When we get married for the first time, the way we manage our money, and our future aspirations seems to evolve as a natural, mostly harmonious process.
In the same way a new relationship blossoms and flourishes, so that 2 partners come together to agree on a way forward, so it is with most aspects of their life and their money as they grow closer.
We choose a new home together; we decide on big purchases like cars and holidays together; we consider having children together; we usually discuss and agree on career changes; know the household income and what we can afford or not.
It all works itself out in the course of settling down in the relationship.
But getting together with a new partner, especially if the first relationship was a long one, can produce some financial shocks and surprises!
We have listed some of the most common issues below and very strongly suggest that new partners take time to have serious conversations about money and their goals BEFORE making lifelong commitments to each other.
Spending habits
A profligate spender and a prudent or miserly partner are unlikely to find financial harmony. These traits should be obvious fairly early on in a relationship but keep your eyes open. In our experience, people rarely change so beware!
Past experience
One or both partners might have experienced a messy financial divorce and might be suffering from all manner of issues such as fear of spending or losing money; refusal to share money or allow visibility etc
Gold-digging
It is always wise to look out for any significant imbalance in the wealth of new partners and whether there is an ulterior motive for a new marriage. Securing assets in individual names is a good idea if this is the case, although this may not always be a successful strategy.
Money management
Single or joint accounts? 2 single accounts and a joint account for household bills? One joint account? Where will salaries be paid to? How will holidays be funded? Who will pay the bills? All these things need to be discussed as well as who will be responsible in the partnership for sorting out the admin for things like insurance, car tax, utilities etc.
Children
This can be a real minefield and one where lines need to be drawn very early on. Are one partner’s children going to need greater funding? Is it possible/necessary to treat all children (whether still at home or adults) fairly? What about child support for children from a previous relationship?
Debt
It is really important to go into a new relationship in the full knowledge of a partner’s credit and debt situation. How much do they owe and to whom? When and how will it be repaid? Do they expect their partner to help with the repayments?
Investments
Full disclosure will ensure the healthiest of relationships. No one likes to think that their partner has a “run-away fund.” Talk to each other frankly about what each owns so that you know what sort of lifestyle you can expect in the future based on the amount of money you have in total together.
Tax
There are some tax benefits of getting married rather than just living together and these should be explored to maximise income and minimise tax. A simple example is that capital gains, for example from property or investment sales, can be shared between spouses, resulting in less tax payable.
Inheritance
Are there any older family members from whom an inheritance might be expected? How might this affect future financial planning? Equally, are any of these older people likely to be financially dependent on either of the partners in the future?
Pensions
Consideration should be given as to how much each partner contributes towards their future retirement if applicable. Also, if one partner is already in receipt of a pension, perhaps from a deceased spouse, will this money be lost on marriage and to what extent will it affect financial security?
Vision
This is perhaps one of the most important considerations. Everyone has their hopes and dreams for the future and these must be discussed early in the relationship to ensure partners are on the same path. The old Prudential pension advert from the 1980s springs to mind – she wanted to travel the world, while he wanted to stay at home and watch the telly!
Partners must be able to agree on a shared vision for the future and how they would like to spend their money. A frank conversation with each other and a good financial planner, followed by the provision of a lifetime financial cashflow forecast will definitely help with this and even where there are differences of opinion, a mutually agreeable pathway can be found.
If someone you know is planning to marry again, do show them this blog and encourage them to seek professional advice BEFORE making any financial commitments.