As relationships become serious, a couple may eventually want to share financial decisions. This is a critical test of a relationship – and a test not every relationship passes. Including professionals in this decision-making process can sometimes make the difference in a relationship’s success or failure.
For most American matchmaking, direct financial discussions are generally off-limits in early dating. It’s socially acceptable – and maybe even obligatory – to ask “so, what do you do?” of a prospective partner early on, but it would be considered incredibly presumptuous to ask “so, what’s your approximate take-home pay?” After the initial rush of euphoria wears off and things get serious, financial matters must become much more important to discuss. At some point, an unmarried couple may consider moving in together or even buying a house together – and without planning, that decision alone could prove disastrous to the relationship.
Take for instance, a recent client engagement. Two divorced, working professionals, both with children from prior marriages. The couple both have shared custody with prior spouses, and both owned individual properties. Eventually, they decided to purchase a home together. This decision invited many complicated questions, to which there are no easy or universal answers:
- Do we need a prenuptial agreement?
- Do we need more insurance?
- Do we need an estate plan?
- What happens if something happens to either of us before or after marriage, and would the surviving partner/spouse be able to afford the home alone?
- Should the surviving children of the deceased partner receive proceeds from the property?
If you are beginning to consider a new relationship to be serious, here are some considerations that may help you bring your own questions into focus:
Competing budget priorities. Each partner will bring a different set of assets, debts, and priorities to the relationship. For example, one partner may be reasonably debt-free while the other may be carrying heavy student loan and credit card debt. Sharing a budget can result in immediate inequity in how debts are addressed and retired. That is not necessarily fatal to a relationship – but it is better to have agreement about spending beforehand rather than attempting to come to an agreement after bills start coming due (or debts and obligations are still being discovered).
Residence issues. Many unmarried couples will start living together in an apartment, but many others may use new strengths from the partnership to seek a purchase of a home. Purchasing a home can be a stressful and complicated process in the best of worlds: Even the manner of titling the deed and mortgage can be a complex decision that will require the couple to weigh their commitment to the new property, their budget, and even their own relationship. While no one wants to consider purchasing a home with negative thoughts, the couple must carefully consider how the home might be disposed of should one of the partners decide to end the relationship or pass away. Will one partner or both be responsible for paying the mortgage, taxes, and insurance? Can one partner afford to carry these payments alone? Regarding equitable distribution, what if there are children from prior marriages? Engaging fiduciary professionals to provide unbiased consultation is a necessary consideration.
Unexpected Job Loss. While couples often meet with careers in mid-stride, COVID-19 taught us all that some things are unpredictable. The most stable workers in the US were even challenged with mass lay-offs, furloughs, and historic extended unemployment circumstances in 2020. A financial planning team can assist a couple with recommending custom strategies which can mitigate or transfer the risks associated with unemployment.
Every relationship will face uncertainty and peril, but no couple must face these alone. At Pegasus Financial Planning, our consultative, team-oriented professionals can provide clarity and insight regarding your high-stakes financial decisions. We’d love to talk to you.