Healthy Finances, Healthy relationship.

Financial health – or rather, the lack of it can be bad for your relationship.  Financial issues rank amongst the biggest reasons couples split up.  It’s been estimated that money problems are the prime cause of 90% of divorces.  So, whether you’re entering into a relationship, already in one or newly married, how do you talk about the elephant in the room?  Your finances – as they are now and as you want them to be through your life together.

Experts say that communication, building trust and of course honesty are vital keys to healthy relationships.  Talking about money in an open and honest manner ensures you are taking the necessary steps to build your relationship and a solid financial future together.  Here are a few tips for successfully integrating your financial lives together.

• Never keep secrets – Each of you should disclose assets, financial commitments (such as loans or other debt) and credit history.  Full disclosure is important because if you’re planning on sharing a credit card or applying for a mortgage – if your partner has a bad credit history there could be some unpleasant surprises.
• Recognize your differences – You may be a saver, your partner may be a spender.  You will need to create a framework and a budget that takes these differences into account and one that you are both comfortable with.
• Joint of individual? – Decide if it’s best to maintain separate bank accounts, credit cards and investments or to merge them to eliminate duplication and possibly enhance financial benefits.  Make these decisions with a clear understanding of the tax and legal implications of doing so.
• Decide  – Who will manage the day to day finances – like paying bills and who will manage overall financial affairs.  What should be done with personal assets, e.g. a car or home that was brought into the relationship?
• Plan – Have a discussion about achieving your goals such as buying a home or starting a family.  It’s a good idea to have this discussion on a regular basis to ensure you’re both still share the same ideas and are sticking to the plan.
• Contracts – A marriage or prenuptial agreement is not very romantic, but they are especially important if you are excluding certain assets from equalization of property should the relationship breakdown, like a family cottage or to protect assets for children from a prior relationship.  Don’t wait for irreconcilable differences to arise before speaking with your family lawyer.
• Save on taxes – Although couples must file separate individual tax returns, there are many tax-planning strategies that can reduce your total tax bill.  Income and pension income splitting where appropriate and spousal RRSP’s could be advantageous.

Talking about money is not the best conversation couples can have but it is necessary for the good health of your financial future together.  Your Certified Financial Planner can help you build the right financial plan taking into consideration not only your shared goals but your individual ones as well.

 

This column is written by Michelle Weisheit CFP, IG Wealth Management and presents general information only and is not a solicitation to buy or sell any investments.  Please contact your own advisor for specific advice about your situation.