Having the money talk with your partner

While you may have been putting off the money talk with your partner, matters of the bank account are very important. 

In fact, discussing your finances with a long or short-term partner, can save you uncomfortable conversations down the track, especially when you start to manage money together.

While you don’t necessarily need to know about your partner’s morning coffee run, some of the basics to discuss could include:   

Money talk – their debts 

If your partner is in debt, it’s important to know what you may be inheriting. While it might be a tough one to discuss, one in six consumers struggle with credit card debt in Australia alone[1], which means it’s a common conversation that needs to be had. According to psychotherapist and couples therapist, Melissa Ferrari, one of the major money issues in a relationship is the perception of dishonesty.

“When we have a situation where one partner has racked up some credit card debt, without any disclosure, you’re dealing with more than money. The fact that this information was withheld, suggests that your relationship may be facing issues around trust and security.”

Regardless of how hard the conversation might be, Melissa believes that honesty is the only policy. “If you have overspent or perhaps made a poor decision around finances, then be up front, open and honest. It’s an issue that you will have to work through together, and for the person who is carrying the secret, the release of stress in sharing is important for their own mental health.

“Get support as well, so you do not have to go through this alone, and working through the issue with a qualified counsellor you’re both comfortable with, can help work through these threats in your relationship.”

Keep in mind, however, that you are not legally responsible for repaying your partner’s debts, assuming they aren’t joint debt and you haven’t agreed on being a guarantor.

Technical expert at BT, Tim Howard says: “You may, however, find yourself taking on these debts, either directly or indirectly if you combine your finances in a longer-term relationship.”

Money talk – defaults or bankruptcy

The reality is defaults or bankruptcy could impact you, or your partner’s credit score and cash flow, not to mention, your future plans with them. If you have joint accounts, then one partner’s credit rating can affect the other, which may determine how you manage money together.

Tim adds: “Many couples may find themselves wanting to buy a home together at some point in the future. With homeownership more often than not being accompanied by the need to borrow, understanding each other’s financial position when it comes to borrowing will be important.

Money talk – financial goals

Do you both have the same vision for the future? Do you want to travel the world while you partner wants to invest in shares? Do you both want to buy property or is one of you happy to rent for the foreseeable future? Having the money conversation early, and knowing this upfront, could help you compromise or save you from heartache down the track.

Tim says: “Managing money is a reality of everyday life, and is not without its challenges, so you need to start making financial decisions that impact two of you, which adds another dimension to the decision making process. Having these conversations early and sharing your views and plans financially can only be a good thing.”

Melissa agrees, saying that creating a safe space for financial conversation is key. “When we come together as a couple, we bring with us baggage from a previous life, particularly our childhood. If someone comes from a background of financial disadvantage, then you are likely to be more frugal with money. The key to every successful relationship is how we communicate with each other, having each other’s backs and creating a loving and supportive environment where no topic is off limits.

“Keep in mind, that having difficult conversations is a key part of a relationship – being open and able to speak freely on a topic, such as how your partner’s spending could cause distress, is very important.

Money talk – joint finances

To combine or not combine – that is the question.

Deciding whether or not to combine assets and finances, or apply for joint loans, can be quite complicated, which is why it’s important to identify the benefits of both: 

Pros for combining

1. Knowing the complete picture for your joint finances, and allowing you to strive to achieve joint financial goals

2. Equal access to funds, particularly in the case of an emergency

Cons for combining

1. One partner’s credit score, could affect the other, especially in joint asset or financial applications

2. Some people might see combining finances as a loss of independence

3. May cause strife in situations where each partner manage money differently, and there’s yet to be agreement on a budget both are comfortable with.

In situations where you partner has existing debts or has previously declared bankruptcy, it might be valuable to seek advice from lawyers, accountants and financial advisers on managing this.

All is fair in love and war

Having practical conversations about finances upfront, can help you find a fair and comfortable way of managing your future with your partner – for better and for worse. “As a relationship evolves, and you begin living together, not having mapped out a plan on how you will deal with the bills and the sharing of finances is asking for trouble,” Melissa adds. “My advice is simple; if you are looking at moving in together and sharing a life, then coming to an agreement on money should be a priority. “

Speak to a financial adviser or learn more with BT

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[1] https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-201mr-asic-s-review-of-credit-cards-reveals-more-than-one-in-six-consumers-struggling-with-credit-card-debt/

This has been prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it.