Get comfortable with your finances before your I Do's
Author: Elaine Smith
Source: The Toronto Star
Talking about money, making decisions together can save a lot of aggravation
Although Abbie McLeod and Riley Cross just became engaged in late July, they are already well on their way to a sound financial future.
McLeod and Cross, Port Perry natives who are both 27, are hunting for a house in the Durham Region. Their down payment shouldn't be much of a problem, thanks to some good planning and disciplined savings. In 2017, the couple and two friends purchased a cottage north of Toronto to rent and improve. This year, they sold it at a profit, and that money, together with savings on rent, will see the young pair well on their way to homeownership.
"I work at Scotiabank headquarters downtown," said McLeod, a co-ordinator for the bank. "We decided to rent a condo in the Distillery District so I'd have a shorter commute to work. We planned to live there for five years, but everything changed within a week when the pandemic hit."
Soon, everyone in McLeod's office began working from home. She and Cross decided to move back to Port Perry, closer to his work as an installer for Tasco Appliances. They moved in with Cross' mother and soon realized that they were saving a few thousand dollars monthly without the burden of Toronto rental costs and the temptation to spend money.
"It was a fun lifestyle, but in the city, you'd walk out the door and spend money," Cross said. "You'd meet people for drinks or order Uber Eats. Here, we go for a walk to get out. We're saving a lot now."
Wallace Howick, a Burlington CPA with extensive financial experience, doesn't comment on finances without knowing the individual circumstances firsthand, but he noted that "it sounds like this couple has made good progress."
Howick knows about joint finances from years of working with clients. The lifetime Fellow of the Chartered Professional Accountants is the author of "Love and Money: Conversations to Have Before You Get Married" (Cormorant), a new CPA Canada book directed at engaged couples - or any couples - who are planning a financial future together.
"When I read books on financial planning, they'd advise people to talk to their spouses, but they didn't say how to do so," Howick said. "There are often no conversations about the attitudes behind money or the values sitting below the surface, but they impact us everyday."
Everyone absorbs ideas about money as they grow up, but most do so without realizing it. By examining these values and their roots, couples can understand each other better when it comes to how they spend and save. Ultimately, it can save a lot of aggravation.
"Money is a reason that marriages so often fail," Howick said. "Wouldn't it be a whole lot better if the things I suggest happen at the beginning of a serious relationship?"
Howick believes that "marriage is rich in shared hope and a shared commitment to the future, but realizing this future depends on understanding each other (financially, as well as emotionally) and using this understanding to work together."
McLeod and Cross seem to understand this approach instinctively and believe in regular communication.
They have developed shared goals for the future, including owning a home and a cottage and beginning to prepare for retirement.
McLeod invests in her company pension plan and has a Tax Free Savings Account (TFSA); Cross also has a TFSA, dabbles in stocks and plans to supplement his retirement savings with an RRSP.
Howick says that with some work, all couples can develop an understanding of their own attitudes toward money, as well as that of their partner, and develop a comfort level with their finances. It's a matter of process.
"If you're seeking answers, there's a four-step process," he said. "You need to understand where you are as a couple financially; where you want to be; how did you get to where you want to go; and how you are doing. The answers to these questions become the framework for a sound financial plan."
When couples marry or move in together, one of the first issues that confronts them is how to divide joint expenses. Do they split everything down the middle or weight it based on income? Do they have a joint bank account to pay for joint expenses?
Howick says there is no right answer; couples must arrive at a solution on their own. McLeod and Cross divide shared expenses equally, something Howick often finds among couples who have good financial communication.
"We have a joint budget and actively look at expenses," McLeod said. "We split expenses down the middle. We went through all of our bills and decided who would take which ones. It results in a lot of e-transfers but it works for us."
Howick believes that COVID-19 has brought a lot of uncertainty about money to the surface, but believes that younger people have "a natural resilience" that they can use to advantage financially.
"I want to help them recognize the need for a process that continues to offer them something constructive," he said.
Whether couples have yet made strides toward a joint financial future like McLeod and Cross or not, they need look no further than "Love and Money" for that pathway.
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