We shacked up a year ago, but not before I read Shacking Up: The Smart Girl’s Guide to Living in Sin Without Getting Burned, by Stacy and Wynne Whitman. I have to give it four stars for tackling complicated legal, financial and emotional issues and still being fun to read. It’s written for women, but it works just as well for men. I made Him read it, although he refused to do so in public. Shacking Up devotes an entire chapter to Money Matters, outlining the basic financial steps cohabitants should undertake before moving in together. Here’s a summary of what the book recommends, and what we did in real life.
1. Discuss the meaning of Money. Talk about whether you are a spender or a saver and how you feel about money. What are your financial goals and fears? How are you alike and how are you different? What could be a potential source of conflict for you as a couple? We also talked about our values, and created a value-based financial plan for ourselves.
2. Lay Your Dinero on the Table. Get a clear, complete picture of your own financial situation, then share and compare. It’s essential to be honest about debt here. Order credit reports together to make sure you haven’t missed anything. You don’t need to disclose any long-term assets that won’t affect your ability to pay the household bills, such as an inheritance from grandma. (You will need to share this information when you commit to marriage, however.) This was the hardest part for us. Her cried over huge amounts of debt, Him disclosed some ugly interest rates, and in the end we were better for it, I promise.
3. Decide Who Pays What. There are two options: split everything 50/50 or allocate responsibility based on earning power. Whatever you choose, make sure you are comfortable with the agreement. Money is power, so be sure you feel like equals. We ignored their advice and picked a third option: Combine all our money except our “allowances” and distribute expenses and savings from the joint account.
4. Create Budgets. They don’t recommend combining all your money, so instead of one budget you’ll have to make three: His, Hers and Theirs. This helps clarify what you’ve agreed on in step 3 and ensures you’ll never be overdrawn. We created an initial budget to determine how much we could afford to pay for housing etc, but do not maintain a regular monthly budget.
5. Put Everything In Writing. This makes it official and protects you if things don’t work out. Plus, experts say that people who write down their goals more often achieve them. This works for money goals too. We created cohabitation agreements, which we (thankfully) have never had to use.
Shacking Up is clear that they don’t recommend combining all your money, for a variety of reasons. They grudgingly suggest a joint account for joint living expenses only, with both parties retaining a personal account for all other expenses. They also warn against opening any joint credit cards.
The only fault I can find with this book is that Shacking up recommends that just one person be the designated financial manager, a move we completely disagree with. We think it’s much better when both people are co-managers of the money and make all decisions and bill payments together. We do this regularly, in our State of The Union addresses. We also pay the bills together every weekend.
The chapter ends with some good long-term financial planning tips for couples, such as plan for the future, set goals, be honest, build a cash reserve, pay off debt aggressively, save for the future (separately!), trim fat from the budget, and keep the dialogue open. Nothing new here, but solid information for everyone. If you’re considering shacking up, read Shacking Up first.