Personal Finance

Moving in together? Take these six steps first 

Key Points
  • Millennials head almost half the households in the country made up of unmarried partners.
  • Before you decide to live together, pin down some of the financial questions and challenges.
  • Splitting everything 50/50 doesn’t work for everyone, and the conversation about finances should recur so everyone stays informed,  says a millennial finance expert. 
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More millennials are living with a significant other than any other generation, according to Pew Research.

But after the first flush of excitement, there's a ton of details to work out.

Like finances.

Nothing wrecks cohabiting bliss like fighting over money.

Living together and figuring how to make it work financially is a growing issue, says millennial advisor Jordan Sowhangar, a certified financial planner at Univest Investments.

"Have everything in writing, and set expectations about debt and income beforehand," Sowhangar said.

Living together solely to split expenses is unlikely to work for more than a year. Then it stops working and resentment sets in.

Luckily there are simple steps you can take to head off problems before they spring up.

Talk it out

It may sound like a no-brainer but your first step is to have open, honest communication about finances. "Talk about your money type," Sowhangar said. "Find some online quizzes to see what your spending habits are like."

Income, your outlook on debt and how you'll manage these issues together are important topics. "Understand how you'll need to compromise," Sowhangar said.

Some of these issues may be uncomfortable. People have outstanding student loans or credit card debt. Keep it positive by talking about your long-term goals and the things you're looking forward to.

Focus on the things you'd like to be able to do in five to 10 years, and don't forget about your strengths. "Talk about the fact that you have $30,000 saved," Sowhangar said. "Perhaps you got a promotion. Mention how your discretionary spending could change."

Be ready to compromise

Don't go in thinking, "This is how I spend money, and these are my debt obligations, and they're going to have to agree with that."

Sowhangar recommends taking a look at yourself and seeing there are some things you might have to change. When two people come together, they'll likely have different outlooks on spending, in their values, in general,

Here's when couples should start having tough conversations about money

That's where the compromise comes in.

"Say someone is used to spending $200 a month on eating out," Sowhangar said. "The other person loves cooking, going to farmers' markets and wants to eat in every night."

Or one person loves shopping, while the other is frugal. "When it comes to the household spending limit, someone is going to have to rein in," Sowhangar said.

Keep talking

Regularly schedule time for what Sowhangar calls the household State of the Union.

"This isn't a one-time conversation before you move in," she said. "Talk about it weekly, monthly or quarterly. The goal is to lay everything out on the table so there are no surprises."

Especially unpleasant ones.

Sowhangar recommends this for couples of all ages since a lot can happen in three months.

She frequently sees that one member of a couple knows everything while the other knows nothing. "Frequent talks put everyone on the same page," Sowhangar said.

Sharing how-tos

The biggest part of the conversation will be how you decide to share expenses.

Many people think it always has to be 50/50, but that may not be fair for both parties. "If one person earns $70,000 and the other earns $30,000 some expenses are going to feel much harder each month for the lower earner," Sowhangar said.

In that case, they can use a percentage of income – say, 15 percent each toward housing and basic expenses.

Sowhangar says this is generally acceptable, but if someone feels that paying more each month is unreasonable, the person who earns less might contribute in non-monetary ways, perhaps taking on more shopping and cooking.

Keep some money separate

No one goes into a relationship thinking their partner is going to clean them out. But just to be on the safe side, don't share all your assets.

People think a joint account is a good way to track and pay expenses. Hammer out in advance what you'll both contribute and how the money will be used, says Sowhangar.

And definitely don't rush to get a joint credit card. "Because each party has equal rights to the credit card and to the bank account, either one can be maxed out or cleaned out," she said.

One person could be more likely to bounce checks or run up a credit card bill – these can ding your personal credit, even though you're not the one with the issue.

Sowhangar suggests using a joint account only for items such as grocery and rent.

Have a will

It doesn't need to be extensive, but if you are moving in with someone, it's a good idea to have a basic will that details who gets what.

The will eliminates any conflict that could arise between your significant other and a family member.

Either might feel entitled to a particular item, and the will is your best recourse. "It doesn't have to be that detailed – just a list of basic assets and where they go," said Sowhangar.

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