When couples first start out, they can often run into conflict over how they're going to handle their finances-even friendly mergers can be difficult. Getting together on the same page about how you'll handle your debts as well as savings and planning for the future can be a great way to minimize one of the biggest areas of conflict between couples.
The first guideline is that both of you must be comfortable with how money is handled. One question you might want to discuss is whether you want to keep the debts you bring into the relationship separate or not. For example, if you enter the relationship with a student loan debt of, say, $10,000, but your partner has a credit card debt of $5,000, do you want to merge these debts, and pay them off together?
There might be some advantages to merging. For example, it's likely that a line of credit will offer a lower interest rate so both debts could be paid off faster. It's also a great way to establish couple credit. And, it can create a real bond of accomplishment as you work together towards a goal of being debt free as a couple.
It's important as a couple starting out to not only know what each other's debt load is, and how you'll jointly manage it, but also to be in agreement about priorities in both spending and saving. A good guide-whether single or in a relationship-is to pay down highest interest debts first. If that means one person's debt seems to be getting all the attention, split your payments between debts held by each of you, so no one feels left out of the debt repayment plan.
As you establish repayment plans on current debt, establish guidelines together on how you'll spend money as a couple in the future. Will each of you carry your own credit card? How much can each of you spend without first consulting the other person? Whatever you decide, be sure to agree that money talks will happen on a regular basis and all spending will be revealed in a timely fashion.
Also, know your credit scores. These can help or hinder future plans to buy a house, or make other major purchases. So to keep your credit score as high as possible, pay all debts on time, every time. Keep balances on credit cards low-some say as little as 35% of the total balance. That means, if you have a card with a $5,000 limit, you should carry no more than a $1,700 balance. Better still, of course, pay that card off every month.
Agree to hold as few cards and lines of credit as possible-even if you have zero balances. Too many sources of credit can also hurt your score. A little known fact, too, is that if you pay off a credit card or line of credit, be careful not to close it out too quickly. Some creditors will view that negatively, and down grade your credit as a result.
Most importantly, save something. Whether you buy RRSPs, open a tax-free savings account (TFSA), or buy a home, you're putting something away for your shared future-and that's got to feel good.