THERE are perks and pitfalls when it comes to managing your money in a relationship.
Working together, a couple can take steps to grow their finances, supporting each other at times when money is tight.
But even couples who have spent decades together can encounter problems. As your financial lives become more closely linked, there are pitfalls to watch out for which could leave you with an empty wallet as well as a broken heart if things go wrong.
Here are five tips to help couples live in financial harmony…
Be transparent about money
If you’re older, it’s likely you’ll both have accumulated some assets along the years, but you may have some financial baggage too.
Don’t keep this information secret. Jamie Jenkins, a life savings expert at Standard Life, says: “Tell each other about debts, as well as savings and assets.”
Update your will
Jenkins says that while many people put off sorting out a will, it’s vital to keep it up to date, as well as thinking about the nominated beneficiaries of your pensions.
Work together to improve your credit score
One in six (15%) adults say they have been negatively impacted by their current partner or ex’s credit history, according to credit checking firm, Experian.
When couples apply for a joint financial product, such as a loan or mortgage, their credit reports are likely to become “linked”.
If your partner has a more positive credit history, it could mean lenders view your credit application more favourably, potentially meaning better lending rates. But if they have previous bad debt, the way they manage money may be considered in assessing whether you can keep up with repayments.
Experian’s James Jones suggests learning how to manage credit and debt together and being honest about what’s realistic.
“Remember everyone earns different amounts, so what’s achievable for one may not be for the other,” he adds.
And if it doesn’t work out and you and your partner decide to part ways, remember to disassociate with credit reference agencies, to uncouple your credit reports in the eyes of lenders.
Carefully consider joint accounts
While there are benefits to combining your cash, there are also down sides.
MoneySuperMarket.com’s Kevin Pratt says opening a joint account should not be done lightly. “The convenience of a single account that can take care of shared bills is a great benefit, but there are potential pitfalls,” says Kevin.
“What if you’re the sort of person who keeps a close eye on every penny, but your partner is more carefree?
“What if it’s the other way round – would you be happy with your other half scrutinising everything you buy?
“There are practical issues, too. If your partner has a poor credit score, yours may suffer as a result of your being associated with them via the joint account.
“If a relationship comes to an end, the joint account can be vulnerable to one partner simply withdrawing the balance and leaving the other high and dry.
“It’s easy to see how arguments might develop.”
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