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Important things to consider before committing

Open communication about money is essential in a relationship. Open communication about money is essential in a relationship. Photo by Getty Images

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By Jennifer Leathem

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Communication is essential in any harmonious relationship. Some conversations are simple: Who picks up dinner? Where do we spend our vacation? Others are more difficult: where are we going to live? Whose family are we going to spend the holidays with? Do we ever want to start a family?

One of the most important conversations to have, the one about money, is often one that couples try to avoid. Sharing information with a new partner about your income and assets can be a very delicate conversation to have. You may not be ready to share and prefer to keep your situation private. It can lead to conflict, expectations or disappointment. But having that conversation today may be one of the most important steps you take.

You may not be able to choose to combine your finances right away or not at all, but here are some important financial considerations when entering into a long-term relationship.

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Be open and honest: Your feelings about money and spending may align or be very different, so ongoing communication is key. One partner may be debt-bearing and the other may be debt-negative. By honestly mapping out your current situation, you will not be faced with surprises later on. It also gives you the opportunity to collaborate and find solutions to any problems.

Make a budget: What one partner decides to spend their money on may be different than another, and it often comes down to values ​​about money. Working together on a budget and planning where the money will go each month helps avoid conflict. Decide in advance how the costs will be covered and make sure it is fair how the money is spent. For example, if one partner covers all costs while the other pays the mortgage, one partner builds up equity and the other does not.

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Discuss your financial goals and objectives: Discussing goals and objectives ensures that you are on the same page. Your partner may have different goals than you. Some important things to discuss are: When do you see yourself retiring? What kind of pension do you want? Is a career important or would you rather have someone stay home and raise the kids? How do you want to help family and charities? Things in life are never linear and there will be life events along the way, such as having children or a career change, that require goals and objectives to be revised.

Meet a financial advisor: A financial advisor can create a financial plan and update it regularly that will serve as a roadmap for you and your partner to follow. This allows you to monitor how you are progressing toward your goals and be accountable to someone other than your partner.

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Protect yourself: You may enter into a relationship in a very different financial situation than your partner. Inequalities with income and wealth are not uncommon. You may be expecting a big legacy down the road. Talk to a lawyer before moving in together to make sure you, and what you’ve worked so hard for, are protected in the event of a breakup later on. Having this conversation with your partner before signing a cohabitation or prenup contract can be awkward, but you’ll be glad if things don’t turn out the way you expected.

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What to look for: Without a clear understanding of incomes and a fixed budget, you may have questions about where the money is going each month. We’ve all heard stories of partners hiding money or debt from each other, as well as serious issues such as gambling or shopping addictions. If you have good reason to believe that your partner is dishonest or is hiding money from you, bring it up early before it gets worse. If necessary, enlist the help of a professional.

The start of a new relationship is exciting and fun, but the honeymoon can often be disrupted by money issues. There are many things to consider when it comes to money and relationships, but the key to success in both is communication. By proactively conducting these conversations and focusing on your common financial goals, you can avoid turbulence on the road.

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Jennifer Leathem, CFP, CIM, is a financial advisor to Nicola Wealth. This article should not be construed as investment advice or a recommendation for any particular security, strategy or investment product. All investments involve risk and may gain or lose value. Nicola Wealth is registered as a portfolio manager, exempt market dealer and mutual fund manager with the required provincial securities commissions.

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