Diverse forms of relationships have always existed and living together is a common step.

Discussing money might not be exciting at this stage, but knowing each other’s expectations and clarifying financial commitments, long-term goals, and how you plan to grow together can be one of the healthiest things that you do for your relationship.

Financial Commitments:  Dividing Expenses

Initiate the conversation by discussing what expenses will be shared.  The next step is to decide how much each person will contribute:

50/50:  This approach is where common expenses, such as rent, and utilities are split equally.  This is the most common way couples approach the division of expenses.

Prorated:  A prorated approach can make more sense when a significant disparity in income exists.  This involves splitting expenses on a percentage basis, determined by the amount of income that you bring into the household.  For example, if you bring in 70% of the household income, you are responsible for 70% of the shared expenses. This can be revisited periodically when there is a significant change in income for either partner.

Expense Assignment:  Specific expenses are assigned to each partner, keeping in mind the overall division of expenses (either 50/50 or prorated).

Financial Commitments:  Combining Finances

In the case of expenses, it may make sense to set up a shared household account.  Some questions to ask include:

• Who will make sure the bills are paid?
• Do you want to handle expenses together or separately?

State of the Nation

Over time, combining finances may make sense, but they warrant further discussion.  If you haven’t already, it’s time to have a conversation about your financial health, which includes:

• Credit Rating: Do you have any credit concerns, such as past collections, that could impact your future?
• Outstanding Debt: Do you have any debt? What are your goals to pay it off?
• Emergency Savings: Are you able to cover your household expenses if you were to lose your income? For how long?

Long-Term Goals

Once you understand your current situation, the next step is to discuss your long-term goals and your relationship with money.  This ensures that you are intentional about the evolution of your relationship and committing to goals as a couple.  Some questions to initiate the conversation are:

• What are your long-term housing plans? Would you like to continue renting or own a property?
• What are your beliefs about money?  Did your upbringing influence these beliefs?
• Would you consider yourself to be a spender or a saver?
• Where do you see yourself in 5 years? 10 years? 20? Beyond?

Relationship Breakdown

The final step is to discuss what happens if the relationship doesn’t work.  Coming to an agreement at this stage is much better than delaying the conversation to the end of the relationship. Some areas to consider:

• Who will stay, who will leave?
• Will the person staying help pay for the other person to move out?
• If you have shared pets or kids, what’s the plan for them?
• How will you split joint purchases or other assets?

One of the best ways to protect both you and your partner is to put a cohabitation agreement in place. Your rights in a relationship can vary depending on the province or territory you live in and the number of years you’ve been together.  A cohabitation agreement spells out what happens financially if you separate, so there is less open to interpretation.

While it is best prepared prior to moving in, an agreement can be drawn up at any time.  Having it drawn up by a professional well versed in these areas is best.