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Money Minute: How to split bills when you move in together

Conservatives may clutch their pearls at the idea of a couple living together before marriage, but whether they like it or not, cohabitation is the new normal in the U.S.

New data released by the Centers for Disease Control in March found that nearly 60% of babies born outside marriage were born to couples who lived together but hadn’t yet tied the knot.  

Some experts blame the financial crisis and ensuing recession for making young people shirk the traditional milestones of adulthood, like marriage. There’s some truth to that — who wants to start a family with upwards of $29,000 worth of student debt on their back? — but it’s not the whole story.  In fact, the shift toward cohabitation has been a long time coming.

The rate of women and men who are living together before marriage has increased by more than 900% over the last 50 years. And research actually shows that cohabitation isn’t such a bad idea and that past studies may have overblown the risks of premarital cohabitation.  

For couples who decide to move in together rather than legally marry, one of the biggest challenges can be figuring out how to merge your finances. Here are a few tips on how to make the transition without putting your finances at risk:

1. Yours, mine, ours. Consider keeping separate bank accounts and adding a third joint account that you both have access to. Put in only enough cash to cover your joint expenses like bills and groceries. If the idea of any joint account is too much to handle, set up accounts at the same bank so you can at least transfer funds to one another easily.

2. Speak openly about financial goals. If you’re in this relationship for life, you probably have a lot of big goals together -- maybe kids? saving up for a house? So check in with your partner before you make major financial decisions that could put those goals at risk. One idea you could use is to come up with a maximum amount you can spend without telling your partner. Depending on your incomes and preferences, it could be $10 or $100 — it’s up to you to decide.  This may be a big adjustment for some people, especially if they're used to having complete control of their finances. But if you’re having that hard of a time trusting your partner and working toward financial goals together, then maybe it’s time to rethink the whole moving-in-together thing.

3. Be fair. You and your partner probably don't earn the same salary, so decide how to split your expenses based on who earns more or less. One person could cover the big stuff like rent, while the other agrees to keep the fridge stocked and cover utilities. To make things simple, use an app like Splitwise, which is great for sharing bills or Avocado, which doubles as a joint calendar and to-do list manager for couples. Over the course of your relationship, your incomes could ebb and flow. One person may lose their job or another has to take time off to care for a sick parent. Check in with one another whenever those big financial upsets occur and be open to adjusting your budget.

4. Prepare for the worst. A “cohabitation agreement” may sound scary, but it can be as simple as writing out your agreed-upon financial obligations to one another and each signing the document. This is especially key if you make a large purchase together, like a house, but only one person’s name is on the deed. For unmarried couples who want to buy a home, some attorneys suggest writing up a special agreement designating who pays what for the home and what you'll do if you decide to break up. It’s like a prenup for your house.  You can have an attorney look it over to make it more official, but both your signatures should suffice.

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