Couples preparing to move in together have many decisions to make, from which colors to paint the walls to how to divvy up the chores. But perhaps the most important thing couples can do before they move in together is create financial boundaries.
Even before couples set boundaries, they need to understand each other’s current spending and saving habits. To do this, both members of the couple should keep a budget for two weeks, recording everything they buy and what it costs. After two weeks, look through these documents together, as well as the past few months of bank and other account statements. What kinds of things were purchased? Is one person a saver and the other a spender? Looking through these budgets together helps couples understand each other’s money strengths and weaknesses so they can predict money issues and help prevent future money arguments.
Once the partners have discussed their budgets, they should begin to set financial boundaries. Here are four important boundaries to consider.
1. Set financial goals and make plans on how to achieve them
Each person should make a list of his or her own financial goals — such as saving for retirement or getting out of debt — as well as a list of shared financial goals, such as saving for a romantic vacation or buying a home together. Next, create a plan for how much each person needs to contribute each month to these goals to make them a reality. For example, couples who want to buy a home should determine how soon they want to buy a house, and then figure out how much they need to save each month for a down payment, which can be up to 20 percent of the purchase price of the house. In addition, prospective buyers should save to pay for closing costs and ideally about six months worth of mortgage payments (check out this cool mortgage calculator), which can make buyers appear like more serious shoppers to lenders and agents. When couples have financial goals, it helps them set their own boundaries on what they should spend money on (the goals) and which expenses are lesser priority.
2. Split up monthly costs
Make a list of all the monthly bills — electric, cable, water, insurance, etc. — and then decide who is responsible for making sure each bill gets paid. Maybe one person pays all the bills and the other reimburses him/her for half. Or maybe the couple splits up the bills so each person takes responsibility for his/her half. Consider opening a joint account that each person contributes a predetermined amount to and use this account to pay bills from; just remember that joint accounts are owned by both partners, so there is a risk of one person taking money out of the account without having to tell the other.
3. Create limits on food costs
Food costs can sometimes be the biggest expense in a couple’s budget beyond housing costs. That’s why it’s important to create limits on how much each person is willing to spend on food each month, including groceries and dining out. It’s usually a good idea for couples to set the food budget at about 10 percent more than they anticipate spending; this way, they’re not likely to go over budget and can use the extra savings for a nice dinner out or toward one of their financial goals.
4. Buy items for the home individually
Even though no one wants to think about this, couples do sometimes break up. That’s why experts say it’s a good idea for couples to individually buy furniture and electronics they share in the home. Then make a list of who bought what. This way, if a couple does part ways, it is easy for them to split up their belongings.
In all, it’s best for couples who plan to move in together to evaluate their finances and create some guidelines regarding their financial decisions. Proper preparation prevents money conflicts or the dreaded strain of accumulating debt. Cover theses simple basics by discussing monetary boundaries to create a healthy financial foundation.