Centsible Love – Personal Finance Tips for Couples
Centsible Love – Personal Finance Tips for couples
So you’re in a long term relationship and are thinking about taking that next step, whether it is getting an account together or purchasing equities or assets you should be aware of some of the reasons why it may be important. So here are four questions you may be asking yourself related to getting financial products with your spouse.
1) Should we get a joinT bank account together
- For those in a serious relationship (getting married, have a child or are already married) – definitely. Imagine if something happened and you needed to access your spouse’s bank account. You can imagine that the bank won’t give you the time of day, especially if you are not married to the person. If you have a joint account, you can pool some funds in together and if God forbid something happen to either of you then at least your other half will not be left scrambling to find money to take care of any emergency expenses etc.
- In the case of the death of your spouse, the money could be sitting in their account waiting on a will to be probated which could take a while.
- Some couples pool all their money together in a joint account, and some don’t pool any at all. The middle ground at a minimum (for serious relationships) is to at least keep your emergency savings fund there so either of you can access it. This also applies to your children if you have any. If you want them or anyone else (a sibling) to access your account in case something happens to you, add them as a joint holder on the account.
- Again, ensure its someone you trust because they can access the money at any time as a joint holder (even if you are alive and well) even if they are named second on the account. Talk to your banker about the implications.
- A similar principle applies for investments. If you want someone else to be able to access it in case something happens you can open a joint brokerage account, you can get a joint mutual fund etc.
2) Should we buy a house together?
Buying a house and madly in love? There are a few things to consider
- It will always be more cost effective for two persons to pay a mortgage than one. Sorry, I know single people may be hurt right now but that’s the reality of life. Two NHT benefits can access $13M dollars and one can access $6.5 M. What does that mean? For a $15 M mortgage the payments would be as follows for a couple vs. a single person paying a mortgage on the property:
See my mortgage calculators on financialcentsibility.com/calculators to calculate it for different scenarios.
- So the couple that has two NHT benefits that are buying their first home will pay $17k less per month than just one person with a NHT Benefit. If you are a couple with no NHT benefit (e.g. you are buying a second home or are not contributing to the NHT) then you are paying $60,000 more per month than a couple who has a NHT Benefit. That could be the difference in you being able to buy the home or not.
- So if you are in a serious relationship (kids, marriage and stability – I won’t define it but you should know if you are ready to make this type of commitment) and you are ready to be a home owner, have a conversation with your partner about buying a property together. Again I am not a financial advisor or lawyer so speak to one about the implications of doing so. They may tell you about things like this …
Joint Tenants or Tenants in Common? Your lawyer will present you with this option when you are going through the house purchase process with someone else. Would you like to register as Joint Tenants or as Tenants-In-Common? The image below shows the difference in the two:
- Basically, for Joint Tenants whoever survives is the person that has the full rights to the property. E.g. if you outlive your husband and re-marry right away, you can will the house to your new husband and the 1st husbands kids can get nothing. It might be the option for you if you are with your forever bae and you trust that person explicitly to do the right thing, especially if children are involved. Stuff happens though so I would say if you are buying property with someone you are not married to, choose Tenants in Common. Speak to your lawyer more about this (and yes you need a lawyer when you are buying a house).
3) Should I name my boo on my life insurance policy?
- If you are in a serious relationship, why not? Especially if children are involved you would want them to benefit from the proceeds of your policy. When you name your children on your policy, if they are under 18 you will have to assign an adult to manage those funds until they are 18 years old. The other parent may be the best person to do so (or may not be) but think about who you would like to be in control of that in case something happens to you.
- Ensure you update your beneficiaries if you got married or are in a long term relationship (and you see it going somewhere) to list the person as your beneficiary. If you’re not that in love just list a family member you trust instead. Do not name the person you met last week as a beneficiary to your policy. I don’t think I need to explain any further on that.
4) Should we buy a car /take out a loan or get a credit card together?
- It is always easier for two incomes to qualify for a loan than one, but that means both parties are responsible for repaying the debt if they co-borrowers. This includes credit cards. If you plan to ask someone to take a loan out with you, if you don’t repay it, it will affect them negatively. There are situations that have gone really badly because persons do not understand this.
- The same thing also applies if you are guaranteeing your partner’s loan. If they default then you are still obligated to repay it. Their debt will become yours and it will show on your credit report as outstanding if they don’t pay it. If someone asks you to be a co-applicant on a loan, be prepared to repay the whole loan amount should something happen to them (unless the loan has an insurance component – which covers death- not them running away).
Hope that helps in understanding some of the implications of accessing financial products with your spouse.
Love will make people do some crazy things, but this valentines that think centsibly when making financial choices with your partner!