The price of love
'It's long been known that money problems always have been, and probably always will be, high on the list of relationship woes, and can be attributed to many break-ups (that and the whole monogamy thing)'. From his book 'The Barefoot Investor', financial whiz kid, Scott Pape advises on the best ways to manage your finances when you are in a relationship
- Joint accounts
- Joint credit
- Discussing your individual financial habits
- Prenuptial agreements
- Living in sin
- A cohabitation agreement
As much as I am a believer in the power of love, I still err on the other side of caution when it comes to sharing bank accounts, and underline that when sharing credit obligations.
Let's start with a joint bank account. This is an account that is set up in both partners' names and either may sign off on transactions, giving each partner equal access to funds. There are advantages to sharing a joint bank account. For one the minimum balance requirement may be more easily met when there are two of you contributing cash. Another advantage is the 'you paid for dinner so I'll pay you back by buying that much of the groceries' hassle. A shared bank account can also be a good way to jointly save for a mutually agreed purchase such as a holiday, with each of you contributing to the pool of funds.
That being said there are advantages to keeping things singular. For starters, there's a lot to be said for a little independence when it comes to how you spend your cash. Unlike a joint bank account, where one partner can go through your transactions with a fine-tooth comb and question your every purchase, with a separate account your money remains your business. There's also the advantage that should things turn sour it's less of a headache if you have individual accounts.
Joint creditI'm not a big fan of couples getting into debt together, when a couple go into debt either through a credit card or a loan it opens both parties up to significant financial risk and unless you are very careful you may end up paying the lion's share of a debt if your partner gets into financial difficulty.
Another potential problem may involve your partner not having the same degree of tardiness that you do when it comes to paying their bills, which may result in both of you getting a black marks against your credit ratings. Remember that lenders don't really care if you have issues. If you both have your names on the agreement they're not going to be too picky which one of you pays it, they just want it paid.
If the temptation is too much and you do decide to join forces and take the vow of credit, it's always good to keep a written record as to who is paying what, and who will eventually be the owner of any goods bought. Again, without sounding too negative, the last thing you want when you're going through a break-up is the unnecessary squabbling over who owns what.
We need to talkMy view is that if you're willing to share toothbrushes, you should be willing to have an open and frank discussion about money at least once. As Oprah would put it, it helps you to get to know each other on a 'deeper level'.
If you're taking the step of moving in with someone you probably have a good idea of their spending habits, but it's always good to talk about whether your partner adheres to some kind of budget, and whether they are in the habit of living from pay cheque to pay cheque, or, if they prefer to have a surplus of funds for when the unexpected arises. The answers to these questions will give you vital clues as to the financial make-up of your significant other.
Another important question to discuss with your partner is the (gasp!) amount of money they earn, and this time if it's a guy, get him to tell you straight, seeing as the last time he probably mentioned it was on the third date when he was really trying to impress. The amount you earn determines a whole range of things, most importantly your ability to pay bills.
The second thing to ask is if your partner has any borrowings, and how much they commit to paying off those borrowings. The third thing to talk about is their thoughts on gambling, and/or financial risk-taking - your boyfriend may like to trade the market and in doing so take big risks.
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Created: 22/05/2006 Updated: 22/05/2006
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