Bruce Sellery, CEO of Credit Canada.HO/The Canadian Press
Entering the next stage of a relationship can be exciting but when it comes to the financial part of your life together, experts suggest having an honest talk about money before packing your bags and moving in with your partner.
A couple’s financial life begins once they become common law whether they have a joint bank account or not, said Steve Bridge, an advice-only financial planner with Money Coaches Canada. The length of time it takes to reach common law status varies by province.
“It’s not 100 per cent required to combine accounts to have a successful financial partnership but 100 per cent openness is,” he said.
Bridge and his fiancée don’t have a joint account yet but he said: “We know what the other person makes, what they have saved, and we also know that we are working toward common goals.”
There’s no right way to manage finances in a relationship other than maintaining open communication. But conversations about money are a progression in any relationship – while it doesn’t happen on the first date, it shouldn’t also wait until big decisions have been made, such as tying the knot or moving in together, said Bruce Sellery, CEO of Credit Canada.
“There’s a conversation you need to have if you’re considering getting married … (or) if you’re looking at kids,” Sellery said. Conversations could progress from planning a vacation together during the dating stages to talking about bills and cost splits when moving in together, he added.
Every couple sets their own way to deal with money, Sellery said.
“Some marriages work where it is a 50-50 split, some marriages work where expenses are connected to income,” he said. While the most common way is to pool finances and spend collectively, some couples stick with a ’Yours, mine and ours’ system, Sellery added.
To find the approach that works best, Sellery said a couple should pick the method in line with their values which also accommodates temperaments such as spending and consistency. If it’s too difficult to decide, he suggested consulting a personal finance adviser or life coach for a neutral take.
Couples who manage their finances successfully typically have a predetermined system, said Jason Heath, an advice-only certified financial planner with Objective Financial Partners.
“The ones who tend to struggle are the ones where nobody’s sure who’s paying or who owes who, and that can lead to challenges.”
Heath said the majority of his clients choose to pool their finances.
“There’s a definite benefit to combining your finances completely because then it is a true union of all things,” Health said. “It allows you to manage your finances more efficiently.”
For instance, if one partner has debt and the other has savings, it will be much easier to pay down the debt, he said, as the couple splits the cost of living and other day-to-day expenses. In some cases, the couple can decide to pay down the debt together as a household.
But it can get tricky if a partner hasn’t disclosed the debt early on in the relationship to find a common solution, Heath added.
“If you go into (the relationship) with eyes wide open that, ’Hey, this is my financial situation,' and you still decide that you want to be together and combine your finances, it’s a lot easier … than springing it on somebody on your wedding day,” Heath said.
But before diving into a long-term relationship, Bridge warns of red flags such as secrecy or controlling behaviours.
“If there is secrecy – (ask) ’Why the secrecy,’” Bridge said. “If you’re hesitant to ask, maybe there’s not 100 per cent trust or confidence or security around that other person – that’s a sign of a bigger problem.”
Gambling, shopping or substance addiction and lying can also derail financial stability in a relationship and it’s important to find out sooner than later, he added.
One of the telltale signs could be hidden in a partner’s credit score, Sellery said.
“You should share this credit score because that is going to illuminate some of the things about their past that they may not have told you,” he said.
While joining finances can feel like a big move, Bridge suggested taking a smaller step and creating a joint budget or joint cash flow to track where the money is going.
“If a couple can do that, it’s absolutely a fantastic start of coming together,” he said. “Then, in an ideal world, I would get people to set up a joint account – your master or mothership account.”
Bridge said it is also important to talk through debt, income, savings, investments, real estate and family situations when making decisions on whether to pool money or not – and it doesn’t have to be an overnight decision.
Regular money dates or meetings at regular intervals, such as every week or month, can help form good habits and make it easier to talk about money over time.
“Really, all comes back to communication,” Sellery said.