Tuesday, August 2, 2016
Lets talk STDs (Sexually Transmitted Debts)
Whether you're a health professional or a financial planner, talking to your client about their STDs is an uncomfortable experience. The fact that the client has walked through your door in the first place is an indication that they are getting desperate for help, because, as with a traditional STD, they are embarrassed and just don't want to talk about it.
The end of any relationship is a traumatic experience, and the majority of us have been through the feelings of abject failure and loss that comes with it. Couple this with the stress of being left to foot the bill, and it's easy to see why there are so many bitter and twisted ex-partners out there.
Avoiding an STD is all about prevention, and I have a discussion regarding the "Separation of Church and State" with all of my single clients. I explain that this concept can be used in relationships as well, in that your emotional attachment and romantic relationship should be viewed as separate to your financial state. Communicating your financial goals with your partner, understanding theirs, and setting "couple" goals is important. Opening a joint bank account to save for holidays or a wedding is a great idea. Going guarantor on a car loan is not.
What you bring into a relationship should be protected, and most people understand and accept this basic principle, even when their only exposure to it has been through rom-coms (thank you Hollywood). But you also need to have the discussion about what happens once you have moved in together. What happens when one of you need a new car, or your bundles of joy come along sooner than expected? I have heard many horror stories of one partner co-signing a car loan and then the other leaves with the car and refuses to pay their half. In this scenario, you can't sell the asset without joint consent, but if you only pay your half, then a default will go on your credit record as well. In one way, investing in a relationship is the same as investing in the share market. Everyone is a high risk investor when things are going well, and everyone is looking for someone to blame when it goes badly.
Now, I'm not sure of what other planner's experiences are, but my clients seem to be less and less dependant on a traditional partner arrangement when building their wealth. I have an increasing number of clients, male and female, who are going into their first serious relationship with an asset base. Those of us who have already been through the wringer will be screaming "co-habitation agreement", but will they listen? It is easy to get caught up in the warm and fuzzy, and the discussion of legal documentation before co-habitation is hardly the most romantic form of courtship, but a full disclosure and understanding of your partner's financial health and attitude is necessary. Jumping in without knowing will not only make your financial planner very cranky, but it can also have long term ramifications for your credit rating and wealth strategy.
For those of us who have already had the unfortunate experience of encountering an STD, don't be embarrassed. Think of it as a learning experience. A good financial planner will be able to adjust your strategy around this roadblock, and will help you rebuild your finances, one bitter little step at a time.
By Erin Wright B.Int Bus Dip. FS(FP), Accredited Aged Care Specialist
Find Erin at Achieveit Financial Planning or call for an appointment on 07 4638 5011