We get it that the decision to move in together can be very exciting. It’s a big step and you should be very happy about it. However, it’s important to put the excitement and happiness aside long enough to discuss finances before taking the big step. Asking financial questions at this stage is certainly not romantic and can be very uncomfortable. An article in MarketWatch.com revealed the results of a study done by Fidelity Investments. Apparently, a lot of couples do not discuss money issues with each other.
If you want the relationship to endure – and without a lot of stress – it’s important to have a mature conversation about how you will handle money-related issues. So what questions must you ask regardless of how awkward it might feel? Here are seven of them.
Do you have an emergency fund?
Both of you really need to have money set aside to handle those unexpected incidents of life. This could be an automobile accident, the need to buy an airline ticket at the last minute because of a family emergency or maybe some kind of medical emergency. Whatever the case, it’s important that the two of you discuss whether you have money set aside to cover these kinds of emergencies. You also need to talk about whether you’re going to merge your emergency funds or keep them separate.
What’s your debt situation?
This might be the most uncomfortable question of all. But it’s one you need to ask. It’s important to know your prospective partner’s financial history. Does he or she have student loans or credit card debts? Is it good debt such as college loans or bad debt like a credit card or gambling debts? Is there a plan for repaying the debt within a reasonable amount of time? Is she or he gaining ground on the debt or slipping behind? As difficult as it might be, you and your partner need to discuss debt and without getting defensive. If you can keep communication honest and open the two of you should be able to tackle debt together in a mature way.
How do we split utilities and rent?
If you’re going to be sharing a house or apartment with someone a big priority is to determine how you’re going to split the rent and utilities. It doesn’t matter whether you’re combining finances or keeping them separate you still need to have some kind of a plan. You should also talk about how each of you will contribute to the household budget that includes groceries and other joint living expenses. You may actually decide to not split things 50/50 because one of you earns a lot more than the other. But the important thing is to determine how you’re going to manage these expenses.
What’s your income?
It’s funny but many people have an easier time talking about sex than their incomes. For some reason, it’s kind of a taboo. But it’s critical that each of you knows what to expect from the other in terms of financial contributions. If one or both of you is uncomfortable in giving an exact number you can be honest by saying something like, “I earn about X dollars,” or “I should be able to contribute around X dollars to our living expenses each month.” If you’re a bigger earner than your partner you might agree to take a larger share of the bills – so long as you’re comfortable with this. It’s also important to make sure that one of you isn’t slacking off so that the other ends up feeling financially stressed out.
Are you a saver or a spender?
The majority of people fall in some grey area between being a total saver or total spender. However, you need to have some kind of an idea as to whether your partner likes to save, save or spend, spend. If you were to find that the two of you are on opposite ends of this spectrum it doesn’t mean you’ll be totally incompatible. It just means you’ll need to be more open to compromises and negotiations. You should never try to change or control the other person’s habits. But you should be aware of your partner’s personality and where you will clash and have arguments.
Here’s one that doesn’t warrant an immediate discussion as if you’re in your 20s or 30s you’re a long way` away from retirement. However, it’s something to talk about if the two of you will be combining your finances. You need to feel comfortable about this and how you will be saving for retirement. Plus, if the two of you begin planning for retirement this shows you have forethought and good judgment which are very good qualities when it comes to having a long-term partnership.
Would you create a budget with me?
There’s nothing fun about sitting down and making a spreadsheet but you need to take the time to do this before moving in together. There are the obvious expenses such as rent, utilities, and groceries but there are also a bunch of others you’ll have to face when you move into a house or apartment together. For example, there’s furniture, decoration, toiletries, pet costs and even more. This may not be very romantic but the fact is that someone does have to buy the toilet paper and Drano. Review your finances and decide who will pay what costs as this will decrease the possibility that one of you will build up resentment over these things. Or, worse yet, you have constant arguments because one of you feels they’re shouldering a bigger burden when all those small costs turn into a big number.
If you’ve never created a comprehensive a budget, here’s a helpful video showing how to do one using an Excel spreadsheet.
The net/net about asking financial questions
The way this nets out is that asking and getting answers to these questions can make for a very uncomfortable situation. No one’s idea of a great date night is to sit around talking about budgets, the splitting of household expenses, retirement savings and emergency funds. But if you move in together without having asked these questions things can get a lot more awkward or could even end up with the two of you deciding to split the blanket due to constant fights about money. So suck up your courage, sit your partner down and start asking questions. It may not feel like a lot of fun but it will head off a lot of angry confrontations in the future.