Romance and Finance
Jan 31, 2017 12:14PM
by Barry Wind and Jeremy A. PearceThe advent of February leads to Saint Valentine's Day, which may lead couples to thoughts and feelings of romance, which may lead to some of these couples to the decision of moving in together. Unfortunately, unlike Valentine, that perfect someone you move in with might not prove to be a saint.
So before the two you share the same roof, it is a prudent, if not romantic, task to have a good long talk about your finances. Below are some of the key points you may want to discuss and agree upon:
Budget: A couple first must identify how much is coming in (and from whom) and how much is going out (and where is it going). If incomes are roughly equal, expenses can be split down the middle, no fuss. If one of you earns substantially more than the other, then the percentage of expenses paid by each can correlate to the percentage of income contributed by each. Or to simplify, the person with the lower income can contribute a set amount each month with the higher earner contributing the rest.
How you spend your money also needs to be agreed upon. This is important for non-discretionary items like housing, utilities, groceries, health care and transportation. Of equal importance are discretionary expenses like entertainment, dining out and cable TV. This discussion may go easier if each person has a monthly allowance to spend as they wish.
Prior Assets/Debt: Many people may have accumulated significant assets or debts before becoming part of a couple. Unless explicitly agreed upon, it generally is best if these previous debts and assets remain separate.
Large purchases: Buying a house, car or big screen TV can be a major source of division with your cutie pie. First, who is paying for it and second, who gets it if and when the relationship sours? Again, unless mutually decided otherwise, a large purchase and the subsequent ownership is easiest if done separately by one member of the pair.
When your romance is ready, sharing the same living quarters may be the right next step. Discussing and coming to agreement on some key financial decisions with your new housemate may just help keep the bloom on the budding romance.
Barry Wind and Jeremy A. Pearce are financial advisors in the Washington, D.C., area, specializing in socially responsible investing with SharePower Responsible Investing, Inc. Comments and questions can be sent to [email protected] and [email protected]
Investing involves risk including loss of principal. Different types of investments carry varying degrees of risk and clients and prospective clients should be prepared to bear investment and original principal loss. Investing, including socially responsible investing, does not guarantee any amount of success. These are the opinions of the author and not necessarily those of Cambridge Investment Research, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.
Securities offered through Cambridge Investment Research, Inc. member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and SharePower Responsible Investing, Inc. are not affiliated.