New Couples and Money

You’ve just moved in with your current love or maybe you’ve just got engaged. This is a happy, exciting time in your life. The two of you may have discussed where to go on a honeymoon, whether or not to have children, how many or where your dream house will be. But have you had a conversation with each other with regard to your finances? Everything listed above costs money and both of you need to be honest with each other regarding your finances in order to have those things.

As you begin a new, permanent relationship, it is time to set your financial goals as a couple and to be honest about your money values.

Here are things you need to discuss.

1. How are you going to manage your day to day expenses? Some couples close their individual accounts and open a joint bank account. All their money gets deposited and withdrawn by either person from this bank account. It sounds like the most convenient way to handle expenses but for some it can cause problems. Who is depositing the money and who is withdrawing the money? And for what reason? This strategy works the best for couples who both manage their money well. So before you decide how you are going to handle your banking, it would be wise to write up a monthly budget then decide who will be responsible for paying for what. Some couples maintain separate banking for their entire relationship. Each is responsible for paying some of the joint bills. For example, one pays for the groceries and the other pays the rent. Some couples use a hybrid of both methods in which each maintain a separate bank account and pay their own individual expenses but both deposit a set amount to a joint bank account and joint expenses are paid from it. But how much should each contribute to the joint bank account? Some couples each deposit the same amount of money, for example, $2000 per month. Other couples each contribute a percentage of their income. Once you have come to an agreement, talk about what will happen if one spouse’s income is reduced because of, a job loss, reduced hours or maternity leave?

1. What is your net worth? This is a list of your current assets and liabilities. An asset is an item that you could sell and receive money for.  For most of us this means real estate, cash in our bank accounts, RRSP’s and vehicles. Liabilities are your debts.  Ideally your assets should be higher than your liabilities. If so, you have a positive net worth. As you get older your net worth should increase.  How do each of your net worth statements compare? Are you both in agreement concerning your net worth goals? This is important because your net worth can determine when you will be able to buy that dream home, afford to have children or when you can retire.

3. What are your short and long term goals? This is important to establish early in a relationship because you may discover you have radically different financial goals. If one of you is happy to rent forever and basically spend every dime on travelling or entertainment, but the other spouse wants to save up for a house and early retirement – the relationship will be challenged. You need to be honest with yourself and each other as to what is important to you and where you see yourself financially in 5, 10 or 20 years. If your goals differ, determine if you are both willing to compromise. Staying in a committed relationship is hard work and can be stressful. When your goals and dreams are aligned you can look forward to long term happiness and peace in the household.

Brian Denysuik is a local credit counsellor and registered insolvency counsellor at Creditaid who has been in the financial services industry for over 35 years.