Love and Finances Debt and Marriage Could Equal Debt and Divorce

WARNING: DO NOT READ THIS ARTICLE IF YOU ARE A HOPELESS ROMANTIC!

The credit report is more powerful and almighty than you might think. I must admit I was horrified when my newly divorced sister announced that during her divorce class (yes, you read correctly) at her local church (seems contradictory) that in entering a new relationship, a credit report should be requested! I was stunned. I thought, this cannot be, but after hearing numerous horror stories from divorced individuals being stuck with half the debt (or all if o­nly o­ne partner had a viable credit rating to begin with) after the relationship ended, I can certainly understand being wary. Debt and marriage is common, but debt and divorce is even more common.

As fifty per cent of all marriages end in divorce, many are avoiding it altogether, but the problem remains, what belongs to whom when there is a split? Should there ever be a commingling of funds and/or assets? These are painful questions that infer a lack of trust, but as o­ne divorce attorney puts it, this is not the person you o­nce knew: this is someone temporarily insane.

But how can marriage and debt result in divorce and debt? There are warning signs to look for very early on before your relationship turns into marriage and debt and results in divorce and debt.

Does your prospective partner exhibit fiscally responsible behavior? Most people love to be showered with gifts and spoiled beyond compare. Many women were gasping in awe when Ben Affleck presented Jennifer Lopez with a 2.5 million dollar o­ne-of-a-kind pink diamond engagement ring. Even though he could afford it, others found it over the top. Do you want your Prince Charming overextending his credit cards and going bankrupt to impress you? Women are guilty too. These days many women earn more than their partners and are willing also to indulge them, whether they can afford to or not. The following provides some money management tips for the various stages of the relationship.

You have to look at the habits of your partner during the dating phase. In addition to the initial wining and dining, there should also be “cheap dates” i.e. walks in the park, picnics o­n the beach and other inexpensive or free types of entertainment. If there is just a lot of money being spent, especially when the means are not there, trouble could be looming. Attitudes about and toward money should be taken into account early.

You are considering living together. This should be well thought out and planned. Leases, households, expenses and other matters should be contemplated and discussed. Make an agreement, that's right, the living together agreement will outline who owns what and the consequences of the “separation” of the household. Also determine who is responsible for which debts, if money is “commingled.” Such agreements are enforceable. This process will also provide both parties with an idea of what could happen and how the other party would react in the event of an actual separation. Should o­ne party borrow funds from the other, memorialize it along with the terms, in writing.

You are ready to cross over the threshold of marriage. If o­ne partner earns the bulk of the money, you may want to get married before the end of the year to minimize your joint tax burden. If both are gainfully employed, you may want to marry the following January, if it would mean paying less in taxes as a married couple. Speak with a tax expert if this is a real concern for you.

Consider a prenuptial agreement. Whether you have substantial assets or not, it always makes sense to clarify what belongs to whom, possible alimony and/or child custody issues, etc. Yes, this is certainly not romantic but it could spare a lot of unnecessary pain and stress should your union end in divorce.

If the bride's parents are not paying for the wedding, do not go overboard. In fact, even if they are paying do not go overboard; they may reward your thrift with additional financial help. If you are paying yourselves, spend what you can and try to pay in cash. Going into debt makes little sense for o­ne day and o­nly serves to start the marriage out with financial stress. If you must have an “affair to remember”, wait until you can afford it.

If you receive cash gifts, put them aside for a down payment o­n a house, future expenses for your children, business ventures and/or investments.

Phase IV: Money, Money, Money

Joint financial decisions have to be made. List your priorities. Where do you want to be five years from now? 10 years from now? How will it be possible to reach your goals? All of these issues should be considered. Have a will drafted and obtain a life insurance policy if you do not already have o­ne.

A budget must be created and adhered to. Who will pay the bills, balance the checkbook, and do the comparison-shopping for large ticket items? These decisions must be made. Organize regular budget meetings to check your progress and to eliminate unnecessary stress.

Are you a spender and your partner a saver? These differences must be discussed and the needs of both must somehow be met. Compromise will be in order. Does o­ne of you meticulously save all receipts and the other avoid paperwork altogether? These differences have to be recognized and dealt with. o­ne partner will inevitably bear the brunt of this burden and this should be accepted and acknowledged graciously. The other partner will have other attributes that contribute to the team effort.

Phase V: Family Ties

You have decided to have children. You will have new, financial obligations that require extensive planning. Will o­ne partner stay home to look after the children or will a good daycare and/or nanny be found? o­nce the child arrives, have your will updated and remember to determine who should look after your children in the event something happens to both of you.

Don't buy all of the latest in child gear. The wipe warmer is cute, but is it necessary? A stroller with all of the latest gadgets that you cannot open without an engineering degree is equally ludicrous. Borrow or buy second-hand, as these items are expensive unless you intend to have several children, in which case the money will be well spent. Do invest in a good car seat, as there are true variances in quality and safety is a top priority.

Will your child/children attend a public or private school? These are considerations that will affect your wallet. Will aftercare be required –which means additional expenses or will the child be picked up immediately following the school day? Start saving for college and look for o­ne of those state college plans if that would better suit your needs.

Phase VI: Till Death Do Us Part…

Finally, enjoy the life that you and your partner have created. You come a long way from pondering requesting a credit report to building a meaningful and lasting relationship together.