Thinking of moving in together? Read our guide first to the financial and practical preparations you should make.
There are many reasons to move in with friends, family or a partner. Renting or buying in major cities is expensive. Sharing living space can be fun and practical at the same time. You might also be able to live closer to where you work, saving on commuting costs and time spent travelling.
To minimise emotional and financial headaches later on, here are the important issues to consider before you move in together:
- Who will pay the bills?
- Your flatmates may affect your credit rating
- Should you use a joint bank account to pay the bills?
- Set some financial ground rules
- Consider your will and inheritance
Who will pay the bills?
Whether it’s a flatmate, a group or friends, or a partner, one person is likely to be earning more, so how are you going to split the costs?
There is no right or wrong answer, but deciding on how you will pay for broadband, utilities, rent or mortgage costs, and repairs is vital if you want to avoid arguments.
You might decide to split all the costs equally, or pay according to your income.
Whatever you decide, remember that in legal terms it is the person whose name is on the bill who will ultimately be left to pay if everyone else leaves.
If you are taking on a phone and broadband service then each person named on the contract will be credit-checked and will be responsible for paying.
Your flatmates may affect your credit rating
Your credit rating is a file of financial information that lenders can check before they give you credit. It is compiled by credit reference agencies like Experian and Equifax.
It’s important to have a healthy credit rating as this can affect the deals you are offered for credit cards, personal loans, mortgages and even broadband and TV contracts. Your rating will be affected by missed payments or multiple applications for credit in a short period of time.
When you apply for joint credit with someone else you create a financial association. This would be if you applied for a mortgage or joint bank account, or even shared names on a broadband contract in some cases. So the finances of the other person will be linked with you on your credit report under a section called “Financial Associations”.
John Webb, Consumer Affairs Executive at Experian, a credit reference agency, says financial association is created by applying for or opening a joint account.
“This creates a financial link on your credit report and that will stay there until and unless you contact the credit reference agency to let them know otherwise,” he says.
You are not linked just because you live together, but if you are thinking of applying for joint credit it is worth talking to your partner about the details of their personal finances.
If you are living with friends and not sharing any credit or contracts then their financial behaviour won’t affect you and you don’t need to worry about them being associated with you on a credit file.
Should you use a joint bank account to pay the bills?
If you are moving in with a partner, then having a joint bank account might seem a sensible option to share the household costs.
It is important to be sure that if you take this step, you are honest with each other about your financial circumstances.
Sarah Pennells, founder of the money website Savvy Woman, says she is regularly contacted by people who are struggling financial because of a joint account and a relationship which has turned sour. Often one partner has left and the remaining person is faced with paying off their debt, which they may not have known about in advance.
“You could end up being asked by your bank to pay off an ex-partner’s debt if it has been run up on a joint account,” she explains.
The bank can contact both people on a joint account and if your ex has disappeared then you will be responsible for any debts, even if you didn’t personally incur them. Claiming that the debt was run up without your knowledge will not free you from the liability.
Set some financial ground rules
When you are sharing living space you’ll need to agree on who does the chores, and how often, and how they are divided up.
In financial terms, you might want to agree a budget for general items like milk and bread to which everyone contributes.
If you are a couple, having a set budget is a good idea, especially if one of you is more of a spender than the other.
Establish what you are going to spend each week, and try to stick to it, says independent financial adviser Philip Pearson.
“Accountability is very important,” he says. “Each week, sit down as a couple and note what you have spent and whether it is more than you agreed in the budget. With the age of cashless transactions it is very easy to impulse buy and not be accountable to anyone.”
Consider your will and inheritance
If you are young and renting with friends you won’t necessarily need to write a will. If you co-own a property, or have dependents like young children, then it is important to set out where you want your money to go in the event of your death.
Couples can write simple wills leaving everything to each other. Wills cost from £500 for a lawyer to write and it is a good idea to get professional advice as a badly-written DIY will might be worse than none at all.
If you are married, then under the intestacy rules your surviving spouse or civil partner will inherit the whole estate if you have no children. If you are cohabiting and not in a legally-recognised partnership, then it is particularly important to ensure you have a will to protect your partner in the event of your death.
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