You’ve met the partner of your dreams and the two of you have decided to live happily ever after. Congratulations! That is fantastic and I am, of course, very happy for you. But before you sign the lease, make sure you have a conversation, or two, about money. Did you know at least 57%* of breakups are caused by financial stress? For those of you who are interested, other major reasons include lack of common interests, bad grammar, and, cheatin’ hearts. I can’t really help you work through issues with grammar or a cheatin’ heart but I can give you some guidance on the money stuff. Time invested up front can save you a few misunderstandings, hassle, and even tears down the road. In this three-part series I’ll walk you through typical issues and give you options for how to address them in your own relationship.
First things first, come clean with where you are.
- Does he make more than you do? Do you make more than he does? Is this okay?
It is unusual for both partners to have the same income. It happens every so often, for example, when both of you are members of the United States Congress or you both teach third graders astrophysics. But for the most part, one of you will have a higher income than the other. You need to know this up front. If you’re both poor grad students this is a very short conversation.
- What financial messes are each of you bringing to the party? Student loans? Credit card debt? A guy named Guido who made it clear you can never go back to Hoboken? Lay it all out there.
- Are your dreamboat’s lifestyle needs in sync with the money? Expensive hobbies and habits, when not in balance, can be trouble.
- Are you saving for your future? Are either of you funding an IRA or a 401(k)? If one and one isn’t, what’s the reason?
- Taxes current? Not filing is a RED flag. If your prospective partner hasn’t filed tax returns I’d seriously take a couple steps back to rethink the whole thing.
Next, share your credit reports.
- You’re allowed a free report yearly from each of the credit reporting agencies. Go to www.freecreditreport.com. You don’t need your credit score; I just want to look at what’s there and see if it all matches up. When it comes to birthdays I love surprises as much as anybody but not when we are talking about money and financial commitments. You need to know what your partner’s financial situation is and he/she needs to know yours.
Once you’ve each communicated your situation and you’re both still game, open a joint bank account.
- Use it only for joint expenses for now. Some people are comfortable jumping in and merging all their finances quickly. These are usually people who have very little, like grad students. After all, zero plus zero doesn’t really make a lot more than zero, does it? Little to lose. When one of you has more assets than the other, there can be reluctance to merge – and there should be. So, starting slow with one joint account is the way to ease into blending your finances.
- Along with the bank account, get a debit card with it. Don’t get a credit card just yet. We’ll talk about that more in next week’s post.
Deciding to move in together is exciting and fun. Or at least it should be. And taking a little time to make sure you know who you’re moving in with and what their obligation can save you a few tantrums later! Next week we’ll look at creating a consolidated spending plan, who should pay for what, and, most importantly, what is ‘fair’.
I’d love to hear your tips on coupling your finances. What worked, what didn’t work, what you wish you’d done, so please post your thoughts!
*Totally made that number up; I’m pretty sure it’s higher than that. If you’ve got the data – share it.