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Amid the excitement of planning to move in with your partner, discussing finances may not be at the top of your mind. But it pays to be candid about money from the jump. And for LGBTQ couples, who face higher rates of financial insecurity overall, establishing solid financial footing as a couple can be key for contending with economic challenges and feeling stable as you take this next step.
Block off a couple hours and find a quiet spot where you can talk comfortably and openly. Then work your way down this list of six financial topics to discuss before you move in with your partner.
1. What's Our Budget?
Create a budget as a couple to get on the same page about covering living expenses and hitting your savings targets each month. Even if you plan to keep your finances mostly separate (more on that below), you'll need a mutually agreeable plan for shared expenses like rent and groceries.
Start by going over your combined income, expenses, debts, savings and investments. Next, work to come up with realistic spending and savings targets that both of you can stick with. One budgeting plan to consider is the 50/30/20 plan, which allocates 50% of your budget to necessities, 30% to discretionary purchases and 20% to savings and debt payments.
2. Should We Rent or Buy?
Before you move in together, discuss whether it makes sense for you to rent or buy a home. Getting a mortgage together is a much larger commitment than signing on a lease together, so consider the length of your relationship and your degree of mutual confidence in its longevity when weighing whether to rent or buy.
If you and your partner are engaged, married or planning for a baby, it may be a good time to plant roots. Even if you're not planning to marry, buying a home with your partner can be a great way to start building equity and financial security.
On the other hand, if you don't feel confident dropping anchor in one place for at least a few years, it may be best to rent. That will give you more time to save for a down payment and possibly sidestep volatile market conditions. You also won't have to worry about footing the bill for expensive home repairs.
3. How Will We Split Expenses?
Make a plan for how much you'll each contribute toward your rent or mortgage payment, utilities, groceries, home expenses and discretionary purchases.
Some couples split everything 50/50. Another option is to divide your expenses based on income. This often makes sense if one partner makes significantly more, especially if splitting everything down the middle would place an outsize burden on one person and leave them with less to save, or put them at risk of going into debt.
For example, consider a couple where one partner makes $60,000 and the other makes $30,000. If rent is $1,600 a month, splitting rent 50/50 would mean paying $800 each. That amount is an affordably low 16% of the higher earner's income. But $800 is 32% of the lower earner's income, which is a high percentage of income to spend on housing.
To set both partners up for success, they could add up their income and determine what percentage each of them makes:
Combined income: $60,000 + $30,000 = $90,000
Doing the math shows $60,000 is about 67% of $90,000, while $30,000 is about 33% of $90,000. Therefore, the higher earner could pay 67% of the expenses while the other pays 33%. Using the rent example above, in this case one partner would pay $1,072, and the other $528.
4. Will We Merge Our Money?
Some couples choose to combine finances when they commit; others prefer to keep things separate. It comes down to where you're at in your relationship and what your individual preferences and comfort level are.
Those in long-term commitments may enjoy the transparency of joint bank accounts, and pooling your money together can make budgeting and reaching goals easier. Some prefer to keep at least some of their income and savings in their name alone.
If you're still early in your relationship, it's probably best to maintain some financial autonomy by keeping your own bank accounts, as well as to avoid cosigning on credit or loans (which you aren't off the hook for if you split up). To simplify paying for shared expenses, you could set up a separate joint bank account and each transfer a set amount of cash in.
5. What Does Your Credit Look Like?
Fill each other in on your current credit scores and debts. It may be an awkward topic to broach, but being open makes it easier to work as a team.
If you're considering buying a house together, know that lenders look at both of your scores to evaluate your mortgage application. If one or both of you have a high debt-to-income ratio, this could impact your ability to buy a home too.
But even if buying a home isn't in your immediate plans, you can still support each other in building credit while tackling debt. For example, if one of you has a large credit card balance, you could team up on a no-spend challenge or cut back on dining out to pay down the balance faster.
6. What Are Our Money Goals?
After you've covered the ins and outs of how you'll split up expenses and budget, look to the future and brainstorm financial goals you can strive for as a couple. Here are some ideas:
- Bolster your emergency fund until you have enough to cover three to six months' worth of expenses.
- Set up automatic transfers into a tax-advantaged retirement account such as an IRA.
- Set a goal number for a down payment on a house and then set aside money toward your goal each month.
- Pay off debt using the snowball or avalanche method.
- Create a sinking fund for a large goal such as a wedding, a vacation or new furniture.
Team Up for Better Finances
Moving in together is a big step, and it presents a big opportunity for teaming up to build more financial stability and nail your money goals. Open, honest communication is key. In addition to deciding who will pay for what, come up with financial goals that represent the future you want to build together.
Aim to support each other in balancing spending with saving, as well as in paying down debt and building credit. Each of you can sign up for free credit monitoring through Experian for an overview of your credit score and alerts on changes to your report, plus personalized advice on actions that could raise your score.