Many couples consider moving in together at some stage in their relationships, and while this is an exciting and big step for the relationship, it is important to consider the financial implications of living together.
“While couples usually have to adjust to the daily habits of living with their partner, the importance of understanding each other’s financial habits, values and management of money is often overlooked,” says Eunice Sibiya, Head of FNB Consumer Education. One of the biggest benefits of living with someone is being able to split the bills and purchase more expensive items such as furniture and appliances. That being said, Sibiya advises that the following financial topics are discussed in order to avoid future issues.
Moving into your partner’s house
If you are moving into a new home together and both have equal responsibilities in terms of rent and the contract, it is fairly simple to decide how to split the rental responsibilities. It becomes more complicated if one of you owns the house.
Discuss whether the other will be paying rent in order to live there or not. Also talk about how household insurance, municipality bills, upkeep, renovations and other payments like geyser bursts will be paid for. There is no right or wrong way but both of you need to be comfortable with the understanding that you come to, particularly before you make any big investments into the house.
Money in – money out
It has been said that the best predictor of future behaviour is past behaviour and because your partner is unlikely to drastically change their spending and saving habits, you have to be comfortable with the amount of expenses and payments that they make every month. Living together means you both have a responsibility to contribute towards keeping the house up and running.
Have an open and transparent discussion about what each person’s financial position is. Take disposable income (the amount of money you have for spending and saving after income tax), current average minimum monthly repayments on debt, total of debit orders, and monthly contributions to savings, into account. Also discuss wants versus necessities and items that you are not willing to compromise on – this will assist when you draw up budget and look for areas of saving.
What about those monthly household bills?
There are different ways of paying the monthly bills. You can open a household account and deposit funds into it at the beginning of each month or list all the expenses and allocate it between the two parties, equally if possible. It is easier for each party to take responsibility for certain shared bills than to split each bill each time. If you open an account, remember to set spending rules such as exactly what purchases are allowed to be made from the account.
When you set rules for the account, think beyond the obvious to events such as weddings of mutual friends – can you buy the wedding gift from the account? It is crucial to keep each other accountable for not adhering to the rules.
Do the same with a savings account. Each party deposits a monthly amount from which money can be withdrawn in the event of emergencies in and around the house.
Debt: what’s yours is yours and not ours
Ideally, each party should continue to manage and pay back their own debt. Complications arise when items are bought together, particularly larger items that could not be purchased with cash and that are consequently purchased on store accounts. If you shop together, make a repayment agreement on the spot. The party who owes the other can either EFT his or her monthly contribution or your partner can take over one of your current expenses to the value of the monthly repayment for a certain period, in order to repay you.
Remember to take into consideration that assets bought together means that each party will have a claim to an asset that may not be capable of division.
Be proactive about splitting up
It is hard to imagine breaking up when you are in love but you will have to discuss this. Decide upfront who will move out, to whom the items that you bought together will belong, who will become the owners of any pets and how final bills will be settled. Never move in together on a whim and certainly never make the decision because it may seem like a cheaper option. Make sure that you have reached a certain level of trust.
If you prepare well, moving in together can be a smooth transition. There is no need to allow finances to push you apart. Good financial planning and mutual commitment will help you in the process of creating and growing your wealth.
