Читать книгу The Modern Couple's Money Guide - Lesley-Anne Scorgie - Страница 6

Scrap Your Emotions and Sort Out Your Accounts

Have you ever skied down a black diamond run with a blindfold on? Probably not — it’s crazy dangerous and just plain stupid. So is allowing your partner to call important financial shots on your behalf.

One of my very first clients was a newly divorced woman, aged 40. During her 10-year marriage, she let her husband manage their investments. After her separation agreement was finalized, she had no idea how their money had been invested. As it turns out, her ex-husband was highly conservative and had kept the bulk of their money in guaranteed investment certificates (GICs) and cash, earning little interest. Meanwhile, my client would have been better off taking on more risk to grow her portfolio. But because she didn’t get involved in the decision making around her investments, she missed out on a decade’s worth of portfolio growth.

If you’re guilty of deferring important financial affairs in your household to your partner, that needs to stop today! I don’t care if your partner is better with money than you. This isn’t the 1950s. Both partners have an equal responsibility to make savvy financial choices together — as a team. Whether money matters are your “thing” or not, you should take an interest in them to avoid finding yourself in a financial situation of which you weren’t fully aware.

Consider the task of checking up on your personal finances like taking your car in for regular maintenance.

Consider the task of checking up on your personal finances like taking your car in for regular maintenance. If you take care of your vehicle, it will run smoothly and for a lot longer than if you were to neglect it. It’s the responsible thing to do.

Financial Chores

What financial tasks or responsibilities happen in your household? As a best practice, it’s wise to swap these chores every few months so that both partners know how to do all the important financial tasks. You may find through this process that one partner is better at a particular task than the other. And it’s okay to lean on each other’s expertise, but both of you should be able to perform all of the financial chores required to run your home. Just imagine what a pickle you’d be in if your partner went into a coma and you’d never logged into your online banking.

Take 10 minutes to create a list of financial chores that are done in your home. For example:

 Bill payments

 Investing

 Online bank transfers

 Meeting with the bank for loans, mortgages, or credit cards

 Budgeting

 Buying a home, a car, or other big-ticket purchases

 Negotiating prices or interest rates

Once you’ve created a list, assign the tasks equally. Should you or your partner find that you’re having trouble completing certain financial chores, help each other out or simply do a search on Google for best practices on subjects like budgeting, investing fundamentals, interest rate negotiation, or how to hire the right financial adviser.

Accounts

When couples get together, both partners have their own existing bank accounts, credit cards, loans, mortgages, and leases. Early in a formal union, couples face the choice of joining their finances or continuing to operate independently. Regardless of your personal views on this, stats show that neither approach is better than the other. It’s completely up to the couple to decide what’s best for them. And the great thing is that if you find sharing a bank account to be problematic, you can switch back to banking independently.

My grandmother and grandfather on my father’s side were married in 1948. My grandmother was a book keeper in Toronto (until “quitting” work because she got pregnant) and my grandfather worked in the finance department of an electronics company for his career. They had separate bank accounts when they met and continued to maintain that system for over 60 years, until my grandfather passed away. Separate accounts were not a problem for them. They developed a household budget together, which my grandmother managed on a day-to-day basis, and they always discussed big financial decisions.

My grandparents on my mother’s side managed their money in the opposite way. After returning from World War II with his blushing war bride, my grandmother, my grandfather set up their finances jointly. Chequing, savings, investments went in both names from the moment my grandmother landed on Canadian soil. My grandparents made financial decisions together, which is what helped keep them together.

The moral of these stories is that it really doesn’t matter whether you and your partner join your accounts or not. As long as you plan your finances together, like a team, you’ll be fine. But, if you plan them apart, like you’re planning for different priorities that are not aligned, that’s when you’ll run into serious relationship and financial trouble.

I do have three tips, however, if you choose to keep your accounts separate.

First, I recommend that you keep each other apprised of what’s happening with your day-to-day banking, investments, and other financial matters. This helps to ensure transparency.

Second, have a crystal-clear agreement about who is responsible for paying certain bills, like the mortgage, or making important contributions, like to your RRSPs by the annual deadline.

Third, in the event that something happens to one of you (death or a terrible accident), you need to have ready access to all of your partner’s financial resources — and his or her will, but we’ll get to that later on. One of my best friends’ father passed away unexpectedly while the family was on vacation in Jamaica. She was only 10 years old at the time. Because the events around his death were suspicious, and her mother wasn’t joint on his accounts and had nothing in her own name, she had to fight with the probate court system for over a year before seeing a single penny from his estate. Throughout that year she struggled to pay their mortgage and other bills.

There are many benefits to combining your chequing, savings, credit card, and investment accounts:

 You have fewer accounts to monitor and lower banking fees.

 You benefit from increased transparency in that you both have access to and can see all the account activities. This makes it easier to have an open discussion about what’s happening in the accounts, create a budget, and manage accounting and taxes.

 In case of an emergency, both partners have access to all financial resources.

 If one person earns a much higher income, it can be shared easily.

There are also drawbacks to sharing accounts:

 When couples pool their incomes, it creates the perception that they have more money than before, which can quickly trigger overspending.

 Couples can get frustrated and may disagree with each other’s spending patterns.

 If the relationship breaks down, there’s a risk of one partner taking off with the financial resources. This would end up being settled later on in court, but it would cause a great deal of short-term financial pain.

 When you apply for credit in both names, you’re evaluated on both your credit scores, and if one partner’s score is bad, it’ll affect the joint application.

To join or not to join — the choice is yours. Transparency is key.

Bills and Loans

Paying bills blows, but it is an inescapable fact of life. From a legal perspective, the person whose name is listed on the bill is the person responsible for paying it. And if the bills don’t get paid, the billing companies will harass you at home and at work, and eventually report you to the credit reporting agencies (there are two in Canada, Equifax and TransUnion). These organizations monitor your credit management history and assign you a credit score. If you have a high score, it indicates that you are responsible with credit. When bills are not paid on time or in full, your credit score will be eroded and it will become difficult to get additional credit.

It’s in your best interest to register the bills in the name of the person who will ensure they get paid on time and in full. It’s very important to note that if your name is not on the bills, you do not build credit even if you live in the same house and have a joint bank account. So, if you want to build a positive credit record, put the bills in your name and pay them on time and in full.

Often, partners bring existing bills or loans into their union. For ex­­ample, one person could have a $20,000 student loan while the other has no debt. Legally, you aren’t held responsible for any debt assumed by your partner prior to your union — just the debt and bills accumulated during your union. But, in some form or fashion, you are responsible for everything because you have to live with your partner’s cash-flow limitations.

Take, for example, Alicia. She has a massive line of credit of $90,000 from a business that she started a few years before meeting her partner, Max. The business went belly up and Alicia is stuck making payments of $900 per month on the line of credit. Max gets frustrated because Alicia’s debt is preventing them from purchasing a larger home. Yet Max had nothing to do with accumulating the debt in the first place.

Alicia and Max’s situation isn’t uncommon and could easily lead to major fights. To avoid unnecessary tension, they’ll have to create a plan to eliminate the line of credit as quickly as possible. The big question is whether Max should help Alicia out or let her pay off the debt alone. I can’t answer that question for them because it’s a personal choice. But what I can share is that the faster Alicia is free from her debt, the sooner Max and Alicia can get a larger home.

What Are You Bringing to the Table?