Money Is More Intimate
So a decision has been made, by the heart, you want to get married or live with your partner, congratulations. It is a romantic time in one’s life. But a few things to consider before doing this, and no I am not trying to persuade you to not live together, I just want you to enter into this with your eyes and purses wide open.
Have you discussed finances yet?
Do you know what debts the other has?
How will you decide who pays what bills?
Do you have a financial plan for the future should you have children or one of you loses their job?
If you answered yes to all these questions then you do not need to read on, if however you did not answer yes to all of them, you may want to consider what I am about to write about.
It is important to have a financial game plan lined up when you make the decision to live together for a variety of reasons, one is you will be sharing certain expenses each month, rent or mortgage, housekeeping, utilities, etc. So if you take a few moments and outline what the bills will be and who is responsible for what, or have a common fund that both contribute to for these bills, not only does it help know how things will be paid, but if you can afford to pay them. It may be your combined income is not enough for each of you to service the debts you have and pay the basic bills. One person may be living at home with parents and not currently paying any rent. So while this exercise helps in knowing what bills you will have together, it can help in knowing what bills you may have separately, meaning other debts.
You may find that one of you has more unsecured debts such as credit cards, overdrafts, loans, etc than the other person. This is important to know when you are casting your lots together. Also important if you decide to purchase property or take on any debts together.
It would be wise to get a copy of your credit reports and share them with each other. You can even get a free credit report online.
So really what do you do? You sit down and draw up a plan, a plan listing what expenses you are going to have living together, what your respective incomes and debts are and how to pay all life’s little expenditures together. If you want to take this a step further, you each may want to obtain copies of your credit histories so there is full disclosure and this will also help if you do plan on purchasing property later on; you can see if there are any errors or items that need to be addressed before the time comes.
You can also decide if you want to combine incomes and have a joint current account. And to take it a step further you can have a rule that neither of you spend more than say £25, without consulting the other. It’s accountability in the relationship, no pun intended. It’s fiduciary trust, there is trust in fidelity, this is trust in financial matters.
One other small point to bring up here is supposed you are moving in together and one of you owns a property, and you are going to reside together in that property. Of course if your finances are separate and one of you owns the property in just their name that is all fine well and good right? Wrong! Depending on how long you reside together and how the bills are split, the person who does not own the property may later be able to claim a beneficial interest in the property. Or say they mismanage their finances and need to go bankrupt, it is your property, this does not have any impact on you or your property, it may. If it can be shown that the person going bankrupt has resided there for a period and contributed to the mortgage, upkeep or maintenance of the property, the court/Official Receiver may try to establish a beneficial interest and part of the property may be involved in the bankruptcy. I think that in itself is enough for couples to communicate their finances not only upfront, but ongoing as they are together.
And as we all know, if you keep the lines of communication open and going, the relationship as a whole will be better.
Happy co-habitation!
Have you discussed finances yet?
Do you know what debts the other has?
How will you decide who pays what bills?
Do you have a financial plan for the future should you have children or one of you loses their job?
If you answered yes to all these questions then you do not need to read on, if however you did not answer yes to all of them, you may want to consider what I am about to write about.
It is important to have a financial game plan lined up when you make the decision to live together for a variety of reasons, one is you will be sharing certain expenses each month, rent or mortgage, housekeeping, utilities, etc. So if you take a few moments and outline what the bills will be and who is responsible for what, or have a common fund that both contribute to for these bills, not only does it help know how things will be paid, but if you can afford to pay them. It may be your combined income is not enough for each of you to service the debts you have and pay the basic bills. One person may be living at home with parents and not currently paying any rent. So while this exercise helps in knowing what bills you will have together, it can help in knowing what bills you may have separately, meaning other debts.
You may find that one of you has more unsecured debts such as credit cards, overdrafts, loans, etc than the other person. This is important to know when you are casting your lots together. Also important if you decide to purchase property or take on any debts together.
It would be wise to get a copy of your credit reports and share them with each other. You can even get a free credit report online.
So really what do you do? You sit down and draw up a plan, a plan listing what expenses you are going to have living together, what your respective incomes and debts are and how to pay all life’s little expenditures together. If you want to take this a step further, you each may want to obtain copies of your credit histories so there is full disclosure and this will also help if you do plan on purchasing property later on; you can see if there are any errors or items that need to be addressed before the time comes.
You can also decide if you want to combine incomes and have a joint current account. And to take it a step further you can have a rule that neither of you spend more than say £25, without consulting the other. It’s accountability in the relationship, no pun intended. It’s fiduciary trust, there is trust in fidelity, this is trust in financial matters.
One other small point to bring up here is supposed you are moving in together and one of you owns a property, and you are going to reside together in that property. Of course if your finances are separate and one of you owns the property in just their name that is all fine well and good right? Wrong! Depending on how long you reside together and how the bills are split, the person who does not own the property may later be able to claim a beneficial interest in the property. Or say they mismanage their finances and need to go bankrupt, it is your property, this does not have any impact on you or your property, it may. If it can be shown that the person going bankrupt has resided there for a period and contributed to the mortgage, upkeep or maintenance of the property, the court/Official Receiver may try to establish a beneficial interest and part of the property may be involved in the bankruptcy. I think that in itself is enough for couples to communicate their finances not only upfront, but ongoing as they are together.
And as we all know, if you keep the lines of communication open and going, the relationship as a whole will be better.
Happy co-habitation!
