Unlike 80 years ago, a large number of couples, if not the majority, now live together before they get married. For some the idea is that it makes sense to “try things out” before getting married. Perhaps, if a couple lives together, it will give them a chance to see if they are right for each other before getting married, or so the thinking goes. The high divorce rate, despite many couples doing this “trial marriage” before tying the knot for real, indicates that this dress rehearsal before the real thing probably doesn’t help.
There is a difference between being married and just shacking up. When you’re just roommates who share a bed you still keep your own identity, along with your own checking account and car payments. This makes it really easy to undo if things don’t work out. If just living together, one person just needs to pack up and go.
If you get married and do things right (by my humble opinion), you should go from being two separate individuals sharing a NetFlix subscription to a joined team, each working selflessly using the skills they have been given towards the success of the household. When this happens, your finances also get joined together even if you keep separate banking accounts. One can work late at the office because the other is there to pick up groceries or fix the car. Because things are done as a team rather than as individuals, meaning that the fruits of any successes or consequences of any poor decisions are shared by both, ending a marriage is not easy or inexpensive nor should it be. There are all kinds of costs and procedures that must be followed to get divorced as you unwind this tapestry that has been created together and decide how to fairly divide up the spoils. There are all kinds of rights that each spouse has.
When it comes to handling money, there are good reasons to wait for marriage before doing a lot of things that you would do as a married couple. While you may be acting like a married couple and have everything but the license and the rings, there is a big difference between being effectively married and legally married. With money, it is this difficulty in leaving and legal protections that come with a marriage that are important. You don’t want to sacrifice of yourself to build something together without being protected should your significant other decide that he/she doesn’t want to be a couple anymore. There are a lot of financial things to make sense to do as a married couple that are really bad ideas to do as an unmarried couple. A few of these are as follows:
1. Buying a house together. Many couples who are living together decide to buy a house. After all, why spend all that money on rent if you can buy? The trouble is that if the relationship doesn’t work out, there are all kinds of issues. If one person puts in more money for the down payment, will the ex-boyfriend/girlfriend be willing to refund the extra money? Who gets the house if you break up? What if one person wants to sell but the other doesn’t? What if one person decides to get back at the other by not making the payments but also not allowing the other to sell the house? What if both incomes are needed to make the payments – do you really want to be making payments on a house in which you are not living. What if one spouse dies – suddenly you would own a house with his/her parents or siblings!
Buying a house together if you are not married is a sure recipe for owning a house with someone you hate. With a marriage, there are legal procedures for dividing assets like houses if the marriage doesn’t work. Also, when getting married everything because “ours”, not “yours” and “mine”.
If you really can’t stand continuing to rent, but aren’t ready to get married, consider having one person buy the house and have the other contribute to the payments in a rental agreement. If things don’t work out, it would then be nothing more than having one person move out of a rented apartment. If you do get married, ownership of the house transfers to both people.
2. Buying a timeshare together. This isn’t quite as bad as buying a house together – at least you could take the timeshare on different years. Then again, it is almost impossible to sell a timeshare, so you would probably end up owning the timeshare with your ex forever, so it may be just as bad. Most of the above issues with buying a house apply equally to buying a timeshare. Buying a timeshare for any reason is a bad idea. Go to some rental condos and bed-and-breakfasts while dating. Once you are married, then buy a condo at the beach.
3. Paying off the other’s debt. While getting out of debt is a noble goal, if you pay off the debt for your boyfriend/girlfriend, he/she won’t learn to handle money and it can lead to bitter feelings if the partner goes out and runs up debt again. If you get married, his debt becomes your debt. While dating, however, keep it separate.
While living together is like being married, and you may believe you will be together forever, it is not the same thing as being married. Avoid tying yourselves financially until you actually tie the knot.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.