When it comes to asking your partner to move in, the question is almost always about love (and, if we’re being honest, convenience). Rarely is it about the most financially advantageous way to file your taxes. But while talking budgets isn’t exactly sexy, it is critical when you’re starting your life together. Here’s what you need to know.
Two bank accounts or one?
That was a trick question. According to financial planner Shannon Lee Simmons, author of Worry-Free Money: The Guilt-Free Approach to Managing Your Money and Your Life, the answer is actually “three.”
“One thing that leads to fights is seeing money as ‘what’s mine is mine and what’s yours is yours,’” she says. She advises opening a joint bank account for household expenses and hanging on to your individual ones for discretionary spending.
It’s not just a strategy for developing money management skills—for common-law couples, it’s also a contingency plan, or what Lee Simmons adorably calls an “eff-off fund.”
“It’s important to have your own stash of money so that, at any point, you can walk away from a job or relationship that you’re not happy in,” she says.
What about a joint credit card?
The better question here is: How comfortable are you sharing a credit rating? Either way, have at least one card solely in your name to build your credit score.
How should we split bills?
Even if you are equal partners in your relationship (and of course you are!), that doesn’t mean you have equal income.1 “When you have one partner making $30,000 and one making $100,000 and you’re splitting bills fifty-fifty, it can breed resentment,” says Lee Simmons. She suggests paying shared expenses in an equitable—not equal—fashion.
I’m comfortable sharing my salary, but do I really have to share my partner’s debt, too?
Not necessarily. However, own up to what you owe, and if you do decide to attack debt as a team, keep in mind that it can improve your household’s net worth and overall cash flow.2
We’re getting married. I’m pretty confident that we’re going to die holding hands during the night. Why does any of this matter?
Straight up, marriages (and in some provinces, common-law relationships) are financial partnerships. If you don’t visit a lawyer or financial adviser prior to the big day, you’re essentially signing a financial document without legal representation.
“The problem is that people still think of marriage as a religious ceremony, but it’s a legal contract,” says Darren Gingras, executive director of The Common Sense Divorce, a family mediation service. “It’s like you and I starting a business and incorporating; all of the debts and assets come under the name of the business.”
Even if your spouse’s name doesn’t appear on your bank account, house title or pension, they’re still entitled to half of everything if you split up. The only way to protect your assets is by signing a pre-nuptial agreement3 or, for common-law couples, a cohabitation agreement.
So, basically love is dead and I should just live in sin until the end of time?
The good news is that there are still legal and financial arguments for why marriage is advantageous. For starters, children aren’t covered by cohabitation agreements. Secondly, suppose you die prematurely without a will? If you’re not married, your estate will go to your blood relatives—like your younger brother whom you don’t even like very much.45
Ultimately, being financially savvy isn’t just about protecting your assets in case true love doesn’t conquer all—it’s also about protecting the person you love right now.
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|1.||↑||What with ladies only working 77 per cent as hard…|
|2.||↑||First, make sure you are not living in a Lifetime movie. Nine times out of 10, you’re going to find out, too late, that you’ve been living with a grifter. If you survive, that is.|
|3.||↑||Also called a marriage agreement. The term “pre-nup” is misleading: The paperwork can actually be drawn up even after the deed is done.|
|4.||↑||Case in point: Stieg Larsson, the author of The Girl with the Dragon Tattoo, had a heart attack at 50. As if dying prematurely didn’t make him enough of a jerk, there was no will. That meant that the rights to his estate—valued at some $50 million—went to his estranged father and brother instead of to his partner of 32 years.|
|5.||↑||Hot tip: As convincing as these arguments are, if you’re about to pop the question, divorce and death probably shouldn’t factor into your proposal.|