What love got to do with money?
A lot…
When you’re entering into a serious relationship, chances are, you’ve already built a life for yourself—financially and otherwise. Whether it’s assets, debts, or investments, it’s a big deal blending this with someone else. The best way to ‘tackle’ this, is to have some open and honest communication to make sure you’re on the same financial page.
Here are some suggestions on what to consider when you’re merging your finances:
Full Disclosure
Before anything else, you have to know where each other stand. Have an honest discussion about your individual financial situations. Lay everything on the table—assets (like property, savings, investments), liabilities (debt, credit cards, loans), income, and expenses. Transparency is key to building trust and you don’t get any unpleasant surprises later on.
Separate and Joint Financial Goals
How does your financial goals align with your partners and what about combined couple goals? Do you plan on buying a house together? What about investing in stocks or property? Do you plan to keep investments separate or combine them? How do you plan to make financial decisions together? This will prevent future conflicts and help you both work towards shared common goals.
Handling Debts
Debt can be a tricky one. Do you both have individual debts or loans? If so, decide whether you’ll handle these separately or together. For debts incurred during the relationship, you’ll want to figure out if you’ll both be jointly responsible.
Estate Planning
Have you already got your estate planning sorted? With a new person in the picture, updating your estate planning documents and will helps to ensure you and your partner is taken care of if anything happens. Think beneficiaries, executors, enduring power of attorney, enduring power of guardianship, just to name a few.
Tax and Income Considerations
The Australian Tax Office can assess your combined income for things like family tax benefits or rebates. So, if you’re receiving any government assistance or rebates, check how your relationship may affect your eligibility.
Legal Advice and Binding Financial Agreements
While prenups is what you hear in the media, it’s more of an informal agreement in Australia. It usually describes how financial matters and assets be handled and it is not legally binding. There is an alternative with a Binding Financial Agreement. This is more formal and can protect both parties by outlining how assets and liabilities will be divided in case of a breakup. Both of you will need independent legal advice to make this agreement binding.
What Happens if You Separate?
Unfortunately, things don’t always work out. If they don’t, how will assets and debts be divided? What about spousal maintenance or support?
Combining two lives and finances can be a bit uncomfortable, with a bit of planning and clear communication will hopefully remove some of the uncomfortableness. If you are both on the same page from start of the relationship, it can make things easier down the road. Let’s try to achieve financial harmony for a happy, healthy relationship!