Dealing with the Debt Demon
The professional couple in their 30s quickly adapted to sharing the same space and even friends reacted positively.
However, there was a snag. Kevin was deep in debt. Credit card bills, coupled with a debt inherited from an ex, totaled well into the tens of thousands.
And though the couple’s feelings were undeniable, the debt controlled the way they lived.
They moved into a cheap apartment where Kevin could cover half the rent and bills. They lived frugally, dined at inexpensive restaurants and didn’t take vacations. Two cars gave way to one as the pair agreed to share the car already owned by Sophie, letting Kevin end his lease.
The debt was a black cloud over Sophie’s head. “Personally, I hate debt and I’ve worked hard to avoid it,” she says, “so it was difficult to accept I was now part of a relationship with money problems.”
For the next year, Sophie tried to put money woes out of her mind but returning home to phone messages from banks and creditors made her uneasy. One evening, she stumbled across Kevin’s bank statement and was stunned to learn he was down to $100 despite earning a good income.
Something was up.
Before he had his coat off, she confronted him. Kevin had not been entirely honest about the amount of debt. To make certain payments, he was using another credit card, also with a balance of several thousand. He also confessed to spending hundreds a month on lotteries and spa treatments.
Though she adored Kevin and knew he genuinely felt badly about his finances, Sophie ended the relationship. “I cared for him deeply,” Sophie says, “but I felt like he created a financial black hole and it felt like I was sucked in. He lost my trust in terms of his being honest about money, and I lost confidence in his ability to handle money.”
“My favorite saying is, ‘It’s not about the money,'” says Margaret Johnson, president of Solutions Credit Counselling Service in Vancouver, which helps couples get back into the black. Johnson knows all too well money’s ability to ruin relationships.
“But my lawyer always tells me, ‘It’s all about the money,'” Johnson continues. “And as much as I hate it, he’s right. Everything we do centers around our lack of, our need of, or wanting to protect it.”
When dating and looking for a partner, Johnson suggests getting to know a potential mate financially as well as emotionally, spiritually and physically (see checklist of tips, below). While Kevin and Sophie had a strong emotional connection, they never really got to know one another financially.
Johnson is continually amazed at how couples, even married couples, know next to nothing about the other person’s financial plans.
“You can’t build a relationship with someone if you don’t know where you’re headed,” she says.
“People will tell you about their sex life but they won’t tell you their credit card balance.”
The first challenge is choosing when to tell a potential mate where you’re at financially, including how much you owe.
If you’re dating and not in a situation where sharing everything is necessary, don’t feel pressured. There’s no need to drop the bomb over appetizers on the first date.
“But when you’re making plans to move in together and your relationship turns to discussing money as a couple, then it’s important to disclose your financial status,” says Johnson.
If you’re in better financial shape than your partner, try to be patient and understanding, as it’s not easy to come clean. “There are lots of issues around money, but if you’re willing to work together with no judgment of the other person, what matters is that they are in front of you discussing it now,” Johnson adds.
As well, talking openly about money is a sure-fire way to asses how well you communicate. “Can you be truthful and open with this person? If you can’t, then your relationship is already doomed,” she says.
Knowing how much debt a person is carrying is only part of the picture. Knowing what kind of debt gives you insight into a mate’s mindset about money. Is it from irresponsible living? Student loans? Inherited from an ex, as was the case with Kevin?
Once you truly know where your partner is at financially and feel comfortable about it, then the fun can begin in learning where each of you wants to go.
Johnson suggests new couples try an exercise she does with her clients. Placing each person in a separate room, she asks them to write down answers to the following questions:
- Do you like money?
- What does money mean to you?
- How do you define success?
Next, each is asked to list their financial goals over a one, three, and five year period.
They return to Johnson’s office and exchange what they’ve written.
If you’ve picked a waterfront vacation property and your partner envisions owning a small plane, maybe it’s time to talk to make sure you’re on the same page financially.
Tips for Not Letting Money Tear You Apart
1. Have Separate Bank Accounts
Keep your personal account and open a joint account for shared expenses, like bills or savings for a home. The joint account should be online, so you both have access to it.
2. Share the Relationship, Not the Debt
If it’s not your debt, and you have not signed for it, you have no legal responsibility to pay it. Take the approach that you’re not in debt together, but have made a choice to be in a relationship together. Instead of making debt payments, help a partner by covering a shared bill or groceries so that they can put more toward their debt.
3. Never Co-sign a Loan
Banks are in the business of selling money, so if a bank deems your partner a poor risk, he or she probably is.
4. Check your Balance
It’s rare that two people have similar financial pasts and spending habits. Usually one partner is careful with money, and the other is not so careful. Find a balance where you both feel safe and comfortable. Money should not be a taboo subject, especially if you share expenses.