If you and your partner have ever had a blow-up over money, you’re not alone. There are volumes of research that show it’s a major source of conflict in many relationships. Here are three practical steps to help you overcome this problem.
Different spending habits, financial dishonesty and debt can all loom large as sources of frustration between partners, potentially upending the relationship.
A recent survey by Credit Canada found that one-in-three Canadians either have ended or would end a relationship because of their partner’s debt. The leading financial reason cited for ending a relationship is a lack of financial honesty, such as hidden debt or purchases (71 per cent), followed by poor money management or spending habits (48 per cent), the survey shows.
People often seek out legal advice when their relationship ends. In my opinion, couples would be well-served to speak to a lawyer before they go into a marriage or move in together so they understand how that will impact their finances. Recognizing that many partnerships ultimately end, it’s smart to look at it from a common-sense perspective.
Here are my top three strategies for money-proofing your relationship:
Step One: Have THE Talk
Like every other aspect of a solid relationship, communication is the cornerstone of a financially healthy union.
Understanding that financial issues are often at the heart of divorce disputes, it’s important to approach the conversation frankly and honestly, removing the emotion. In modern society, we have somehow conflated the idea of romance with avoiding tough conversations, but that’s nonsense. The healthiest unions are ones where partners openly discuss potential problem areas before they get married or live together and regularly throughout their relationship.
Often the issue surfaces when couples move in together or get married and face the decision about whether to combine finances. Will one partner pay the mortgage and utility bills while the other covers the food and entertainment expenses? Does it make sense to have joint or separate bank accounts and credit cards? The answers to these questions will be as varied as the people who pose them; what matters most is that you discuss it.
Even topics as simple as spending habits can cause big problems in relationships. In many couples, one partner is a spender while the other is a saver, and this clash of ideals can be a chronic source of conflict.
Step Two: Protect Your AssetsIf there’s a disparity in assets or income between partners, it’s a good idea to get legal advice before saying, I do, or calling the movers.
The law protects people who enter the relationship with more assets, money, real estate, etc. as long as they aren’t intermingled, and there’s a paper trail to reflect that. Otherwise, income that’s generated from those assets may be considered part of your net family property if/when the relationship ends, and you’ll have to share it with your former partner.
I advise couples to outline their financial positions in an agreement (cohabitation agreement or marriage contract), so it’s crystal clear, and any revenue generated from the property is protected. It’s also vital to have an agreement when you’re entering into a second marriage, have children, and want to ensure certain assets are allocated to them alone.
Step Three: Get Intimate with Your Finances
No one goes into a marriage or committed relationship thinking it will end, but it’s prudent to consider that as a potential outcome. With that in mind, it’s essential that both parties understand their household finances.
Don’t blindly turn all things financial over to your partner even if they have superior skills in this area. It’s in your best interests to have a firm handle on the inflow and outflow of money, especially if you’re in a common law relationship, which doesn’t afford the same legal protection married couples enjoy.
Too often, I see situations where one partner, often the woman, stayed at home to raise children and all the property and assets are in her partner’s name. Then they split up. While there are certain legal arguments she could advance to make a claim on property, the onus will be on her to do so. It’s not naturally assumed the way it is when you’re married.
Another nasty surprise that can surface when a relationship ends is discovering there’s much more debt than you realized. While you may not be liable for debt incurred by your partner, it could have a devastating effect on your children and your lifestyle. Keeping a watchful eye on financial statements is sensible, regardless of how great your relationship is.
A recent study from Fidelity Investments shows that one of the biggest regrets of people who have divorced is not being more involved in the day-to-day finances during the marriage. Those people took longer to recover from the financial stress of divorce, with nearly 40 per cent of them saying they have yet to recover.
Money is always a touchy subject, but having these conversations early on and throughout the relationship will save couples headaches and position them for a financially successful union.