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5 Reasons to Have That Awkward 'Money Talk' with Your Partner

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Last updated on February 14, 2019 Views: 547 Comments: 0

Most couples like to think they can talk to each other candidly about anything. But the truth is that more than a third (36%) of Canadians in a relationship rarely or never discuss finances with their partner, according to the results of a 2018 Ipsos survey for BDO Canada.

That’s not only bad news for a pair’s romantic prospects — couples who are frank about money argue less than their closemouthed counterparts — but also for their financial futures.

Still feeling tight-lipped? Here are five reasons to open up to your partner about money matters.

To Achieve Your Goals

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If you and your partner aren’t on the same page about finances, you’re less likely to meet your aspirations. Say, for example, one of you is dreaming of buying a house and wants to save as much as possible for a down payment, while the other has a “pay for experiences, not things” philosophy and prefers to spend all discretionary income on travel, fine dining and entertainment. One — or both — of you will be disappointed if you don’t talk about your financial expectations and objectives.

By discussing your priorities for the next year, three years, and longer, you can come up with a solid financial plan that will accommodate both your day-to-day wants and needs as a couple, as well as help you achieve your respective long-term goals.

It’s never a good time to find out your partner’s credit score is abysmal, but it’s particularly inopportune if you’re about to apply for a mortgage.

To Create an Effective Budget

It’s difficult to know how much you can allocate toward spending, saving and investing if you don’t have a good handle on what’s coming in and what’s going out. That means being frank with your partner about how much money you earn, how much debt you have, and any recurring expenses that are not shared (e.g. credit card, loan or car payments).

Once you have an accurate picture of total income and expenses, you can map out a realistic budget and make sure you’re using your money more purposefully and as a team.

To Be Equitable

If you don’t know your partner’s income and blindly decide to split shared expenses down the middle, it could leave one of you with an abundance of discretionary income while the other is scraping to get by. Not only is this wildly unfair, it may also breed resentment and lead the lower-income partner to accumulate “secret” debt in an attempt to keep up with their partner’s lifestyle.

Hiding spending isn’t rare; about a third (32%) of respondents to the BDO Canada poll said they hide credit card debt from their partner, while one in 10 indebted Canadians have hidden the cost of a large purchase from a loved one. While the bulk of these purchases (63%) were under $1,000, 8% had hidden a purchase worth a whopping $15,000 or more.

By talking to your partner openly about your income and finances in general, you can come up with more equitable accounting for joint expenses and hopefully avoid the need for secret spending. One possibility is to split costs based on a percentage of income, rather than dividing everything 50-50.

To Avoid Unexpected Surprises

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It’s never a good time to find out your partner’s credit score is abysmal, but it’s particularly inopportune if you’re about to apply for a mortgage.

Knowing your partner’s credit history sooner rather than later gives you both ample  time to correct the situation — for example, by paying down or consolidating outstanding debts into a lower-interest rate product — long before it becomes a crisis.

To Make the Most of Government Benefits

Even if unmarried, a couple is considered to be in a common-law partnership by the Canada Revenue Agency if they have lived together for at least 12 consecutive months, or currently live together and share custody of a child.

That’s important because common law or married couples can file a joint income tax return, and by sharing information and being strategic you may be able to save money on your tax bill. For example, you might be eligible to claim the spousal tax credit, pool charitable donations or medical expenses to maximize your tax credit, or lower your overall rate of tax by splitting pension income.

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