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.
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. 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.
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.
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
- Knowing the complete picture for your joint finances, and allowing you to strive to achieve joint financial goals
- Equal access to funds, particularly in the case of an emergency
Cons for combining
- One partner’s credit score, could affect the other, especially in joint asset or financial applications
- Some people might see combining finances as a loss of independence
- 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.