Foundations for Strong Families 201. Building a Joint Relationship with Credit


This section discusses three financial and three relationship issues that are important to success in finances and in love. From a financial perspective, knowledge of the types of credit, joint vs. separate accounts, and credit scores will help couples build credit together. In turn, financial missteps can be avoided by understanding how to handle the common relationship themes of communication, children and child support, and extended family.

Once couples are ready to invest in their life together, obtaining mainstream credit is important and often necessary. Using credit to borrow funds may be imperative because it can serve as the bridge that allows couples to purchase desired assets. Although their resources are often limited, many low-income families are already saving money and using credit. However, about one fifth of low-income families are unbanked, that is they do not have a connection to a formal financial institution.4 Therefore, their savings may grow more slowly or lose value in the face of inflation and can result in more obstacles to using credit to become an owner or investor.5 Making use of mainstream financial institutions is important because there is some evidence that the having to withdraw money from the bank or not having money easily accessible in one’s wallet can reduce obstacles to saving.6

There are several reasons for couples to use credit to help attain joint financial goals. Some constructive suggestions for using credit are explained below. In addition to understanding the ways that credit can be helpful, it is important to understand the drawbacks. Because of the variety of credit products available, this is not a simple matter.

Figure 1

Couples Quiz: What’s Your Financial Compatibility?

Couples frequently avoid talking about money before marriage. That is unfortunate, because sharing perspectives about money can help couples resolve the financial issues that complicate many marriages. The following financial compatibility quiz can help couples planning to tie the knot discuss financial issues. Answer “true” or “false” to each of the following statements.

  1. We are aware of and comfortable with each other’s money personalities.
Some of us grew up in families where parents watched every dime; in other families money flowed easily. Some people measure self worth in terms of money and possessions. Some people are natural spenders; others are savers. Understanding your future spouse’s background and values can help avoid problems down the road.
  1. We have discussed our short- and long-term financial goals.

Setting financial goals helps you develop priorities and define the type of lifestyle you will lead. Break down your goals into manageable pieces. If you want to buy a house in five years, for example, determine how much you need to save monthly to meet the down payment and to meet that goal.

  1. My spouse and I are well-versed in personal finance.
Parents and schools rarely provide training in personal finance. Work together to develop your financial knowledge and build confidence by taking a course, meeting with a financial planner, or purchasing a reputable book.
  1. My spouse and I have discussed a plan to structure our finances.

Will you pool all your resources into joint accounts, maintain separate accounts, or devise some combination of the two? There is no right or wrong answer; the key is to come up with a plan that works for you both.

  1. We have planned for the impact that marriage will have on our taxes.

The marriage “penalty” means that you and your spouse together are likely to pay more taxes than you each did as singles. Check with a CPA or tax professional to ensure that you are prepared to meet your tax responsibilities and aware of any tax law changes in this area.

  1. We have decided how to divide the money management tasks.

Decide who will be responsible for balancing the checkbook, filing taxes, and tracking investments. Better yet, set up a plan for rotating these and other financial tasks

  1. We understand the importance of establishing a realistic budget.

Couples without a budget tend to live and spend from day-to-day. A well thought out budget helps you save regularly, utilize income wisely, and avoid misunderstandings about how money is spent.

  1. I know my future spouse’s investment personality and risk tolerance.

Investing styles are different, ranging from conservative to risky. Take the time to arrive at a level of risk where you both feel comfortable.

  1. I know how much debt my spouse is bringing into our relationship.

Couples must enter marriage knowing how much debt they each carry and how it will be paid.

  1. We have made a commitment to discuss money regularly.

Differences are inevitable. How you handle them is important to your marriage.

SOURCE: Copyright 2009 American Institute of Chartered Public Accountants


Figure 2

Relationship Attachment Model

This model of relationships, developed by author John Van Epp, Ph.D., provides an overview of major stages individuals go through to get to know and bond with each other. At each stage of the relationship, people can gather information about their potential partners’ relationships with money and credit as well as their own. Thinking about why and how partners use credit can help with making healthy choices for finances and relationships.

  1. Knowledge: In this stage, people gather information about partner’s family background, the choices they make, their goals, and their past relationships.
  • Think about partners’ past financial choices, how finances were dealt with in past relationships, financial values, what are the financial implications of past behavior (debt, credit, and earnings).
  1. Trust: In this stage, people evaluate the mental picture they have developed about this person and assess whether the picture is accurate. Is the potential partner an IRS hazard, that is, are they what the model calls Idealized, a Rescuer, or a Substitution for someone else?
  • Talk openly about financial habits and current financial situation, observe financial practices and decision-making about spending, saving and credit. Does partner have credit cards that s/he can’t pay off?
  1. Reliance: In this stage, people start to test the trust they have developed with the person they are getting to know and whether they are able to meet needs and are dependable. Does trust go up or down as reliance increases?
  • Check out whether the financial trust that has been established is accurate by openly checking out each other’s credit scores and other financial documents.
  1. Commitment: In this stage, people think about the positive and not so positive reasons to commit to a partner.
  • Have partners been open about what debt they have accrued, why they have debt, and how they will pay it off? What does it mean for you or your partner to take on each other’s debt, financial spending and savings habits? Are we financially compatible?
  1. Sexual Touch: In this stage, romantic partners consider the extent of physical and sexual touch based on the extent that they know the trustworthiness and reliability of a partner.
  • Imprudent sexual involvement can lead to emotional and financial dependency upon a partner who is unreliable. Is my partner a high financial risk? Does my partner mismanage finances?
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Although obtaining credit can be helpful to reaching a couple’s goals, it can be risky and requires taking on debt. It is important for couples to distinguish between good and bad debt to understand when taking out a loan will actually help increase their assets in the long run. Good debt is an investment, like student loans, retirement savings, or starting a business, and it creates value. Whereas bad debt has no potential to increase in value, except for the creditor. When faced with bad debt, it is vital to reduce and eventually alleviate it.

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