Millennials are proving themselves to be game-changers from a financial perspective and they’re also making waves when it comes to their attitudes about marriage. Research shows that young adults are waiting longer than any other generation to get hitched, with many preferring to live together instead.
In light of how 20- and 30-somethings are struggling in the job market and battling student loan debt, the decision to cohabitate is often driven by financial concerns. Even for those who aren’t seriously involved, taking on a roommate is a cost-effective alternative to living in their parents’ basement. Moving in with someone is a big step, whether you’re in a relationship or just friends but following these money rules for millennials can make the transition easier.
1. Pick your place
The first thing you and your new roomie have to figure out is where you’re going to live. If one of you has been renting in the same place for awhile, it might make sense for the other person to move in. On the other hand, if your landlord doesn’t allow additional tenants, you may be looking at finding a brand new place. If that’s the case, you’ll have to decide whose name is going on the lease.
Putting both your names on the lease makes you equally responsible for the rent and it also offers you the same legal protections. That can be good or bad, depending on the person you live with. For instance, if you’re moving in with your significant other and the relationship goes south, you can’t just kick them out if their name is on the rental agreement.
Deciding where to settle down is also tricky for millennials who own a home. You don’t need to have the person who’s moving in sign a lease but it might not be a bad idea if you want to make sure you have some legal means of removing them if they become a problem. If you’re planning to buy a home with your sweetie, you’ll have to tackle the issue of whose name goes on the loan and the title to the property.
2. Break down the bills
Once you’ve settled on a place, the next step is determining who’s going to be responsible for paying what. When you’re rooming with a friend, a 50-50 split of the rent or mortgage and related household expenses is typically the norm. The division for couples, however, might look very different. For instance, if one of you earns substantially more, it might make more sense to split up the cost based on your individual incomes.
Aside from figuring out how much each of you should contribute, you should also work out who’s going to physically pay the bills so that nothing falls through the cracks. A late payment usually means a fee and it can even go against your credit so you both need to be clear on when things are due. Having regular budget talks to go over what bills are coming up in the month should help to keep both of you on the same page.
3. Establish boundaries
As far as your other expenses go, like student loan payments, credit card bills and transportation costs, you’re usually better off keeping those things separate. That way no one feels like they’re handling an unfair share of the financial load. The only exception might be if you’re sharing a car or you’re both on the same cell phone plan.
You want to be careful about incurring any joint debts with someone else, regardless of your relationship status. Co-signing a loan for your roommate or adding your girlfriend to your credit card as an authorized user can have serious implications if they don’t pay. Not only will your credit history be affected, but creditors can come after you for the balance due. Even one negative mark in your 20s can affect your credit, well into your 30s.
Sharing assets with someone you’re not married to is just as big of a no-no as sharing debts. You’re better off keeping bank accounts separate, at least until you decide whether you’re actually going to tie the knot. If you want to simplify things a little, you could set up one account that both of you put money into for joint expenses, but you should have equal access so you can see what’s coming and going.
4. Get it in writing
Signing a roommate agreement allows you to set the ground rules for sharing space so you both know how certain issues or situations should be addressed. You don’t have to get Sheldon Cooper-crazy about it but some of the things you might want to cover include: when it’s acceptable to have people over, guidelines about sharing food or splitting grocery costs and what chores each of you are responsible for.
5. Create a contingency plan
Untangling yourself legally and financially from a joint living situation can be messy, especially if there are underlying emotional issues involved. Working together to create a contingency plan in case a roommate decides to move out or your true love doesn’t last, can eliminate a lot of the hassle later on.
For instance, if you bought a home together you could specify whether one of you would have to move out or if you’d both agree to sell the property. If one person is staying put, you’d want to be clear on what their responsibilities are as far as refinancing goes. Sure, it might detract a little from the romanticism of it all but you need to know ahead of time what will happen on the financial front if things don’t work out.