There hopefully comes a time in every couple's relationship when they want to take things to the next level. In many cases, this means moving in together or getting married. When that happens, you also probably consider co-mingling your finances.
One thing to keep in mind is that financial struggles are a leading cause of divorce in the United States. You also have increasing incidents of one partner destroying the other partner's credit rating.
Just the other day, I was getting my haircut when my hairdresser told me the story of a client whose husband had destroyed her credit. The woman was just waiting for her husband to pay up before having her attorney draft up divorce papers.
While no one wants to talk about these things, they are financial realities couples need to deal with. That's why it's important to have some conversations before applying for joint credit or co-mingling finances.
But first, we need to clarify something…
Why Apply for Joint Credit Instead of Having an Authorized User?
This is a small form of protection and prevention. If you make a partner an authorized user this simply means they can use your account without it affecting their own personal credit.
That means if you guys have an ugly breakup or your partner has some questionable financial habits, that you run the risk of them destroying your credit rating without any consequences on their part.
By applying for joint credit you ensure the account is also tied to your partner's credit. That way they'll at least think twice before trying to do anything stupid.
Of course, this doesn't mean you are in the clear. There are still some important conversations that need to be had before applying for credit together.
What's Your Credit Score?
This is a loaded question because it actually opens the door to several other questions. By discussing your individual credit situations you'll know how much each of you owe, how much your credit limits are and what lines of credit you each have open.
You need to talk about everything when it comes to credit. Especially if you're getting married, because you will both be responsible for any debt you incur together during the marriage, even if the marriage ends in divorce.
Additionally, you'll want to discuss debt repayment plans and how much money each of you plans on bringing to the table. Without this information you run the risk of having a very serious mess you won't want to clean up later.
What are Your Financial Goals?
Getting in the habit of working toward financial goals together makes for stronger couples. A Kansas State University study found that couples that take the time to talk about money together are less likely to end up in divorce court.
This means the two of you aren't just committing to each other, you're also committing to sitting down regularly to talk about financial goals. Better yet, try to find ways to help each other with financial goals.
What are Your Spending Habits?
Relationships are often said to be a balance of two people. For example, one person may be mellower while the other may be a little more energetic. As such, they both balance each out.
This also tends to happen with finances in a relationship. One person may be more of a saver while the other is more of a spender. The only problem is this could lead to some issues if you're not on same page financially. It's okay to balance each other out. What's not okay is having each of you do whatever you want with joint finances.
It happens all the time in relationships, which is why it's important to discuss spending habits ahead of time.
While it may be uncomfortable, you need to have some serious talks with your partner before co-mingling finances. If not for the fear of having them ruin your credit, then at least so you're less likely split up.