Money arguments are the second leading cause of divorce.
To reduce your odds of breaking up due to money problems it is vital that you have the “money talk” BEFORE comingling funds.
Like the “STD talk”, if you do not feel comfortable talking about money, and each of your specific financial situations, you are simply not ready to comingle your money.
It may seem romantic- and maybe even sensible- to create a joint bank account to show how serious you are about your relationship. After all, this is one of the steps to committed relationships, right?
Not exactly.
There are a number of reasons why you might decide not to comingle your money with your significant other.
A big one is if your partner or spouse has a bad track record with spending. Whether it is retail therapy, gambling, partying, or any other expensive hobby, you do not want them to have access to the money you need to pay the bills.
A second is the legal ramifications. Depending on where you live, using joint funds to pay, for example, your mortgage could give the other person legal rights to the equity in your home. It may not be a big deal if you live happily ever after, but could be a problem if you do not.
Part Two of the legal ramifications is that your significant other can take some or all of the money in your joint account(s) without your permission. And there is nothing you can do about it.
A third is accountability and autonomy. Do you really want to be asking your significant other what they are spending the money on? Do you want to be giving a detailed accounting of every penny you spend? How do you decide how much each person is “allowed” to spend without consulting the other?
There are others, but these are the most common.
Not sure what questions to ask? Here are a few to get you started:
1A. What is your credit score (for those in North America)?
You should each know your score and why it is where it is.
1B. For outside North America, do you have any negative reportings to the national credit bureau (they have different names, depending on the country)?
2. What is your total debt? This includes credit cards, student loans, mortgage, auto loans, personal loans, and anything else owed.
3. Have you ever declared bankruptcy? If so, why?
4. Have you ever used a debt consolidation or reduction service?
If your partner has a history of not paying bills in their entirety and then racking up more debt, you will want to be aware of this vicious cycle.
5. Have you ever found your spending to be completely out of control?
This will uncover those shopping, gambling, and other problematic spending patterns that could cause your significant other to dip into your joint account.
Past money problems or red flags do not have to mean an end to the relationship. Once you have laid all your financial cards on the table, you can form a plan to determine if you keep your finances completely separate, completely merge them, or have yours/mine/ours accounts.
To avoid future problems, ensure both partners have full access to any joint accounts. And, make sure you keep any separate accounts completely separate. Use passwords your partner will not easily figure out. You may even want to use different banks (I actually had to do this with my now-ex-husband because the bank allowed him to access my business account, even though his name was not on it, because we had our joint account at the same bank).
These are just a sampling of the discussions we have in my Money Mom Academy program. With 8 modules, weekly group calls and bi-monthly 1:1 calls, there is plenty of time and support to discuss whatever questions you might have about money, finances, investing, and money mindset. We can discuss your personal situation, or ways you can help guide your children and other loved ones. After all, no one is born knowing how to navigate the various financial stages of life- and they certainly are not teaching this in schools! For more information or if you have any questions about having the “money talk”, email me.