Moving In Together? How to Merge Your Finances
As you make the commitment of moving in with your new spouse or significant other, you’re probably thinking about the fun stuff, like housewarming parties or buying new furniture. Have you thought of your finances? The financial aspects of your new life together can affect everything from your rent or mortgage payment to weekly grocery expenses. Do you have a plan to manage your debt, expenses and credit? Start with these steps to help get a handle on your money matters.
Create a household budget
Start by sitting down with your partner and identifying all the money you each have coming in and going out. Make a list of recurring bills, expenses and debts from each side, and be sure to include often overlooked expenses such as 401(k) contributions and insurance payments. Once you have your list intact, start a household budget. For a rough idea of budgeting allocations, U.S. News recommends the following ranges.
- Housing costs: 25-30 percent of your total budget
- Transportation: 8 percent of your total budget
- Food: 5-15 percent of your total budget
If you find you’re highly skewed in any of these areas, you may need to re-evaluate your spending.
Establish a joint bank account
If you’re not ready to give up your individual bank account just yet, consider establishing a joint account. About 66 percent of married couples have joint checking accounts, according to a recent American Express survey. Based on your established budget, you can allocate a percentage of your paycheck to this account and use it for common household expenses, such as the rent or mortgage and household bills. If the joint account seems to be a good fit, setting up another joint account for savings could be beneficial, too. About 51 percent of couple have a joint savings account, according to the same survey. A joint savings account could be the pot you both contribute to for future vacations or a dream car.
Check in on credit reports
Keep tabs on your and your partner’s credit reports — that way, you’ll be in the know about your credit health when it’s time for a big-ticket purchase. Get a free report annually from each of the three major credit reporting agencies, and check it for inquiries and any negative holds. If you come across incorrect information, check with the Federal Trade Commission’s guidelines on how to resolve errors or discrepancies.
Start an emergency fund
Being in a relationship typically means supporting one another, especially in times of trouble. An emergency fund is there to help you and your mate should a tough time rear its head — such as an unexpected medical bill, a car repair or a home issue. It’s ideal to have enough money to cover three to six months of expenses in your fund should an emergency strike. But if getting to that number is difficult, start with a goal of $1,000 to have a little helpful household cushion.
Keep your plans in check with tech
Now that you’ve established a budget and have a handle on the big things that can affect your finances, keep track of your spending as a couple. Many apps and online programs can link to your bank and credit accounts, as well as sync to your partner’s app accounts. Some helpful ones include Mint and Spendee.
Merging your finances as a couple can be stressful, but a little planning and open communication can go a long way. After all, should moving in together eventually lead to marriage or a baby, you might need to take your budgeting to the next level. For now, re-evaluate your finances as a couple under one roof, then move on to the fun part — redecorating.