You’ve met someone, the relationship is going well, and things are starting to get serious. You may be talking about future plans like a holiday, marriage, or moving in together. It’s so exciting, but don’t get swept up just yet!
Money is one of the things that many couples argue over, and sometimes financial disputes can end relationships. So, it’s important to understand your partners’ approach to money before you really commit. Linking your finances with your partners’ can impact your credit score, so it’s important to know as much about this as possible.
How you and your partner will manage your money is also important for the long term. Who will pay the rent, or the mortgage one day, and how much do you want to save? Here are five financial questions to ask your partner before you get serious (even if it feels a bit uncomfortable).
1. How Will We Manage Shared Expenses?
Rent, bills, car payments, food, entertainment and leisure time can all be shared expenses if you live together. One of the easiest ways to manage shared expenses is to have a joint bank account. This will allow you to both manage and view transactions concerning your shared expenses.
There are two main types of joint account available in Australia:
- A joint account where both parties are required to sign for a transaction.
- A joint account where either party can sign for a transaction.
The first type of joint account is less common, but it could be used to save up for a purpose or a big purchase, such as a house deposit or car. This means that both of you have to give permission to approve a transaction. The second type of joint account is more common and is suitable for everyday usage such as paying for grocery shopping, household bills, and paying direct debits.
You’re not going to go out and get a joint account as a symbol of your commitment to each other, but it’s definitely worth having the conversation!
2. Do You Have Any Credit Cards, or Other Types of Credit?
Your partner’s financial history is as important as their personal history. It’s important to know if they are bringing any debt into the relationship that could impact your life together. However, you should approach this topic sensitively, as many people find talking about their debt difficult.
The last surprise you want in your relationship is finding out that a partner is saddled with debt. That said, having debt is not necessarily an issue—it’s more about how they’re managing their repayments. If your partner is good with managing their money and makes all their credit payments on time, there’s nothing to worry about.
Being honest about your own credit history is a good way to open the conversation whilst placing no judgement on how either of you have managed your money in the past.
3. What Do You Plan to Spend on Your Goals and Hobbies?
It’s great to have goals and hobbies that you enjoy as an individual and as a couple. But spending on hobbies and goals can quickly spiral out of control, even if the hobby appears to be a low-investment one such as hiking or cycling.
That said, this conversation isn’t about setting spending limits on hobbies and goals. It’s more about understanding your partners’ passions, what they want to commit to them, and how this will fit into your monthly budget together.
Combining incomes and expenses means there can be more room to spend on hobbies, but you should also think about your joint future goals. The amount spent on hobbies shouldn’t impact your agreed monthly expenses or the lifestyle you both want to live.
4. Do You Want to Buy a House in the Future?
This is a natural step for many couples in long-term relationships. Buying a home together is a symbol of your commitment to each other and an investment of your money.
It’s important that your expectations about buying a house are similar. Do you both want to buy a small house in the city or do you dream of a farm in the country? The kind of home you want to buy and the neighbourhood impacts your finances now.
You should also discuss what you’re willing to budget for home renovations, insurance, and other costs that go with running a home. Our article on the 5 Hidden Costs of Home Ownership [KT1] is worth reading if you’re already starting to consider this.
Buying a home with someone is always a compromise between your wants and needs and their wants and needs. Clear communication of your expectations early on means that neither of you are surprised when it comes to picking out your dream home.
5. What is Your Current Credit Score?
If you decide to buy a home together or apply for a joint loan for travel or home renovations, your partner’s credit score could seriously impact any credit applications that you make. Both of your credit scores are taken into account, and if the loan is rejected, the search and application for credit will still appear on your credit report.
With this in mind, you should ask your partner what their credit score is before you get too serious. If they have a low credit score, you can work together to improve it and avoid making applications together that could impact yours.
There are many places where you can check your credit score for free, such as Equifax. Do remember that each credit report provider’s scoring will vary a little but will be accurate, subject to the data held on it being correct.
Communication is Key When Talking About Finances
When you approach the topic of finances with your potential partner, clear communication is essential. Money is an emotional topic for many. Keep cool and do your best to talk about money realistically, not ideally.
Asking these five questions before you get too serious with your partner can help you decide whether you’re a good match financially now and for the future.
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.