The case for soft launching finances before hard launching a relationship

By Tanysia Komers, fee-only certified financial planner, registered retirement consultant, and owner of KFLA Financial Literacy Agency.

As told to Jessica Martel.

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De notre commanditaire

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Here’s the answer to this week’s reader question.

I’m pretty young, and I want to have a family one day. I want to know how to manage my money, and earn more before getting married.

—Katrina

Should you share finances with a partner? If so, how much?

Before I get into handling money once you get married and how to manage money with your partner, my advice is to take time to understand your own financial situation first. Review your income and expenses, cut unnecessary costs, build an emergency fund, pay down debt and start saving for goals like a home, retirement or the big day: your wedding.

It may sound like a lot, but the idea is to come into the marriage with a solid financial foundation.

Here are a few ways to boost your income.

• Start a side hustle, like tutoring, selling products online or dog walking
• Negotiate a raise or look for a higher-paying job
• Use a cashback or travel rewards credit card to help offset expenses like your honeymoon

Once you know where you stand, it’s easier to build a financial plan together. And this is good advice for your future Mr. or Mrs., too.

Talk about money before you say “I do”

Before you walk down the aisle, have an honest conversation about money. You’re preparing to marry your best friend and the love of your life, but you’re also marrying their money. Ask them questions about their family’s financial habits, and share yours, too. Discuss your attitudes toward spending and saving, and share your short- and long-term financial goals.

To better understand where you’re both at financially, write down your individual assets, liabilities, income and insurance policies. This can help to clarify your financial situations.

If you want help, consider meeting with a certified financial planner (CFP), who can help you build a plan together.

Take advantage of tax benefits for first-time home buyers

If you and your partner plan to buy a home together, check out the government programs for first-time home buyers. They can help you save thousands of dollars and speed up saving for a down payment.

• Home Buyers’ Plan (HBP) allows you to withdraw up to $60,000 tax-free from your registered retirement savings plan (RRSP) to buy or build a home. You then have 15 years to repay the withdrawn amount. 
• First home savings account (FHSA) allows you to save for your first home with tax-free contributions and withdrawals. You can contribute up to $8,000 per year. When you’re ready to buy a home, you can withdraw this money, and you don’t have to pay it back. Contributing to an FHSA can reduce your taxable income, which can result in a tax refund—money you put toward your wedding or a down payment. 

Prepare important legal documents

Once engaged, you should think about the legal factors of building a life together.

Some important documents to consider include:

• Prenuptial agreement: A contract about how your assets and debts will be divided if your relationship ends
• Power of attorney: Names who will manage your money if you’re unable to physically or mentally do so
• Personal directive: Names who will make healthcare decisions on your behalf if you’re incapacitated
• Will: This document outlines your beneficiaries—who will get your stuff after your death

There are online kits available that you can download to cover a lot of these documents. If your situation is more complicated, if you’re blending families, for example, you may want to contact a legal professional for help.

Start building your financial future together

It’s not all joint accounts and tax deductions. Money is one of those topics that can complicate romantic relationships if you’re not on the same page. Understanding your personal finances and having open conversations before marriage can help you build trust, set expectations and avoid any unwanted financial surprises.

Jessica Martel, MSc, is a freelance writer, researcher, and certified financial education instructor (CFEI). She is based in Calgary, Alberta.