Getting Married? What Are The Finance and Credit Implications?
There is a big difference between looking after your own finances while living alone, or with parents, and living with a partner. The transition can be very difficult, especially if both partners are strongly independent, or one partner is financially weak and the other strong. In fact, it is an area of a new relationship that has many pitfalls if you do not set the ground rules from the start.
It is best to sit down together and quietly plan your finances, even before you get married or move in together. Then, when you do so, it is important to be open with each other, and discuss what may go wrong with the domestic finances if you do not plan correctly. That way, you can work on a plan together, and a budget, and set ground rules for a smooth financial future together. It is sensible to bring the use of credit into that discussion, as there will come a time, maybe from day one, when credit cards and other forms of credit become an issue. Agreement on all relevant credit and finance issues will reduce the risk of problems, arguments and misunderstandings later on.
An early decision to make is whether to keep finances separate or not; deciding, for example, whether to have joint bank accounts or joint credit cards.
The Benefits of Joint Accounts
The advantages of consolidating funds into one current account include:
1. Easier record keeping.
2. Should you apply for a loan at any time, there will be less paperwork.
3. Working closely together on the running of the account may help to solidify the relationship and build trust. It gives an opportunity for both of you to bring out your best co-operative nature.
There is one drawback, though. With two people actively using the account, it is not so easy for you to keep track of the account transactions and balances, especially if you are both using the account a lot. This can be overcome by discussing openly all expenditure the day it happens.
The Benefits of Separate Accounts
Keeping separate accounts will allow each person in the relationship more freedom: each will not need to check with their partner over every purchase. In addition, having separate accounts may create fewer complications in the relationship. It will allow them to maintain a sense of independence, and this can be very important to some relationships.
One negative to a joint finance arrangement is that it can seem unfair. If one partner earns £40,000 per year, and the other only £25,000, the person with the lower salary may feel there is a lack of trust!
If you do decide to have joint bank accounts checking or savings accounts, then you will need to find a system for paying household bills and handling other joint finances together. One option that works well, and that I use, is to have one joint bank account into which you both pay each month for the house expenses. This can work very well, especially if you sit down together and agree the budget first, and what proportion will be funded by each partner. It is important to get this all clear from the start, then there is likely to be less risk of a problem with financial arguments later on.
Joint Credit Arrangements
Something else to consider with joint finances is credit. This can be considered beneficial, or problematical, depending on your individual credit ratings. At some stage, though, you may both want to apply for joint credit. This is most likely with a big purchase, such as a car or a house. It is best to do that if you have joint credit. With joint credit, you will both be 100% responsible for the debt, even if you co-sign a loan with your partner, or add your name to your partner's credit card account. If, on the other hand, you decide to maintain separate credit, the general rule is that you are not responsible for each other's debt. An exception to this may be if the debt is considered a family expense.
Should one person have had a bad credit record before marriage, then it is advisable for the other to keep their credit separate. A joint credit application will be considered based on the two crdit scores, and the lower one will drag down the other.
This finance and credit article was written by Roy Thomsitt, owner and author of the Eliminate Credit Card Debt Now website.
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