Stop the money wars this valentine's day

Have you ever thought about what would happen should your happy, yet, unrecognised union, end in heartbreak?

It’s that special time of year when love is in the air. For many lovebirds, this means romantic dinners, whispered sweet nothings and a little extra effort to spend time together. However, the reality is that no matter how strong a relationship is, the only things certain in life are death and taxes. So, if you are in a relationship that has not been officially recognised, what are you doing to ensure that you’ve protected yourself when the relationship breaks down or ends as a result of death. You may face dire consequences if there was no prior agreement with regard to assets, maintenance and the like.

“It is common for people to be in a permanent relationship without ever getting married. And whilst the times are good, it is fine but when couples break-up arguments can turn to money squabbles and these disputes can turn perfectly sane, rational individuals into money-focused villains. Unfortunately, there are no winners when it comes to financial disagreements,” Explains Matthew Hunter, Head of Investments & Saving for Absa Retail Bank.

South African law does not recognise the concept of a "common law marriage". This means that no amount of time spent living with another person will convert a cohabitation relationship into a marriage. Many people are nonetheless under the mistaken belief that "common law marriages" are legally recognized and that rights and duties automatically arise therefrom. Although our Courts have, in specific instances, recognized that certain reciprocal duties flow from such relationships, this is not a given.

Managing the often neglected yet significantly important elements of your relationship are therefore vital to ensure you are taken care of, irrespective of your relationship status.

If you are in a relationship that has not formally recognised, what should you consider to ensure that you are both equally protected should a break-up arise?

“You need to be clear in your approach. Whether you are dating, living together or plan on tying the knot, having a game plan from the start, will mean that an enormous amount of conflict and unspoken tension will be avoided,” comments Matt.

“Once you have decided to move in together, the first step is to sit down and understand each other’s saving and spending habits. Also, don’t be shy to list your current debt so that your partner is aware of your situation and demand the same information, so that you begin your cohabitation agreement on a solid foundation,” Matt goes on to explain.

Below, are key pointers to start your discussion:

• Merge your hearts, but not your money. While living together, finances should be kept separate - you pay expenses, your partner pays for theirs and you share mutual costs i.e. entertainment, living costs and others. Should you decide to go your separate ways, there will be no complicated money issues to deal with

• Retain separate cheque and credit card accounts, this will also avoid any unnecessary complications should you split.

• Living costs – it is important that expenses are split fairly. When moving in, discuss upfront who will be responsible for which bill as well as your respective responsibilities when it comes to running the household. If you are furnishing a home together, one buys the fridge, the other the washing machine. If you go your separate ways, you keep what you bought and they keep theirs.

• An easy and fair way is to divide expenses according to what you earn. A simple arrangement would be to work out, in percentage terms, what each person can afford from his or her salary. Ideally, if your partner is earning more than you, then he/she should pay proportionately more of the expenses

• Think carefully about lending your partner money – small amounts are acceptable, , but taking out a personal loan on their behalf is not advisable.

• Be mindful of signing surety on debt that your partner wants to incur, especially for luxury buys such as a car, motor-cycle or television. . If the relationship comes undone, so could your bank balance. By signing surety, you agree to be responsible for paying back the debt and if your partner fails to pay, the debtors will haunt you and you could be left with a tarnished credit record.

• If your partner already owns the home that you move into, the rent you pay should be accrued to you if you break-up. Many people fall into the trap of paying for the every-day items such as groceries and electricity while their partner pays off the bond. It means one of you has nothing to show for what they put in, while the other gets a paid-off bond out of it. Don’t let this happen. Sign a co-habitation agreement that you can have drawn up by a lawyer stipulating what you are entitled to in a live-in relationship. This can be amended annually as assets accumulate.

• Should you and your partner be moving into a rented property, the lease should be the responsibility of both parties. If either of you decides to move to on, there is a contract binding you to your obligations i.e. they need to continue paying their share of the rent.

• You may be saving some money now that you are living with someone and your expenses are split. Ascertain how much you may be saving and invest it wisely.