Marriage and Finances

Of Breakups and Closed Accounts

In our last issue, we discussed whether you should blend your finances when you get into a relationship. Money will be your biggest source of friction, and having boundaries doesn’t hurt. I listed some of the different financial relationships couples choose. There are different options besides “What’s mine is mine and never ‘ours’ or “It’s all or nothing or I’m out of here.”

Sometimes your best efforts to create a life together fail, and the relationship ends. Today, we’ll discuss how to unblend your finances. Whether you decided to share all of your accounts, or only share expenses, you should separate your finances as soon as possible, because you can be sure that someone’s name is on the wrong paperwork.

Take a look at your…

Rent or Mortgage: Who is on the lease agreement or loan? It should be the one who actually lives there. Ignore that piece of wisdom and risk having your home sold out from under you.

Utilities, cable, and cell phone: Whose name is on the accounts? They should be in the name of the person using them. If you don’t transfer ownership, you could have your utilities cut off without notice.

Insurance: This includes car, apartment, home, life, and medical. You don’t want to be without insurance, and you don’t want your money going to the wrong person if you don’t update your beneficiaries.

Credit cards and loans: Do you want to have your credit affected by charges that aren’t yours, or be forced to make payments on a car you don’t use?

“But Jill,” you say, “these all sound like things that happen in a hostile breakup. We’re not like that.” Even if your breakup is friendly, and your ex is as trustworthy and competent as a super hero’s alter ego, you still need to separate your accounts to protect yourself in case something happens to one of you. If one of you dies, or is mentally incapacitated, the law won’t recognize verbal agreements or promises. They only see whose name is on a piece of paper.

Let’s talk about verbal agreements. Let’s say the house and car loan are in your name, but you want to be nice. You don’t need them, and your ex does. Your ex has agreed to make payments, so it’s no big deal, right?

Wrong. Your credit will take a hit with the first missed, or late, payment. And, you may not be able to get a new car or house for yourself because your debt to income ratio is too high. The bank won’t take verbal agreements with your ex into consideration when you apply for your loan.

Here’s something else to think about: Can you maintain your current lifestyle if you live separately?

If you end up with the house or the car, can you afford the payments? Can you pay for the utilities, the maintenance and the insurance? You may have to make tough decisions, because you could be without the things you need to live if you don’t plan ahead.

Too many people have found themselves temporarily homeless, or had their credit ruined, after a breakup. Don’t let this happen to you.

Of Love and Shared Bank Accounts

I recently led a discussion about relationships and money: how to blend, and end, your finances with someone else. Questions were asked, and there were some interesting conversations going on in the room. Then, a few weeks ago, a long time reader of Quick Tips asked about shared bank accounts. I decided it was time to write about this subject again.

First of all, you may choose not to blend your finances at all. Many couples keep separate accounts and actually have happier and more successful partnerships because there are fewer arguments about who spent money on what and who overdrew the bank account. Others choose to handle their money and debts together, and they do just fine. The choice is yours.

Look at your habits and goals when you consider whether to combine your accounts or keep them separate:

How does each of you handle savings and debt repayment? Do you have similar philosophies, or are your bank balances mirror opposites, with one carrying a large debt balance and the other carrying a large savings balance?

Do you have the same financial goals? Or, is one of you saving mainly towards retirement, while the other wants to save for amazing vacations and a nice car.

Does one, or both, of you have any issues that you would bring into a blended financial arrangement? For example, are there any debts that are currently in collections or that were charged off; bankruptcy; judgments; wage garnishments; or tax liens?

Some people find this subject to be a touchy one. I even received an angry comment on my blog by someone who insisted that married people should share everything equally. But, keeping separate accounts isn’t about holding out, or being less in love. Sometimes, it’s about protecting each other and making decisions that will carry you furthest towards your mutual goals.

If You Have Separate Accounts, How Do You Split Expenses?

Most people assume 50/50, but there are other options. You could choose different percentages based on incomes, family size, habits and hobbies. For example, if you have shared custody of your 3 kids with a former partner, then you might pay a higher percentage of the food bill. If your hobby raises the electric bill (gaming, woodworking, sewing), then you might pay a higher percentage of the utilities. You don’t have to use percentages – you can divide up the bills, where one of you pays for this expense and the other pays for that expense. The choices are as varied as the couples who make them.

