By Amanda Morrall
GST Club, STINKRS, STDS. Welcome to the world of financial heartbreak.
Allow me to decode the bizarre lexicon that is the staple of divorce lawyers and trust specialists.
The first, (GST Club) is in reference to the financial ruin facing the unlucky in love individual who experiences a trifecta of failed relationships. In the unfortunate event of three flops, where co-habitation for a three year period was the result, the hapless divorcee's assets are reduced to about 12.5%. (That formula was before the GST increase.)
STINKRS? These are the one's hoping to avoid the GST club because they're either separated (or divorced), or they've been taken to the cleaners and are not keen on a repeat.
STD? Sexually transmitted debt.
Call them the financial hazards of love. Celibacy is one way to guard against the above. Being realistic, smart and taking preventative action is another.
Here's my five-point plan for financial well-being.
1) Protect your assets
Whether you're coming into a serious relationship for the first time or plunging back in, take stock of your assets and figure out what you have to lose, potentially, if things were to go wrong. After three years living together (less if someone is coming into the relationship with a child), what's yours is theirs and vice versa. In the event of a break up, it's 50/50. Ask yourself if that's something you can accept and live with being realistic about the brutal repercussions. If not, then you should consider whether a trust might be appropriate or pre-nuptial agreement defining what belongs to whom in the event of a split. Keep in mind that the rules around trusts are changing and a trust that is established after the relationship hits the skids may not stand up in court. Some financial foresight will go a long way to protecting your assets.
2) Have the talk
Don't wait until after you've moved in together to find out what kind of debt your partner is bringing into the relationship, how they manage money and what their long-term goals are. Good communication is the foundation of a healthy relationship. If you want to avoid fighting about money it's best to know well in advance one another's assets and liabilities, your unique financial strengths and weaknesses and have some established ground rules, or at least a general agreement, about who and how money will be managed. Having regular discussions or meetings to review the state of your financial affairs is also helpful.
3) Good credit, bad credit
If you're teaming up financially, taking out joint credit cards and joint bank accounts, then be aware that you're jointly on the hook for any debt. If one party starts to run amok with the credit cards, after you've split, creditors can hold you accountable for it financially. Trust is key but if that trust is broken and there's money at stake, and your financial reputation, put the breaks on as soon as possible. The new positive credit reporting system allows you a 14-day period to put a freeze on your credit record, so you can contact any lenders to advise them of the situation while you deshackle yourself financially by closing joint accounts down.
For more see my interview here with John Scott of credit reporting agency Dun and Bradstreet.
One party may excel at excell spreadsheets and thrive on playing chief financial officer, however surrendering financial control or keeping your head in the sand is risky even if the relationship is rock solid. If for some reason the person running the show is unable to do so, it could create all manner of problems and financial strife as well as stress. Holding regular summit meetings to review the family finances is a good idea or periodically getting the co-pilot to take the wheel will help to establish some balance.
5) Eyes on the prize
Having common goals or a shared vision of the future is financially advantageous. Not only does it unite you as a couple emotionally and philosophically, but having shared goals will influence how you structure your finances which can have the effect of helping you to achieve your goals faster. Two is better than one if you're on the same page.