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Smart Money Moves Before You Move In Together

Budgeting, Money Saving Tips, Personal Finance
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Moving season is kicking into high gear as U-Haul vans and freight trucks rumble through neighborhoods across the country. If the time is right, the surrounding commotion could have you thinking about moving in with your significant other. The benefits are hard to ignore, as you’ll be able to split the rent and won’t have to trek from one person’s place to the other anymore.

But before you decide to join the ranks of unmarried couples living under the same roof  in the U.S. — and there were some 7 million such households as of 2013 — there are several money-related issues you’ll want to address.

“Deciding whether to take the next step in your relationship by moving in together forces you to consider many factors, not the least of which is financial,” says Carrie Houchins-Witt, a financial advisor in Coralville, Iowa.

Set a budget

As you and your partner start thinking about taking this step, try to come up with a shared budget to get a rough estimate of your monthly expenses. This can help you gauge one another’s financial priorities.

“This exercise will likely bring to the surface a number of issues, such as each person’s income and debt, each person’s ability to afford a certain lifestyle, preferences for certain products and services, and financial values and attitudes about money,” Houchins-Witt says.

Though these talks can be uncomfortable at times, they can help you get on the same page financially. And ignoring the need for such talks isn’t a good move — couples who fought about money once a week were 30% more likely to break up than those who engaged in such disputes only a few times a month, according to a 2009 study.

Eleanor Trenary, a 24-year-old manager and volunteer coordinator at a thrift shop in Golden Valley, Minnesota, says these kinds of discussions have helped her and her boyfriend get a better idea of the kind of apartment they’ll be able to land. The couple plans to move in together this August.

“We’ve talked a lot about our ideal budget, like how much we’d want to spend on rent and other expenses just to get a sense of whether we’re in the same range or not,” Trenary says.

Divide utilities

As your budget takes shape, start thinking about how you’ll divide your monthly bills.

For Graham Sutherland and Laura Moulton, who are both in their mid-20s and live in Minneapolis, that means splitting rent down the middle. The couple, who moved in together shortly after graduating from college two years ago, arranged it so that Sutherland would pay the Internet bills while Moulton took care of the heat and electricity tab. Because the latter tends to fluctuate throughout the year, they came up with a system to keep expenses even.

“If the Internet was a little more than heat and electricity, she would write me a check at the end of the month for the difference,” says Sutherland, who works for a college access nonprofit headquartered in the Twin Cities.

“It’s also important to make sure that there aren’t hidden costs going to one person,” he says, admitting that his girlfriend initially bought the majority of household items, like cleaning supplies, because she’d realize that they needed replenishing before he did.

And if one person earns a significantly higher income than the other, it’s worth discussing whether he or she should contribute more to shared expenses, says Andy Tilp, a financial advisor in Sherwood, Oregon. Revisit this plan regularly as expenses and incomes can change over time.

Joint checking accounts

To make things even easier on yourself, consider pooling at least a portion of your incomes in a joint checking account.

“We’ve been talking about having a shared bank account in which we’d just put a certain amount of money every month,” Trenary says. “We’d each get a debit card and use that for shared costs, like utilities and groceries. That way, it can just be communal money and we won’t have to worry about who owes who.”

The bottom line

Before you and your partner sign a lease, best to have a frank talk about your finances. That means being candid about your income and debt, including unpaid credit card balances and student loans. Although initiating this type of conversation may not be easy, it’s the all-important first step in what could be an exciting new chapter in your relationship.

Tony Armstrong is a staff writer at NerdWallet, a personal finance website. Email: tony@nerdwallet.com. Twitter: @tonystrongarm.


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