The bottom line is that you need to make informed choices that are right for you individually and as a couple. Money is the biggest source of friction in relationships. Have the conversation before you get married or move in together, so you know what to expect ahead of time. If you’re already living together, it’s not too late to make changes.

Next issue, I’ll talk about separating your finances after the relationship ends.

If you’re in a relationship, how do you handle finances as a couple?

Are you in a relationship? If you are, you know what it’s like to share your life with someone you love: your joys, your sorrows… and your money.

One of the biggest reasons for divorce (or breakups) is finances. I know you don’t want that to happen, so what can you do about it? Talk. Communication is the key to handling joint finances.

People have different ways of handling their finances. One person might be a saver who really values the money saved for future dreams and needs, while the other might be a spender who lives in the moment. If these two individuals become a couple, there can be disagreements about money that can escalate to divorce.

Take a minute to talk with each other about your money habits. It can be a really eye opening conversation. Really listen and try to understand the other person’s point of view. What did they learn about money growing up? What do they want right now? Where do they want to be in 1, 5, 10 years and beyond? With this understanding, you can choose a path that will work for the both of you. Meaning, the spender will save a portion and the saver will spend some money. Come up with mutual goals and agree on how you will achieve them together.

The goal is to handle your household finances and your goals in a blended way so that both people are comfortable. To do this, communication and action is key so that all feelings are heard and considered.

If you’re in a relationship, tell me how you handle your finances as a couple. Who handles the money? Who makes the budget? Who sets the goals?

Who handles the finances in your relationship?

I met a woman who asked me some questions when she found out what I do for a living. This subject is one that all of you should be aware of. You wouldn’t believe how many people this affects.

Are you married or in a relationship with joint finances? Even when couples share accounts, living space, or property, it’s typically one person who handles the finances in a relationship – paying the bills, savings, investing, etc. But, the other person shouldn’t be left in the dark.

Because this is your joint future, both should know what is going on and how to access the information at any time. The definition of the word joint is defined by Merriman-Webster as “united, joined, or sharing with others”.

Both of you should be making decisions together, understanding where you are today with your money and where you want to go for the future. You should both know the names of your banks and investments and how to access these accounts if you use an online account. Think of it this way, if the person handling the finances is not able to do it – what would happen? Could you put food on the table? Would the utilities be on?

Remember, too, that your children can see how the money is handled in your relationship. What you do, and don’t do, shows them just as much as what you tell them.

I also believe that each person needs to establish credit in their own name and if you are listed as a co-owner on the assets you should also be listed as a co-owner on the liabilities. What that means is that if you own a home (your name is on the deed) you should also be on the mortgage.

Many partners are left out of the finances. If that’s you, and something happens to the person who handles everything, you are going to have a difficult time. You may find that the bank accounts that you thought were joint are not. You may find that you thought you owned the home you live in, but you don’t. You may find that you need to open a credit card or take out a loan and you have no credit in your name.

All this happens more times than I can count. If this describes you, then you need to have a conversation today with your partner. You need to what know what assets you have, what liabilities you owe and have a plan for moving forward to achieve your goals. The first step is having this conversation.

A Mortgage and A Divorce: Not a Love Story

In a divorce, the best way to handle the mortgage is to refinance. This is to protect both parties. If you’re making the payments, the loan should be in your name. If your ex is making the payments, then take your name off the loan.

Why is it so important? Because your mortgage company considers a divorce decree to be a personal matter – not a legal matter. A divorce agreement can’t prevent foreclosures or repossessions. It also can’t prevent your ex from ruining your credit if he or she refuses to make payments. The loan document is all that matters.

What if the divorce decree put your ex in charge of mortgage payments, but he or she is refusing to make payments or agree to a refinance. You could always make the payments yourself. That would save the home and your credit. The courts will (eventually) order your ex to reimburse you, just don’t expect it to happen anytime soon.

Sometimes, the biggest income earner is ordered to pay the mortgage even if that person no longer lives in the home. This is more common when children are involved. In that case, both parties may be reluctant to refinance the mortgage, because they feel the original mortgage agreement gives them control over the other person or the home. This is a bad situation for everyone. If the person left in the home can’t afford the payments, and the person out of the home refuses to pay… then you could lose your biggest investment.

