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Pay It Forward

Making the big leap: Not marriage, just moving in

About the author

Kate Ashford is a New York-based freelance journalist who writes about personal finance and health. She has written for Money, Real Simple and Redbook magazines.

What you need to do before you move in together without a ring. (Thinkstock)

What you need to do before you move in together without a ring. (Thinkstock)

You love him. (Or her.) You’ve probably been dating for a while, and you’re thinking of making it official — and no, you’re not exchanging rings. Instead, you want to move in together.

“Culturally, living together is very accessible, almost expected now,” said Hilary Hendershott, a financial planner in California in the US.

The numbers are growing. In the US, three-quarters of women have lived with a significant other outside of marriage by the age of 30, according to a report by the Centers for Disease Control and Prevention. In the UK, cohabiting couples are the fastest growing type of family, according to the Office for National Statistics. In Australia, more than 78% of marriages are preceded by living together, according to the Australian Institute of Family Studies.

But sharing an address with a romantic partner isn’t complication-free. Here’s how it works.

What it will take: You must be prepared to communicate about finances, prepare a joint budget and combine households.

How long you need to prepare: This will depend on your living arrangements. At least one of you will have to end your lease (or wait for it to end) or make arrangements for a sublease. And if you plan to find a new place together the search can take a few weeks to a few months.

Do it now: Have a frank conversation. “Often times, couples don’t communicate about their finances until after they’ve moved in together and this can lead to a ton of conflict,” said Shannon Lee Simmons, a financial planner with Simmons Financial Planning in Toronto. Before getting a joint set of keys, there should be an open discussion about your partner’s financial situation. Is there debt? Can he pay bills on time? What are her financial goals? “Make sure your financial habits are well understood by your partner and that you understand theirs before taking the plunge,” Simmons said.

Also, do both of you know where the relationship is going? Is marriage in your future? What happens if someone gets pregnant? “Many times people have issues when life situations pop up because they never asked each other the right questions,” said Melisa Alaba, a professional counselor in Illinois in the US. 

Thinking of moving in together? (Thinkstock)

Thinking of moving in together? (Thinkstock)

Create a budget. How will you handle bills when you live together? Will you split everything down the middle or will you divide expenses up proportionately based on what you both earn? Devise a plan for household spending and groceries. “This can be the biggest issue in monthly budgeting for new couples, since many times only one partner ends up grabbing groceries,” Simmons said. “So it feels like this spending is all on them.”

Rent first. Purchasing real estate together is a serious financial step with sticky results if you break up. “The most common thing I hear about is people buying a house together, and I’m always shocked,” Hendershott said. “It’s a million dollar transaction, so they get a joint loan and I just see trouble coming.” For a married couple, in the event of a divorce there are clear rules about the division of property and responsibility for ongoing expenses. If you’re just living together, there are no such guidelines. “If you’re the person who makes more money, you might be forced to pay for the new roof out of your own account,” Hendershott said.

Do it later: Keep finances separate. In the event of a break-up, detangling yourselves will be much easier if you don’t mingle your money. This is true also for new accounts — avoid co-signing for things. “You will be held responsible for the car note or cell phone bill if they leave,” Alaba said. One exception: You should both deposit money into a joint account you use for household expenses, such as rent and utilities.

Know the laws. In some countries, living together for long enough will result in the equivalent of a common-law marriage — basically, you become married, or your assets become joint, in the eyes of the government. In British Columbia, Canada, couples are granted the same central rights as married couples after two years of cohabitation. In the US, in some states, if you present yourselves as a married couple you will be considered in a common law marriage, even if you never married. In New Zealand, “if you live together more than three years, your assets may end up as joint assets,” said Rod Mudgway, a financial advisor with Brackenridge Financial Solutions in Auckland, New Zealand.

This will affect how things go if the relationship ends, so it’s worth finding out how it works where you live. “Get legal advice if you think things will last,” Mudgway said.

Do it smarter: Ponder a cohabitation agreement. If there are serious assets (such as a house) or children, experts strongly recommend this step, which details your legal rights and obligations should the two of you separate. “You have to recognise that you are in a legal financial partnership,” Hendershott said. “If you don’t want to be married, you still need to take your finances seriously. You can use a lawyer and contract for all the things a marriage contract calls for, without getting married.”

Consider a trial period. “Finding a place together takes a lot of time and money, so before the two of you go out of your way to make this major step in your relationship, try living together for a month or two,” said Toni Coleman, a psychotherapist and relationship coach in Virginia in the US. “You will be able to notice red flags, bad habits and test your communication skills.”

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Culturally, living together is very accessible, almost expected now. — Hilary Hendershott