Moving in before marriage: What it means for your money
Around 80 per cent of Australian couples will live together before they get married. Back in our courting days the quaintly termed “living in sin” had a stigma about it. Not today, where it’s seen as the sensible thing to do. A sort of test drive strategy.
Yes it’s practical but it also comes with financial consequences.
As a general rule of thumb, if a couple live together for longer than 2 years then they have a claim over the assets of the relationship similar to as if they were married.
You are co-mingling your money which means you need to prepare for what happens if you don’t end up buying after you’ve tried.
Even if it doesn’t work out romantically, house sharing with someone else still involves working out the financial practicalities.
Protect the assets you bring with you. The key here is good record keeping. List all the assets you bring, get them valued at the time the relationship starts as a base level and clearly valuing any assets from inheritances and windfalls is important.
Add your name to the lease. In the unfortunate event that you break up with your partner and one of you has to move out, the person whose name is on the lease is in the best position to maintain possession of the space. If both names are on the lease, both people have a more equal opportunity to remain in the apartment and renew the lease.
Create a personal budget. Before you agree to rent a new apartment or pay a removalist, stop and create a budget for your new monthly bills that includes rent, utilities, and anything else that you may now be paying for as a couple. Don’t forget to include your moving expenses, security deposit, new furniture, etc. Make sure it stays within your budget and you can cope financially.
Purchase items individually. That way, in the unfortunate event of a breakup, the person who paid for the TV or bed is entitled to it, and the person who bought the sofa can take it or swap it with their partner for something else.
If you want to contribute equally, then build the shopping list, value them and then each pay for individual items up to the agreed amount.
Keep good financial records. Keep receipts, bank statements, credit card statements, or a journal of shared expenses and purchases to make it easier to divide things up later. If things go pear-shaped it’s good to have the right records to sort out any claims of one contributing more than the other.
Be very careful of joint debt. Whether it be credit cards or home loans, if they are jointly held then you are liable for your partner’s responsibilities as well as your own. If they skip out without paying, you could be liable for paying their debt commitments.
Make time for regular talks. The majority of money problems can be traced back to a lack of communication between partners about their finances. That’s why in a serious relationship it’s a good idea to regularly set aside time to talk about money together.
Even 15 minutes a month can make a world of difference. We don’t mean paying bills and checking credit card statements but actually talking about the big financial issues… goals and dreams for your money, setting a plan to realise those dreams and monitor how you’re tracking.
Work as a team. Couples who manage their money successfully know that you have to work as a team to avoid potential problems. A good option to help the camaraderie is to set savings goals that you both have to contribute towards, and build a budget together to ensure that you’re both spending consistently. We’ve said it before, and we’ll say it again, couples that save together stay together.
Don’t keep secrets. Our feeling is that if you’re together in love, you’re together in money, so we’ve always made a point of being open about finances in our relationship.
If you don’t trust your partner enough to be transparent, at some stage you have to question what you’re doing with them in the first place.
Let them know about hidden bank accounts or inheritances, and make sure to be candid about any debts lurking in your closet.
And don’t fall into the trap where one partner controls all the finances; make money matters a joint decision. If your partner uses the old “don’t you trust me” line, respond with “don’t you care for me because what will happen if you suddenly get hit by a bus.”
If they still want to control the finances by themselves… get rid of them.
Open a joint account. Joint accounts are a handy way of fairly dividing household bills and also a great way to reinforce trust in a relationship. If you do go down this path, it’s important to set some ground rules around what the joint account will be used for.
Our view is that just because you may earn more than your partner doesn’t give you the right to have a different spending pattern… it’s a partnership of equals both emotionally and financially.
Get smart about couples finance. Once you’ve got the basics right, there are plenty of more advanced ways you can take advantage of being in a healthy financial relationship.
For example, saving money by taking out insurance as a couple, looking into consolidating your reward and credit card benefits to get results more quickly, and salary sacrificing options if one partner isn’t working or earns significantly less.
Are you confused about money? Kochie’s Money Makeover will show you practical strategies to improve your finances. Find out more.
This post was first published on www.moneymakeover.com.au