In Part 1 we explained what an STD is and how they can occur, Part 2 looks at practical tips for avoiding them.
Are you financially compatible with your partner?
Honest communication about financial habits and styles allows both parties to be clear about how to handle joint finances.
Communication is important. When your relationship gets serious (especially if you are about to rent or buy a home together, or get married) it is a good idea to honestly discuss
- your financial situation,
- your approach to money (is your spouse a spender while you are a saver or vice versa?) and
- your long term financial goals.
Are you financially compatibility with your partner? Are you both on the same page?
If not, you may need to put some basic ground rules in place to prevent any potential money disputes causing irreparable damage to your relationship.
You should discuss both those smaller, day to day issues (such as how you agree that groceries, rent, utilities and other living costs will be paid), as well as your larger goals and plans for the future (your goal of saving a home deposit in 5 years, kids uni fund, overseas trip etc so you can explore your strengths and weaknesses.
Practical tips to avoid contamination by an STD
- Keep your own account for your income and savings (especially early on in the relationship);
- Don’t put your name as a joint card holder on credit cards – you will be responsible for the whole amount if the primary card holder defaults;
- In fact, try to avoid joint credit cards altogether or other entanglement of finances;
- If you decide to set up joint accounts, put checks and balances in place. For example, joint signature requirements for any withdrawals from your joint home loan facility.
- Don’t ever sign a Guarantee or joint loan flippantly, particularly if it is for something you won’t ever own or use, such as a new boat for your partner. You can be made to pay for it in full if you partner defaults or doesn’t have the cash to pay up.
- If you are unsure and feeling the pressure from your spouse/children/business partner for a loan/guarantee, don’t feel pressured to say “yes”. Seek advice from a professional, such as an accountant, financial planner or solicitor if you are unsure about the legal ramifications.
- If you are providing a loan to your partner – put it in writing. All too often cases end up in court with one party forced to prove they loaned money which the other party was sure was actually a gift. Having even a simple statement signed in writing can help prevent these disputes.
- If your partner has significant debts or is in a high risk occupation or business, get a pre-nup or post nup or cohabitation agreement (collectively known as Financial Agreements) that sets out who is responsible for these debts (as well as the assets).
And if you separate…
- Arrange to have your name immediately taken off phone, electricity and other bills by transferring or disconnecting the services if you are moving out of the home;
- Arrange to have your name taken off the Lease if renting and you are leaving the home – otherwise you will still be liable even if you have left the premises, risking a black mark against your name on future rental or credit agency checks;
- Arrange for your share of the bond to be released or transferred if renting and you are leaving the home;
- If you have joint accounts, close them immediately should you split up and make arrangements for your pay to go to a separate account;
- If you have a mortgage, you should advise the lender of the separation and immediately cancel any redraw facility.
- Consider putting a Financial Agreement in place to finalise your property settlement (your agreement about who is responsible for the debts, and the assets, of the relationship).
Using Financial Agreements to avoid the burden of an unwanted STD
Financial Agreements (a type of pre-nup for de facto’s and married couples) can be used either during a relationship or after a relationship has ended to formalise
- who is entitled to the assets of the relationship, and
- who is responsible for the debts of the relationship
should the relationship breakdown
If you are entering into a Financial Agreement after a relationship has ended, you should aim to sever any financial ties. For example:-
- jointly held property can be transferred to one party only, who should also refinance any loan facility in his or her name only, so that the other partner is released from all obligations in respect of the home; or
- if either party is unable or unwilling to refinance and retain the home, then the property can be sold and proceeds split in the percentage you agree, in order to achieve complete financial separation.
In any event, the result should be to sever any financial ties and clear all joint debts, which should either be refinanced in the name of one partner only, or otherwise completely paid out.
To read more about Financial Agreements, or to download a Financial Agreement Kit go here.