Financial Mingling for Unmarried CouplesWith marriage rates plummeting among young people in the U.S., the number of unmarried couples who are living together is on the rise. When you’re cohabiting with your other half, you probably aren’t experiencing the pressure to build a financial life together that married couples face, but that doesn’t make it any less of a good idea. By thinking of your finances as a duo rather than as two separate individuals, you’ll be more prepared to meet the various economic challenges that pop up through life, and you’ll probably be happier with your partner, as money is a very common source of tension in relationships. If you’re starting with you and your significant other’s finances completely separate, here are the first steps to bringing them closer together. Before we dig into our tips, we should note that combining or integrating your finances may not be right for all couples, so it’s best to know where your significant other stands before you make any changes, which brings us to our first point.

Be open about your finances

Financial conversations are hard, due in no small part to America’s social taboo against talking about money. However, it is absolutely crucial that you and your partner sit down and have an open conversation about your incomes, savings, debts and credit histories. Those last two items may be tempting to skip over, but for many people, they’re important parts of their financial lives. Eighty percent of Americans have debt of some kind, according to a study by Pew Charitable Trusts, and the amount of money you’re paying toward those debts affects how much you can contribute to shared household expenses, which is why debt is essential to discuss. Likewise, if you and your mate are getting an apartment or purchasing a home together, your credit scores could dictate where the two of you are qualified to rent or buy. When you have this conversation, consider bringing at least one of your credit reports with you, and going over it line by line, as this can help you both understand each other’s credit habits.

Once you both have a complete picture of each other’s fiscal situations, you can then make a budget together. As you create your budget, make sure you list all of your expenses (from rent to groceries to credit card payments), note who is paying for what and when each item is due, so you can both be on the same page. Budgeting may sound like a dry activity, better suited to old spinsters than unmarried couples, but think of it as a way for you and your partner to learn more about one another. Discovering someone’s financial priorities is a great way to learn what they value, and taking a critical look at how you spend your own money can teach things you didn’t know about yourself. From a practical standpoint, a budget also helps you and your significant other get on the same page about how much you’ll need to cover the essentials and allow you to see if you can cut back on any unnecessary expenses. Also, remember that a budget is not something you set and forget. Instead, it should be something you both update regularly and go over together — schedule a day every month or every other week for the two of you to talk about your budget to see if anything needs adjusting.

Decide how you’ll handle shared expenses

When you’re cohabiting, costs of living like rent, utilities and groceries stop being “me” expenses and start becoming “us” expenses, and you’ll want to decide early on whether you split costs equally or equitably. Equal splitting means you and your partner divide costs 50-50, right down the middle. As a benefit, equal splitting keeps the financial power dynamic in the relationship even, since both people are putting in the same resources. Negatively, if there’s a large difference in income between the two people, then the person who makes less could feel unfairly burdened. When one person has to spend almost all of their money on shared expenses, while the other person only has to spend a fraction of their paycheck, it can create an easy breeding ground for resentment.

Equitable splitting, on the other hand, means shared costs are divided according to each partner’s means. For example, one person makes $30,000 a year and the other makes $50,000 a year. If shared expenses are $2,400 per month, the person making $30,000 would pay about $900 per month, and the person making $50,000 would pay the remaining $1,500. With equitable splitting, both people pay an amount they can realistically manage while still having money left over for personal expenses. However, this can lead to cases where the person paying more feels like the person paying less owes them or is taking advantage of them, and uses that as leverage to dominate the relationship. Remember that if you try one of these methods and it doesn’t work for you, it’s easy to switch over to the other one.

Consider opening a joint checking account

While this isn’t absolutely necessary for couples to do, having a joint checking account with your partner can make handling shared expenses much easier. This doesn’t mean you need to get rid of your personal accounts, and in fact, you probably shouldn’t, as having both a joint and a personal account lets you feel like you’re in a committed relationship without giving up your independence. Just use your budget to see how much you owe in shared expenses each month (e.g., rent or a mortgage payment, utilities, groceries, etc.), then transfer that money to the joint account. Overestimating that amount by a little might be helpful, as it can cover any fluctuations like a higher heating or grocery bill during a particular month, and if the joint account builds up a surplus, then you and your partner can use that money for something fun, like a date night.

Once you’ve gotten used to the joint checking account, you might also consider opening up a joint credit card. Paying for regular expenses like groceries with a rewards credit card instead of a debit card can get you cash back or points, and the additional credit will help your credit utilization ratio. Credit cards also offer more fraud protection than debit cards, making them a better choice overall. It should be noted that a number of credit card issuers no longer allow joint applicants. If that’s the case, you and your significant other can apply for separate cards (e.g., you get a credit card that earns cash back on groceries and your partner gets a credit card that earns points on travel expenses), then you can add each other as an authorized user, so both of you can earn rewards and use the cards when you’re not with one another.

Set personal and couples financial goals

After doing all of the above, you may think you’re in the clear in terms of couple’s finances, but actually, your journey has only begun. As your relationship grows, your financial needs will change, and a great way to stay on top of that is to set financial goals. Setting goals, both individually and as a couple, will get you and your partner talking regularly about financial planning, and set you up to be able to afford the things you really care about.

If you’re having trouble thinking of personal financial goals, getting out of any debt you have is a good top priority, followed by saving up six months’ worth of living expenses for an emergency fund and putting money in a retirement account. For couple’s goals, start off with something easy like dinner for two at a fancy restaurant, and then work up from there. Until the relationship gets really serious, like planning for marriage serious, try to pick goals that are easy for you and your partner to share. For example, a car is tough to evenly split, and if you break up, then ownership could become a huge issue, but a vacation is something you can both experience equally.

The scope of dealing with money in a relationship is much wider than this, and only gets more complex as you go through life, but these steps will give you a solid foundation to venture out into that world. To find more tips on building your financial future, read our personal finance blog.