At some point in any serious relationship, the topic of joint finances will eventually surface. In fact, four out of five love-struck Canadian couples have already combined finances with their significant other in one way or another.
According to the 2013 TD Canada Trust Love and Money Poll, 64% of couples share a bank account, 60% own a home together, 50% use a joint credit card, 36% have a joint financial plan and 32% contribute to one another’s RRSP.
Combining finances with a partner typically begins with a joint account for shared household expenses, Janice Farrell Jones of TD Canada Trust says. Though one size does not fit all when it comes to successfully integrating finances, being honest with one another about savings, debts and financial goals sets the foundation for a solid financial future together.
Here are some tips for integrating finances with your significant other at any life stage:
Paying down student debt and saving for home ownership take centre stage for many couples. “Often, milestones like planning for a wedding, having a baby or perhaps a less fortunate situation like a parent becoming ill trigger us to begin planning for the future,” Farrell Jones says.
The money talk: You’ll want to discuss debt, saving, spending habits, financial goals and credit history to find out if anything might affect the ability to secure future loans together. If you’re planning to one day buy a home, determine if it’s a short-term or long-term goal. Make sure you’re on the same page and be prepared to compromise.
Plan of action: Create a household budget that meets your expenses while also manages debt. Set some money aside for shared financial goals, such as a vacation, new car, home ownership or even retirement.
This stage is typically characterized by competing priorities. “Many couples are paying down debt and continuing to pay down a mortgage, oftentimes while raising kids,” Farrell Jones says. “It’s also a time when many people realize retirement is not as far off as they once thought it was.”
The money talk: Focus on what will make life easier financially together. Do you want to combine your finances, continue keep everything separate or do you prefer a middle ground? Revisit your financial goals; consider working with a financial adviser to keep priorities on track.
Plan of action: Many couples build a more formal financial plan, often with the help of a financial adviser, Farrell Jones. Automate savings with pre-authorized transfers into a TFSA, RRSP and a child’s RESP.
Many couples have a solid financial base. “But with fewer earning years ahead, it becomes increasingly important to have a clear picture of what retirement will look like and what it will take to get there,” Farrell Jones says.
The money talk: It’s important to have a clear picture of what retirement looks like — do you want to travel or do you want to spend time with the grandchildren? “This can be another important time to refresh your financial plan and to sit down with an adviser and figure out how your savings and investments will translate into income in years when you’re not earning,” Farrell Jones says.
Plan of action: Work with a financial expert to help determine how much more needs to be saved and ensure each individual financial plan complements the other to maximize savings and investments. Ensure your retirement savings strategy takes advantage of spousal RRSP contributions to help reach retirement goals faster while lowering income taxes now and in retirement.