Falling in love doesn’t typically involve a detailed financial plan. Brian Court, a certified financial planner at JustAnswer, believes it should. He explained to Newsweek that safeguarding money in a relationship is about preparation, not distrust. While couples don’t plan for breakups, failing to protect finances early can make a split even more painful.
The Centers for Disease Control and Prevention (CDC) records about 672,000 divorces annually, showing that even legally committed relationships often end. For cohabiting couples who never marry, financial fallout can be severe without a divorce’s legal framework.
Five Financial Tips for Couples
1. Maintain Individual Accounts
Court advises maintaining an account in your name, even with joint accounts. This isn’t hiding money. It’s about preserving financial independence. Ideally, you should have enough savings for several months of basic expenses. Court emphasized the importance of having financial freedom in case the relationship ends.
2. Understand Each Other’s Finances
Before living together, Court suggests discussing income, debt, credit history, spending habits, and financial obligations. Hidden debts or credit issues should be known before combining finances. Financial surprises are tougher to handle after signing a lease or buying a home together.
3. Caution on Joint Debt
Cosigning loans or opening joint credit accounts without understanding the consequences is a common mistake. Court highlighted that having your name on a loan makes you responsible. He used a cosigned car loan as an example, where both names on the loan can result in shared responsibility, regardless of who drives the car.
4. Written Financial Agreements
For couples making significant financial contributions together, Court suggests putting agreements in writing. Cohabitation or property agreements for unmarried couples, and prenuptial or postnuptial agreements for married ones, can prevent larger issues later. These agreements are best made when both parties are on good terms.
5. Protect Your Credit and Build Assets
It’s important to continue personal financial growth, even if a partner earns more. Court recommends contributing to retirement accounts, maintaining personal credit, and checking credit reports. Leaving a long-term relationship without savings or a credit history can make financial recovery difficult.
Financial independence shows good planning, not distrust. Court emphasized that both partners should maintain financial independence while working towards common goals. Having savings, good credit, and assets can ease the financial burden if a relationship ends.