The price of love: iVillage

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

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 credit

I'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 talk

My 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.

Cohabitation and prenuptial agreements

Something old, something new, something borrowed, something blue ... Oh, and something in writing too. Welcome to the world of prenuptial agreements. Usually the domain of tacky gold diggers like Anna Nicole Smith, now there is increasing interest in them in the UK.

These agreements are mainly used by one person who comes into the relationship with significantly more assets than the other - as in boy meets girl, girl has a three-bedroom apartment.

In the UK, prenuptial agreements are generally not enforced in divorce courts. Those fuddy duddy old judges don't like having their hands tied when it comes to making settlements in divorce cases.

Living in sin

About 40 per cent of marriages end in divorce, perhaps one reason why more of us are choosing to cohabit. Around 70 per cent of couples now live together before getting married, compared to just 5 per cent in the mid 1960s.

The fact is that people are delaying marriage till later in life. Instead, they're going down the somewhat more sensible route of living together before marriage. Why is it sensible? Most people will agree that the only time you really get to see someone's true colours is after sharing a roof with them for an extended period.

'De facto' is a rather ugly term that describes two people in a relationship living under the one roof. Most couples I know that live together agree that living together is a big form of commitment, and is basically the same as marriage, except for the expensive wedding, and the engagement presents.

A cohabitation agreement

It's possible for a couple that are living together to draw up a legal agreement to cover what might happen to their joint possessions in the event of a break-up. Both parties would need their solicitors to advise them and the agreement should only cover significant material possessions such as property or joint investments and be unambiguously worded. It is worth remembering that agreements like this have still to be fully tested in UK courts so if in doubt, either make sure your own assets are kept entirely separate - or get married!