Finances and building the love nest

With nearly one quarter of weddings occurring in the month of August, planning is no doubt in full swing. Likely all the major decisions will have been made by now – venue, wedding party and menu. But wait! Has the happy couple discussed their finances yet?

Finances are one of the major causes for marriage problems – and unfortunately, one of the primary reasons for divorce (60 percent of Canadians cited money related conflict as the number one reason for divorce according to a Bank of Montreal survey conducted in 2014). The reason for this is likely the differences in spending habits and a general lack of communication about things like debt and credit history.

According to a recent survey from TransUnion, one of Canada’s leading credit reporting companies, the majority of Canadian couples (86 percent) are familiar with their spouse/ partners credit history. Canadians earning under $40K annually are significantly less likely to know their spouse or partner’s credit history, while younger Canadians (age 18-24) are significantly more likely to be unfamiliar with their spouse or partner’s credit history. Financial experts say couples should carefully explore topics such as income imbalances, debt and savings before tying the knot. But often, these topics are ignored because they can be difficult to discuss. The question is really – how do you know if you’re really credit compatible?

Heather Battison, vice president, TransUnion Consumer Division, shares some “watch-outs” for couples heading to the altar:

  1. Surprises are not always good. Talking with your significant other about current debts and expenses you both have can eliminate any surprises when it comes time to finance a larger purchase.
  2. That diamond ring may have to wait. Lenders focus primarily on credit when determining the conditions of your borrowing allowance. Couples with lower credit could receive higher interest rates or even be rejected for loans.
  3. Credit scores don’t marry up. Married life brings shared financial responsibilities that can make it difficult to keep credit histories completely separate. Your credit may be excellent, but you can expect some challenges if you marry someone with bad credit. When jointly applying for credit, the lower score can dictate the rate and terms you’re offered.
  4. Discuss debt before marriage. Like marriage, your combined debt is a contract. A person’s credit history can affect everything from getting a mortgage to qualifying for professional licensing and even getting the best rate on car insurance. To avoid unexpected marital stress, couples should fully disclose their credit histories prior to tying the knot. While a variety of circumstances can lead to a poor credit history, bad credit can also be a sign of underlying problems handling money.
  5. Talk about it. The majority (83 percent) of Canadian couples talk to their spouse or partner at least twice a year with more than six-in-ten talking at least once a month about their debt. “We talk hypothetically a lot to ensure that we are properly planning for both unexpected money coming in (like a bonus) or if we have a housing improvement (or need an urgent upgrade) and how we can plan for this accordingly,” say Lindsay and Kipp from Toronto. Openly discussing finances with your partner is the best way to prevent future disagreements or unwelcome surprises. Don’t forget to review your credit report. TransUnion recommends couples do this at least once a year.
  6. Prepare to build a love nest. Be sure that your budgeting tactics and financial goals are aligned before marriage. “We set aside time each month to talk about the finances and both have input into how we are managing our money,” say Lindsay and Kipp. TransUnion suggests that couples assign responsibilities to each partner to help manage the budget as one person should not completely own the family’s financial system.

Battison explains that while talking money isn’t always the most comfortable thing for some people, it can pave the way to a happier (and more prosperous!) future together.


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