According to the American Psychology Association, about 40% to 50% of married couples in the United States divorce and out of all of the reasons, money is the number one for relationship turmoil. Do money issues within a relationship start once a couple gets married? Or are there ways to rectify this before a couple decides to get serious? Being proactive as it relates to having the money conversation is a great way to nip money conflicts in the bud.
The following are five money mistakes to avoid when moving in with your significant other:
1. Not Having a Honest Conversation About Money
The number one mistake that couples need to avoid when moving in with each other is not having an honest conversation about money. Everyone has a different money personality depending on what their experience is with money, so it is imperative that partners have real dialogue about how they view and manage money. Is your partner a saver or a spender? A money hoarder or risk taker? Knee-deep in student loan debt or saving up for luxury car? Do they have a perfect credit score or perhaps do they not know what FICO is? These are all questions that should be asked and known upfront. This will offer both partners insight to ensure that either you are on the same page or understand your differences, hopefully avoiding future conflict.
2. Not Developing a System to Divide Expenses
Another mistake to avoid when moving in with your significant other is not developing a formula for dividing expenses. Usually if the couple makes an equal amount then it is easy to just divide bills half-and-half but what if one person makes more than the other, what system will you use? Will one person pay the rent while the other focuses on the expenses in the house? Will you base the division of expenses on income or some other metric? In order to avoid resentments, I suggest having this conversation upfront and being clear about who is going to pay what.
3. Not Setting Financial Goals Together
Some couples might be on the same page but believe it or not, they are reading a different book! Not setting financial goals together is a big mistake when moving in with your significant other because it opens the door for not only miscommunication but mismanagement of money. One person may be going right, while the other is going left. Setting financial goals together sets the foundation for money management and allows both parties to put first things first in order to reach those goals. It also creates checks and balances for your finances so that one person is not deviating from what you both set forth to be the direction you are going with your finances
4. Not Communicating About Finances on a Regular Basis
Creating a budget is something that requires adjustment every now and then. You must keep an eye on your finances on a regular basis to make sure that the plans and goals you set financially still work and are being followed. One mistakes that couples make is that they will meet once about finances or sometimes not at all; but they do not have discussions about finances on a regular basis. This may create division in the household. Make sure that you are having money conversations at least once a month.
5. Combining All Your Money in One Account
You may think that as a couple that is living together, it may make sense that all money is combined into one account, but this can be a big mistake and create conflict with in a relationship. While it is a good idea to combine finances and have a joint account that covers all bills that they shared together, it is also important that each person have an individual account that they control. This would be achieved by creating a budget and depositing into the joint account the monies that will go towards paying bills. However, even within a relationship there should always be financial independence, which can help aid in longevity.