When you are all loved up, money matters can seem very unromantic but like many practical things in life, they’re important. Talking about finances when you are in it for the long haul can save you from a lot of arguments down the track (and help keep the romance alive).
No time like the present
Good communication is a key part of a relationship – and being clear about finances and your expectations is all part of this. This conversation is worth having as soon as you realise it’s getting serious and you want a future with your partner, Daniella Elchaar, Senior Financial Adviser with BT Advice, recommends.
You don’t necessarily need to know every little thing, after all, chances are you are still finding out a range of more interesting and fun quirks about your partner, but the basics might include the following.
- Their debts
You need to know what you’re inheriting when it comes to joint debt. This might range from big ticket items like home loans to the less remembered but equally important credit card debts as well as HECS debts.
- Defaults or bankruptcy
A default or bankruptcy could affect yours or your partner’s credit score and cashflow – not to mention your future plans with them such as buying a property together.
- Spending habits and values around saving
This could actually be a major source of contention down the track if one partner flashes the cash while the other is more frugal. Shared habits affecting money might also include one of you living from pay check to pay check while the other is more likely to put something aside each week.
- Future finance dreams
Do you both have the same dreams? Does one of you want to spend everything on a gap year while the other wants to put everything in shares? Or is one party a gambler who might carry this habit through your relationship? Knowing this upfront can help you compromise, but also save you from heartbreak down the track if these dreams are deal breakers for the relationship.
Bear in mind, how we manage our finances can link to our personality so your partner’s behaviour can be something that carries into the relationship, for better or worse.
Pooling resources – are you really ready to become one
To combine or not combine – that is the question. Deciding whether or not to combine assets and finances – or apply for joint loans – can still be complicated. There are pros and cons to combining or keeping everything separate.
Pros for combining include:
- equal access to funds, particularly in the case of an emergency
- knowing the complete picture for your joint finances and allowing you to strive for better things than either alone might have been able to
- in the event of a separation, joint ownership is easier to prove.
Negatives for combining finances include:
- the ability of one party’s credit score to affect the joint asset or finance applications
- some people might view combining finances as a loss of independence
- may cause strife in situations where each party has different spending habits and there hasn’t been agreement on a level both are comfortable with.
In situations where your partner has existing debts or has previously declared bankruptcy, it might be valuable to seek professional advice from lawyers, accountants and financial advisers on managing this. Elchaar also mentions one example where there were no joint assets or debts and one partner wanted to ensure their newly formed business wouldn’t impact on the other’s assets within the relationship, should anything go wrong with the business. Speaking to professionals helped find a solution for structuring the business to manage a worst-case scenario.
All’s 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 the best and the worst. Some of those urban legends about couple debts have risen because there haven’t been clear and honest discussions. Consider this the new love tip – discuss your finances and plans to keep the romance alive.
Information current as at 15 August 2017. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it.
Daniella Elchaar is a BT Adviser. BT Advisers are representatives of Westpac Banking Corporation ABN 33 007 457 141 AFSL & Australian credit licence 233714 (Westpac). BT Advice is a Division of Westpac. This publication has been prepared by Westpac. ©BT Financial Group 2017