Financial realities behind the romance

VALENTINE’S Day is just around the corner and hearts will be all a flutter as thoughts turn to love.

It’s a popular day for proposals, and many people will start making plans for their future together.

Whether it’s a wedding, finding a place to live, travelling or starting a family, loved-up couples need to get their heads around the costs.

Because it’s not just hearts that will become entwined, finances will too. And as money worries are one of the biggest reasons for break-ups, getting things off to the best start and being open and honest is vital.

Love may be free but moving in, tying the knot and starting a family with someone else are all major financial commitments.

Here’s how to ensure your finances are in perfect harmony.

Getting engaged

Taking that next step normally leads to a shared approach with finances. But you may be totally different with money – one could be a spender, while the other is more careful.

It’s important you are up front about the way you are with cash, so you can plan and not come unstuck later in your relationship.

If you have financial issues, such as debt or money problems from the past, don’t try to cover up or hide it from your partner.

Sit down and have the money chat early. Start the way you mean to go on, with total honesty.

You will then understand where you both stand, how much you earn, what you have in savings and any debts you have on credit cards or loans.

You don’t have to join all your finances and can keep you own separate bank accounts.

But if you are moving in together or planning your wedding, you will most likely start to have shared finances, such as a joint account to pay bills and a savings account you both pay into.

Having joint finances means your credit reports become linked by a ‘financial association’. This will then appear on both your credit reports and means you will affect each others credit applications.

James Jones, head of consumer affairs at Experian, says: “While most couples who live together probably do open joint accounts and, as a result, link up their reports, it’s wise to sit down and discuss this early in the relationship. Make sure you both understand the repercussions of joint borrowing and that you’re happy to link up your credit histories.

“To avoid any unpleasant surprises, I’d also recommend checking your credit reports and scores together, so everything is out in the open from day one.”

Getting married

You will most likely want to set up a joint savings account for the big day – and knuckle down to building up a decent fund.

The average wedding in the UK in 2022 cost £18,400, according to specialist weddings site hitched.co.uk.

If you wanted to plan for a wedding in two years, you would need to save more than £760 per month over the next 24 months, which is a big ask.

A new joint account will help keep your marriage fund separate.

If you get into the habit of sharing the cost and saving for things together now, it’s something you’ll do as a matter of course for the rest of your life

together.

Catherine Wray, senior manager for savings at Leeds Building Society, says: “The cost of living is impacting all of our lives and the idea of saving might feel more challenging than ever. But with interest rates high, now is a great time to get into the saving habit and reap the benefits as you enter married life. If you can cut back and reduce your wedding budget you could use the money saved to put towards a mortgage so you can start your married life in a home of your own.”

Buying a house

Whether you start off renting or buying a home of your own, you’ll have a list of bills to pay, including rent/mortgage, energy, council tax, insurances, water bills and food shopping. It can make life simpler if you have a joint current account, specifically to cover all your bills.

Do a budget of the total costs and work out how much you need to put away each month. Pay that amount into the current account – if you can afford to, round it up so you build up a slush fund to help cover any increases in bills.

You may agree to pay half each, or if one of you earns more you may agree to contribute a larger share.

Be aware that while a joint current account may be convenient and help you budget better, there are risks. Both parties on the account will be credit scored and if one has a poor credit record it could mean any application is declined.

You will be jointly and severally responsible for any debt on the joint account, so if one person refuses to pay, the other will be liable for the whole overdrawn balance, not just half, as many people assume.

And if you have a sole current account with the same bank as your joint account, the bank has the right to debit money from the sole account to cover an unauthorised overdraft on the joint account. So it can be better to keep the joint account with a different bank.

Having children

Starting a family will mean your priorities will change, and that includes financial plans.

You need to think longer term. How would one of you cope if anything serious was to happen to the other and how would it impact your children financially?

Similarly, if you were to lose your income due to accidental injury or long-term sickness, how would you manage to pay the bills?

If you don’t already have life insurance and income protection, you

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Get into the habit of sharing costs now so you do it as a matter of course

should give them some serious thought. Speak to an independent financial adviser for help on how much life cover and income protection will cost. You can find an IFA in your area via unbiased.co.uk or vouchedfor.co.uk. If you didn’t make a will when you got married, then having your first child should trigger you to get this sorted.

It’s not that expensive, but it will give you peace of mind that your finances will be managed according to your wishes.

And if things don’t stay rosy...

According to the Office for National Statistics, around one-third of all marriages since 1964 have ended in divorce in the UK – and more than two in five couples are expected to get divorced in future.

And the number of those choosing to stay in unhappy marriages because they don’t want to face the financial implications of divorce is expected to be even higher.

Experian’s James Jones says: “Of course, sometimes relationships don’t work out, despite our best efforts. If you’ve recently come out of a relationship where your credit histories were linked then, despite the two of you going your separate ways, your credit reports will stay coupled together unless you act.

“It’s easy to rectify this, once any joint accounts have been closed or transferred into just one name. Simply submit a ‘financial disassociation’ on each of the three main credit reference agency websites (Experian, Equifax and TransUnion), and they will decouple your credit reports and stop your future applications being affected by the other person.”

‘‘ If your credit histories were linked, credit reports will stay coupled unless you act