After a period of serious dating, probably a few trips, and plenty of friends and relatives asking when you’re going to take the next step, you’ve decided to move in together. Congratulations.
However, if you want to ensure that your new domestic reality is rewarding instead of regrettable, then it’s critical that you avoid all of these financial pitfalls and bad money habits:
Not Having a No-nup Agreement
Yes, I get it: having a formal agreement sounds about as romantic as, say, getting a root canal or re-grouting the tile around your tub. But you know what’s even less romantic? Having your financial life devastated after a break-up. It’s bad enough that you’ll have to mend a broken heart.
What you need is called a no-nup agreement (a.k.a. cohabitation agreement). It’s the prenup equivalent for couples who aren’t getting married, but want to have a clear process in place that governs how to de-tangle financial assets and obligations — including joint responsibilities — if things don’t go as planned.
Not Having a Budget
This mistake is surprisingly common and very painful. Many couples believe that they’ll have plenty of disposable income because they’re sharing expenses like rent, food, and so on. On the surface, this makes perfect sense. After all, if both parties are spending $1,500 a month on rent, then moving in together frees up $1,500, right?
Yes and no. Technically, yes, that $1,500 is available. But as we all know, just as how having extra shelves and drawers at home seems to magically attract more stuff (read: crap), a boost in disposal income has a strange ability to decrease — rather than increase — overall savings. Just ask lottery winners.
Having a realistic budget and sticking to it will ensure that you come out ahead, and that your disposal income increases your wealth and net worth vs. sending you into debt, in which case you might have to file a consumer proposal or declare bankruptcy. (If this is necessary, you’ll get help by contacting professionals like the ones at the Law Office of Charles Huber.)
Not Talking about Money
The number one thing that couples fight about isn’t missed anniversaries, what to watch on TV, or whether visiting relatives does or does not constitute a war crime under the Geneva Convention. No, the number one thing that leads to more furious glares and hours spent sleeping on the couch is — let’s all say it together — arguing about money.
The bad news is that there’s no way to avoid these occasional confrontations. But the good news is that smart couples dial down the intensity by talking about money on a regular basis, which ensures they’re on the same page when it comes to both spending and saving (not one vs. the other).
The Bottom Line
Here’s the thing: regardless of how much you know your beloved or how much he or she knows you, the fact is that you’re both in for some surprises when you start sharing the same living space. Of course, many of these surprises will be of the happy variety. But to expect that there won’t be some struggles along the way is simply unrealistic. Reality isn’t that convenient.
However, if you avoid the three pitfalls described above, then you’ll go a long, long way toward ensuring that no matter what the future has in store — good, bad and TBD — that you’ll face it as loving couple. And isn’t that what being together is all about?