Moving in together is an exciting new stage in any romantic relationship, filled with exploring furniture shops and browsing paint colours. Elephant’s breath. Who knew?
After the novelty wears off, cohabiting can come with challenges if you haven’t prepared yourself beforehand. Whether it is moving into one person’s house or getting a brand-new home to call your own, there’s plenty to discuss and decide.
Moving in together inevitably means mixing money. This could range from the basics, like rent, bills, toiletries and food shopping, to opening a joint bank account. For most Brits, talking about money is taboo and definitely not on the agenda for romance.
This could be the reason money is the top relationship strain for couples in the UK. Over a quarter of UK adults (26%) say money places a strain on their relationship. Relate also state it is the leading cause of divorce in the UK.
A candid talk about finances should be top of the agenda before moving in together. This can avoid conflict, brooding frustration and resentment further down the line.
Here are the top five financial questions to ask your partner before moving in together:
What is your financial situation?
Opening up about your personal financial situations is a great start. Be prepared to share information about one another’s income, debts, credit rating, savings, investments and retirement plans. Discuss your best and worst investment choices so far.
How do you manage your money?
Discuss spending habits, attitudes to money and how you both manage your money. This will help you to identify how financially compatible you are and avoid any surprises in the future.
You should ask each other questions like: How much disposable income do you have at the end of the month? How much do you spend on leisure, shoes, eating out or cars? How much do you put into savings and investments each month?
If you have widely different spending habits, then it may be better to keep your money separate. If your partner is an avid saver who is averse to debt and you are a big spender with a relaxed view on borrowing, sharing money could cause tension and arguments. But if you are financially compatible, sharing money in a joint account may be more convenient for you.
To be clear: financial compatibility doesn’t mean having identical finances to your partner. It is more to do with your attitudes towards money and your habits concerning money.
How should you divide up expenses after moving in together?
On paper, moving in with a partner can appear to be a financially savvy move for most couples, providing someone to share the expense of rent or mortgage and bills with. However, without discussing it in advance, it could end up being a drain on your finances, leaving you feeling resentful.
Making assumptions on who pays for what can be a recipe for disaster. So, agreeing how you will divide up the expenses in advance is essential.
Some couples choose to split everything down the middle: simple and easy.
However, if one of you earns significantly less than the other, this may not be fair. It could mean that one partner has to opt for a cheaper house or lower-cost lifestyle due to the other partner’s budget. Or, on the other hand, the wealthier partner could cover more of the costs of buying a house and providing the lifestyle they both want.
You should also discuss how individual expenses like debt, memberships and car leases will be paid. Will you help each other out with debt in order to avoid racking up interest? Or will you pay your individual expenses and debts separately?
If you decide to go further than splitting bills, you should list all your expenses and decide who will pay for what. This way, there can be no confusion or assumptions.
Will you have a joint financial plan when you move in together?
At this stage in the relationship, you are likely to be committed to a future together, so should you have a joint financial plan?
Sharing your future plans and ambitions is an exciting part of relationships. Building a financial plan to help achieve your goals will mean that your finances are geared towards them. A robust plan will eliminate any worries, like: Are we spending too much? Are we saving too little? Can we afford to do that? Doing this can help your finances run more harmoniously.
What happens if we break up?
There’s nothing less romantic than preparing for a potential break-up. However, preparation is very practical and can avoid a costly legal battle, as well as relieve additional stress at an emotional time.
The growth of the number of unmarried couples living together over the last decade has resulted in a rise in complex and costly legal disputes after break-ups. Despite widespread belief, the status of common-law spouse or partner does not exist in English law. Therefore, people living together don’t have the same legal protection as married couples or those in civil partnerships, regardless of how many years they have lived together or if they have children.
A cohabitation agreement sets out who owns what and to what degree. It documents how you will split your property, home contents, belongings, savings and other assets should your relationship break down. If you have children, it can cover how you will support them and what maintenance will be in place. It may also address how you would deal with bank accounts, debts, and joint purchases, such as a car.
Cohabitation agreements are legally binding and should be drawn up by a solicitor. This can cost around £2,000 – £3,000 (prices will vary). The fee should include an initial meeting, the drafting of the document, and making any amendments before reaching the final sign-off.
If you would like some advice on how to manage your joint finances or would like a financial plan, contact Capital today.