t destroying his or her credit score, stick to managing your own money and common expenses.

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