Marriage is defined as a formal union between two people as partners in a relationship.
You’ve chosen your life partner and have agreed to come together emotionally and economically. You’re literally contractually obligated to each other until one of you passes away or you decide to divorce.
Divorce of course is something we’d all like to avoid, but there’s no denying that it’s a serious concern when the divorce rate in Canada is near 50%. Some couples go as far as keeping all accounts separate in the event of a marriage breakdown, but is that really the way you want to build a relationship?
There’s nothing sexy about talking about money, and quite often money leads to arguments, but figuring how to merge individual financial situations can lead to a long-lasting marriage. Talking about joint bank accounts is a good start, but don’t ignore these other topics.
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Debt can be a bit tricky since its individuals who obtained it, so why merge debt when getting married? Well it’s more about determining what’s the reason for the debt and how much do you owe?
Student loans are tolerable debt and really shouldn’t be a concern, but if one partner has maxed out credit cards, there might be a bigger issue that needs to be addressed first. Talk about any outstanding debt and come up with a plan to clear it that works for both partners.
In no situation should you ever try to hide debt from your partner. Your credit score can affect your spouse, especially if you plan on buying a home together, so just be honest about any debt that you may have.
Your investments don’t need to be merged right away but there’s a ton of benefits when you pool your resources as opposed to investing in individual accounts. For example take a look at two of the most popular investment vehicles: RRSPs and TFSAs.
Every individual can invest in an RRSP, but how much you can contribute is determined by how much you earned in the previous year. However, couples can make spousal contributions, which can be tax-friendly for both partners.
TFSAs are another savings vehicle where couples can combine their finances and really take advantage of the benefits. As of 2015, individuals can contribute $10,000 a year for a total of $41,000 when factoring the previous limits of the TFSA since it was introduced in 2009. That’s a total of $82,000 of contribution room that couples can invest in—tax-free—together.
Basically, you want to look at what’s available to you and maximize that as a couple.
Okay, so you’re not technically merging life insurance policies but you do want to make sure that you have the right coverage. Quite often individuals don’t have life insurance before getting married, which is okay if you don’t have a mortgage or dependents, but eventually you’re going to need to have a policy in place.
There are a lot of different insurance policies out there so it’s worth talking to a life insurance broker to assess your needs. The key thing to remember is that insurance exists to help protect your loved ones. Even if you currently don’t have any debt or dependents, having a policy in place can give you peace of mind.
Also note that any life insurance policy offered by your employer may not be good enough since it only applies while you’re employed by them. It might make sense to get your own policy to fully protect your family.
The family finances in any relationship should be given high priority. By simply creating a budget and having regular discussions, you can hopefully avoid any serious money fights.
Finally and most importantly, any money decisions should be made as a couple. Anything can happen in life so it’s paramount that both partners know exactly where any money is invested and how to access it.
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