If you can’t agree to refinance, then sell the house and move. Regardless of how much you love the home, or the idea of your kids living in it, it is best if both parties move to a more affordable home than to endure the continued heartache of credit problems and payment disputes.

Finances: Choose the Right Relationship for Your Money Type

When people are looking to get into a relationship, they usually look for someone with similar interests and values. But, their shared interests rarely go as far their wallets.

People tend to attract opposites when it comes to money. Spenders attract savers and savers attract spenders.

With Valentine’s Day this weekend, let’s look at what you should be asking yourself so you can attract someone with similar money values.

First, you need to know what money type of person you are.

Are you someone who…

Has a budget or spending plan?
Maps out what your financial goals are and how to get there?
Carefully considers whether you need an item before buying?

Are you a spender or a saver? An impulse buyer or comparison shopper? Are you somewhere between the two extremes? You need to figure this out before you get into a relationship with someone. Then, you need to find out the other person’s money type.

If you don’t, you’ve doomed your relationship to endless arguments about money. If one of you has come into the relationship with great credit, no debt and their finances well thought out, and the other person has substantial debt with past due accounts and no savings, then that is a sign that you have very different philosophies about money.

Money arguments can destroy a relationship no matter how many similar interests you share. You need to add “money philosophy” to the list of qualities you’re looking for in a relationship. Money and credit will often be the determining factor in whether you can reach your dreams and survive unexpected emergencies.

Good Credit Marrying Bad

Reader Question: I have excellent credit and have worked to keep it that way. I will be getting married to someone who has debt and past tax liens, will this affect my credit?

Fortunately, credit reports are by individual. A person with good credit will not be affected by their spouse’s bad credit UNLESS they have joint accounts.

For example, if you purchase a home together, the mortgage will be a joint debt. If your new spouse is handling the bills and often forgets to pay your joint mortgage on time, then his late mortgage payments will show up as late payments on your credit report. This applies to any other debts that have in both names. Any activity will reflect on both of your credit reports (good or bad).

Could his older tax lien prior to your marriage and mortgage come back and hurt you? Yes, I believe it could. If you purchase a new home together as I described above, your spouse’s old tax lien could be put onto your new house. This would definitely affect you. I strongly advise that you check with a real estate attorney before purchasing a home together.

Married Finances: Should Two Become One?

Weddings are an emotional celebration. We love the idea of a bride and groom starting a new life together. We use words like “two becoming one” or “sharing your lives as one,” meaning that everything will be shared as though the couple are no longer individuals. I believe this puts a lot of unnecessary sentimental pressure on a couple to share all their finances even though it’s not always necessary, or even wise, to do so for every single account or property.

So, how do you merge two separate financial lives? There are many successful ways to do this. Some couples keep their individual incomes and expenses separate by having separate bank accounts, credit cards etc. Then, they have a joint expense account for their household bills that they each put money into. Sharing the joint account can be as simple as having each person responsible for different bills, or figuring out the bill totals and having each put in their half. Some people base the joint account total on a salary percentage (this works great when one spouse earns more money that the other). And, of course, some people merge everything and all accounts are joint.

You need to think about what type of financial people you are. Here are 3 questions to think about that will help you decide (and could possibly save some financial squabbles):

Are you a saver and your spouse a spender? Having one person be the fall back for financial emergencies can be challenging financially and to the marriage.
Are you both spenders? What will happen when there are no reserves for emergencies?
How do you each handle bill payment? Are all your bills paid on time? Do you have bills that have slipped through the cracks?

Answers to these questions can be tricky, but worth the discomfort. Proactive thought can be a financial life saver for your future. Double check your answers by looking at your account statements and credit reports. You may not be as good at finances as you think you are, or you might be better than you thought. Discuss your habits with each other, as well as any outstanding issues that could affect you both.

I am a firm believer that you both should participle in your finances. You have joint goals in your future, so you should do the financial planning for this together as well. Don’t let the responsibility fall to one person. If something were to happen to the “responsible” one, then the other party would be left completely in the dark, not knowing anything about the accounts or how to deal with them. I have seen many situations like this. It may seem kind, or convenient, to handle the money if your partner doesn’t know how, but it’s not.

Whichever way you choose to handle your finances as a married couple, make sure it’s a mutual decision based on real knowledge of your habits and goals.