Cohabitating Before the Ring: Covering Your Financial Bases

April 8, 2015

It used to be dubbed “living in sin,” but regardless of the previously negative connotation, cohabitation rates have gone up a whopping 900% in the last 50 years. Studies show that two-thirds of newly married couples lived together an average of 31 months before marriage.

Perhaps even more interesting is the trend towards buying a home together before committing to the walk down the aisle. A 2013 survey by Coldwell Banker found that 24% of married couples between the ages of 18 and 34 purchased a home together before marriage.

But regardless of whether it’s renting or buying, couples who decide to cohabitate find themselves dealing with a unique set of financial questions – or challenges, depending on the situation.

Two Incomes, Equal Partnership – Now Who Pays What?

As someone who works full time and was previously used to paying all of my bills on my own, I wasn’t looking for someone to take that over when I moved in with my boyfriend. In fact, our taking that step had nothing to do with financial need. Yes, it lightened the load, but neither one of us was struggling under the load to begin with.

Our relationship began with him picking up the tab on most of our dates (something he adamantly insisted on), but at the time we moved in together, I felt it was only fair to both be putting in equal – or near equal – amounts. In both of our minds we needed to both have something invested in the relationship.

The struggle for us wasn’t in getting on the same page, it was about finding a viable solution that took into consideration more than just the financial bottom line.

Here are a few things I’ve learned along the way.

Don’t Avoid the Awkward Conversations

If money isn’t something you feel comfortable talking about, get ready to feel uncomfortable. These conversations don’t get easier when you live together, they just get bigger and hairier the longer you try to keep them at bay.

What exactly is your financial situation? What is your partner’s situation? Do you carry debt? Are you on top of your finances or are you fly-by-the-seat-of-your-pants kind of person ?

You may be keeping your finances separate, but living together ensures that your financial decisions will undoubtedly affect your partner either now or at some point in the future.

If you need help getting started on this conversation, read this: The First Money Talk with Your Partner

Being Together While Staying Separate

Part of the strange tug of war in a cohabitating relationship is finding the balance between keeping your financial autonomy enough to ensure you are protected while still merging your lives enough so it actually feels like a partnership.

I did a little too much merging when I agreed to co-sign on a credit card with an ex-boyfriend. My credit is still a bit dented from that financial mistake.

When it comes to merging accounts or making big purchases like a house, there isn’t a one-size-fits-all solution. Your partner might make 90% of the income and wants to fit the bill accordingly, or you might make more, and you’d feel more comfortable with a 50/50 arrangement.

It’s really just about selecting a breakdown that works for your situation, and one that both parties feel completely at ease with. With that in mind, one of the best ways to feel at ease is to know your rights if the relationship were to go awry. If, for example, you share a car (payments and all), but there is only one name on the title, you run the risk of losing all rights to that car if the relationship ends.

Also, be aware that two names on a bank account mean both parties are entitled to the funds – even if your ex spends that money like it’s going out of style.

You likely don’t want to think about things going downhill, but having an exit plan in place will help soften the blow substantially if a break up were to occur.

If you need ideas on how to merge finances in a way that works for you, read this: How to Combine Finances with Your Partner

Talk Goals Even If You’re Saving Solo

I’m convinced you can tell a lot about a person by talking to them about their financial goals. (And if they don’t have any, that can be telling too.)

Why? Ask someone their money goals or what they are saving for and their answer will give you a picture of what is important, or means something to them. Sharing financial goals in a relationship can help you better understand the path your partner is on and how you can reach milestones together – even if your money is being funneled into separate accounts.

Goals are really just another part of a person’s financial picture that should be taken into account when deciding a household budget or spending plan. And it’s what helped me confirm that the partner I chose is on the same path as I am, and if marriage is in the cards, I won’t be dealing with someone who has a completely different financial outlook than I do.

If you need help setting or perfecting your 2015 money goals, read this: How to Set (and Conquer) Your 2015 Money Goals

If you want to sit down and set some goals with your partner, read this: Setting Goals with Your Partner