All You Need Is Love (Not) - Financial Implications of Moving in Together
Moving in with your partner is a HUGE step and contrary to the classic song, “All you need is love”… you need to be able to get along, work as a team, be willing to compromise, etc. You usually don’t find out how well you and your partner do with these things until you’re faced with the mundane, everyday life that is “living together”. Sharing chores, deciding who cooks and does the laundry, who takes out the garbage, and ultimately sharing your finances. Whether you're new to a relationship or have been together for years, the time will come when you'll need to figure out how to manage your finances together.
Money is a big issue that can cause problems in any relationship. Studies have shown that it is also one of the leading causes of divorce. That is why having the conversation is essential for any long-term relationship. Yes, talking about money can be uncomfortable, mainly because finances bring up many negative emotions for people as it can be a major source of stress and worry but the truth is you're never going to do any better if you aren't aware of your financial situation.
Do you split everything evenly? What if one person earns way more than the other? These seem like big questions that can sometimes be difficult to answer, so let’s walk through the steps of figuring out how to make it work.
Communicate, communicate, communicate!!!!
It’s important to have an open and honest discussion not only about how you plan to split your finances but also about your financial future goals as well. Do you have an emergency fund? Are you saving towards a big purchase? Are you investing for retirement? Do you have joint goals that you want to save towards together? This will help form a good base so you are both aware of the financial stages each person is in. Now, don’t get me wrong, you don’t have to have it all figured out and if you don’t, communicate that as well. This is also a fluid conversation that you will continuously need to have with each other as you go through different life stages together and your financial situations evolve.
Now let’s budget
Congratulations for getting through the conversation, now let’s put some plans into place. Now that you understand each other and know how you both approach money, you can start drawing up a budget by:
- Deciding what the household needs are: these are the obligations that need to be met (rent/utilities) before splurging on any extra items or luxuries. It’s important to know what each person is going to contribute towards each month to avoid disagreements.
- Creating short term and long term goals: you can discuss some financial goals that you both want to contribute towards each month. It is way easier having a goal in mind to avoid overspending.
- Address individual needs and wants: This one can get a bit tricky and is really a matter of personal preference because you won’t always agree on what your partner splurges on. To avoid this being an issue you can both have your own spending allowances to avoid being accountable to the other person.
Let’s go halves
There are a few different ways to split expenses, but the most important thing is to be fair and honest with each other about what you're spending. You can either split all expenses evenly, this can be done by percentage to ensure each person pays an equal share of the bills based on their income or you can decide who will pay for what based on your individual incomes. You can do this by making a list of all your shared expenses: rent, utilities, insurance. Then talk about salary. If you make R70 000 and your partner makes R30 000 then you can pay 70 percent of the total combined expenses and your partner settles the remaining 30 percent.
You don't need to get too hung up on who pays for what, you should always try to keep in mind that you are spending money together, so it's okay if you end up paying for something that you didn't necessarily intend to pay for. Just make sure that you communicate about these issues before they become a problem. So, whatever method you choose, make sure that you talk about it openly to avoid any arguments or resentment down the road.
Like I mentioned before, things do change and sometimes life gets in the way and there might be some unexpected expenses that you have not budgeted or even discussed that might come up. To avoid these creating any tension, you guys can simply create an Emergency fund that you can both contribute towards and put aside funds solely for emergencies. You can do this by simply signing up on the Franc app and setting up a savings goal (in one of your names) for you and your partner to contribute towards using that accounts payment reference. It’s waaay better to earn interest on an emergency fund than to pay interest on a loan.
Through different phases of your relationship, whether it’s buying a house, getting married or having kids, money is always going to be a very important factor so it’s important to have those sometimes awkward and uncomfortable conversations so that you and your partner are on the same page.