Feb 03, 2020 / News

Financial Planning

Having the money talk with your partner

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.

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 alone1, which means it’s a common conversation 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.

“When we have a situation where one partner has racked up some credit card debt, without any disclosure, you’re dealing with more than money. The fact that this information was withheld, suggests that your relationship may be facing issues around trust and security.”

Regardless of how hard the conversation might be, Melissa believes that honesty is the only policy. “If you have overspent or perhaps made a poor decision around finances, then be up front, open and honest. It’s an issue that you will have to work through together, and for the person who is carrying the secret, the release of stress in sharing is important for their own mental health.

“Get support as well, so you do not have to go through this alone, and working through the issue with a qualified counsellor you’re both comfortable with, can help work through these threats in your relationship.”

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.

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.

Your financial goals 

Do you both have the same financial vision for the future? Having the money conversation early, and knowing whether or not you do could help you compromise down the track. 

Melissa believes that creating a safe space for financial conversation is key. “When we come together as a couple, we bring with us baggage from a previous life, particularly our childhood. If someone comes from a background of financial disadvantage, then you are likely to be more frugal with money. 

The key to every successful relationship is how we communicate with each other, having each other’s backs and creating a loving and supportive environment where no topic is off limits.

“Keep in mind, that having difficult conversations is a key part of a relationship – being open and able to speak freely on a topic, such as how your partner’s spending could cause distress, is very important.

Joint finances

To combine or not to 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

  1. Knowing the complete picture for your joint finances, and allowing you to strive to achieve joint financial goals
  2. Equal access to funds, particularly in the case of an emergency

Cons for combining

  1. One partner’s credit score, could affect the other, especially in joint asset or financial applications
  2. Some people might see combining finances as a loss of independence
  3. 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 your 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. As a relationship evolves, and you begin living together, not having mapped out a plan on how you will deal with the bills and the sharing of finances is asking for trouble,” Melissa adds. “My advice is simple; if you are looking at moving in together and sharing a life, then coming to an agreement on money should be a priority.”

For assistance with having these conversations with your partner and putting together a plan for managing your joint finances, contact your Edwards Marshall Financial Solutions Advisor today.

About us

EMFS was formed in 2001 originally to service the financial planning needs of the clients of Nexia Edwards Marshall, Chartered Accountants. In addition, we now service clients referred by other accounting firms, lawyers and clients who are not serviced by Nexia Edwards Marshall. We manage funds totalling about $250m on behalf of clients.

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Liability limited by a scheme approved under Professional Standards Legislation. Contents of this publication are general of nature and are not intended to be used for decision making purposes. Edwards Marshall Financial Solutions Pty Ltd ABN 45 096 434 842 is an Authorised Representative of Edwards Marshall Advisory Pty Ltd ABN 18 600 878 555. AFS Licence No. 479 792.