Alison in PRINT

Deeply, madly in love a good start on the financial journey together...

Toronto Star - September 24, 2009

Q: I’ve noted your comments about financial stress being the leading cause of marriage break up. My husband and I are in our early thirties, madly in love, and just starting our life together. How do we get on the right track together financially? I make more money, but it’s all on contract. He has a regular job with the works. Christa L


A: Being madly in love is the very best start. The second best is broaching those financial questions before the rains come. And trust me; they will come, particularly when an umbrella isn’t at hand. Unless, of course, you’ve followed my Granny’s advice, “Keep a brolly in the boot and you’ll never get wet.” Do a good job of setting up your financial lives now you’ll always have a brolly in the boot.

Ideally there would be no my money-his money and no my debt-his debt as you join forces. In the long run this weakens the financial unit. Over a lifetime together employment and earning situations can change dramatically. Divisions set up now might be hazardous to your relationship health in the future.

However, not everyone is psychologically capable of taking this approach, especially those, like you, in their thirties with an established financial history, possessions and debts. Nonetheless, whether you mingle your money or not you need to know where each of you stands financially.

The first step is what I call a financial pre-nup – essentially an inventory of everything you earn, owe and own. If he has a car, you should know what it is worth, how much he owes and what the payments are. Be conservative about possessions, we usually over value what we own.

You also need to know your respective net incomes. It seems obvious but many people consider their gross instead of net, i.e. after taxes and other deductions. I made this mistake myself. Years ago, I landed a host job at CBC radio. The salary was $72,000 and my husband and I were euphoric. After a decade of freelancing, we were rich. But my first paycheque was a cold shower. The net ended up being just a smidge more than I had been earning before, once I took into account the far lower taxes on self-employment income.

You also need to detail all debts, interest rates and share your credit reports. One couple I know found their dream house and applied for a mortgage. She suffered the embarrassment of discovering her credit rating was in the tank because of delinquent student loans.

They went to a higher risk lender for a mortgage at twice the bank interest rate. In the end, they couldn’t support the payments and the undisclosed student loans sat like an indigestible lump in the middle of their marriage, which did not end happily ever after.

Examining your credit report is a great exercise because mistakes do get made and you can correct them. Go to www.equifax.ca or www.transunion.ca.

Next, familiarize yourself with the terms of his pension and health plan. Lots of people don’t know the specifics about their health coverage. He can likely add you at a nominal cost.

Meeting with an accountant is an excellent investment even if you do your own taxes – which I recommend. You want to get the most out of your deductions. If you can’t afford a consultation then visit a Revenue Canada office for a review of your last tax return.

Getting a relationship on the right track financially takes a bit of effort but it will be liberating in the long run. Be sure to discuss your feelings about money; are you a saver, do you put off paying bills, is going to the mall and shopping your idea of recreation? And don’t forget to talk about financial goals and how you might reach them.

Next week, I’ll get down to the fine details about sharing your financial lives.