How Debt Advice Can Change Your Financial RelationshipApr 21, 2017
Following a divorce, you may need professional advice to learn how to deal with new expenses on your own and help with managing your debt after the assets have been divided. The same can also be true when you are beginning a new relationship, and wanting to avoid the same money mistakes from your previous marriage. Below, we will discuss how you can protect your assets, be honest about your finances and set financial goals with your new partner.
Love and money
According to a recent study, 59 per cent of divorces were due in part to financial differences and in most cases, each spouse had very limited knowledge of their partner’s financial situation before marriage. But, after dealing with the expenses associated with divorce and the ramifications on their budgets, 73 per cent of divorcees say they would only remarry if they knew their new partner had good credit. So, if you or your partner has previously been through a divorce, you’ll want to make sure to be open about your financial situation, including your credit score.
The importance of financial transparency
If money woes led to the breakdown of your prior relationship, it is reasonable for you to feel cautiously guarded. Learning how to be financially independent can be a rewarding experience, but it is also a learning process. In your new relationship, it’s best to minimize future financial conflict by being open and honest about your finances and allowing your partner to do the same. Schedule a financial date night to discuss your credit histories, debt levels, financial successes and learned lessons. Communication is key when it comes to finances, as well as any other important subject in a relationship. Sharing the same goals can help create a firm foundation and align yourselves with the same values.
Marrying into debt
It is reasonable to assume that you and your future spouse hold some amount of debt. However, the amount and type of debt your partner has can often be a deterrent. A recent survey shows that student debt is more forgivable in a relationship because it signifies an investment in that person’s future and earning power. However, credit card debt and personal loans can be a potential turn off because they sometimes represent careless spending.
If you are concerned about your future partner’s debt load, be honest about it. You may choose to keep your money separate and let your partner handle their own debts, or you could combine incomes and pay down debt as a couple. It may be wise to seek help with debt from a debt relief professional, such as a credit counselling agency or a Licensed Insolvency Trustee (LIT). An LIT can suggest different options for repaying debt including consolidation, a consumer proposal or even bankruptcy, which is usually seen as a last resort. To learn more about the bankruptcy process, visit the Office of the Superintendent of Bankruptcy website.
A credit counsellor can also offer debt advice by helping you rework your budget, improve your financial skills and possibly lower the interest on some of your debts.
Protecting yourself from your partner’s debt
It is important to note that if you co-sign or guarantee any debts with your partner, you will be on the hook for repayment if they default or file for bankruptcy. One option to prevent yourself from taking on certain financial obligations is a marriage contract. This legal agreement can help you both decide how assets and debts will be handled once you marry or begin your lives together. A marriage contract can also outline details for children who may be entering into a blended family situation.
An example of this might be a family business you hope to pass onto your children when you retire. Once you re-marry, your spouse might be entitled to half the value of that business in a separation or divorce. In an instance like this, sound debt advice would be to enter into a marriage contract in order to limit legal trouble.
Did you decide to keep your finances separate when you entered a new relationship? Join the discussion by searching the Twitter hashtags #LetsTalkDebt #BDODebtRelief