A Mortgage and A Divorce: Not a Love Story

In a divorce, the best way to handle the mortgage is to refinance the loan into the person’s name who will be making the payments. If that person is your ex, then it’s doubly important.

Your mortgage company considers a divorce decree to be a personal matter not a legal matter. If your name is on the loan, then you will face the full consequences if the loan isn’t paid. A divorce agreement can’t prevent foreclosures or repossessions. It also can’t prevent your ex from ruining your credit if he or she refuses to make payments.

If you don’t want to refinance, you could always try to save the home, and your credit, by making the payments yourself. The courts will eventually order your ex to reimburse you. Just don’t expect to be reimbursed soon enough to save your home or your budget.

Sometimes, the biggest income earner is ordered to pay the mortgage even if that person no longer lives in the home. This is more common when children are involved. In that case, both parties may be reluctant to refinance the mortgage, because they feel the original mortgage agreement gives them control over the other person or the home.

If you can’t agree to refinance, then sell the house and move. Regardless of how much you love the home, or the idea of your kids living in it, it is best if both parties move to a more affordable home than to endure the continued heartache of credit problems and payment disputes.

Finances: Choose the Right Relationship for Your Money Type

When people are looking to get into a relationship they look for another person with similar interests and values.  This is not the case with money – people tend to attract opposites here.  A spender attracts a saver. With Valentine’s Day this weekend, let’s look at what you should be asking to attract someone with similar money values.

First, you need to know what money type of person you are.  Are you someone who has a budget or spending plan and takes time to think about your money and map out what your financial goals are and how to get there?  Do you make purchases with a thought out plan or do you buy on impulse.  Maybe you are a spender and you make purchases even if you don’t know where you’ll get the money from.  Or you might be somewhere in the middle.

You need to figure this out before you get into a relationship with someone else.

Then, you need to find out about the other person’s money type.  If you don’t, you could end up in a serious situation where one person has acted responsibly with their money and comes to the relationship with great credit, no debt and their finances well thought out.  The other person could have substantial debt with past due accounts and no savings.

This can destroy a relationship no matter how many similar interests you share.  You need to add this quality to what you are looking for in a relationship. Money and credit play a big role in your future life – employment / earnings, where you will live (rent or own) and how you will survive the unexpected financial emergencies.

Married Finances: Should Two Become One?

Weddings are an emotional celebration. We love the idea of a bride and groom starting a new life together. We use words like “two becoming one” or “sharing your lives as one,” meaning that everything will be shared as though the couple are no longer individuals. I believe this puts a lot of unnecessary sentimental pressure on a couple to share all their finances even though it’s not always necessary, or even wise, to do so for every single account or property.

So, how do you merge two separate financial lives?  There are many successful ways to do this.  Some couples keep their individual incomes and expenses separate by having separate bank accounts, credit cards etc. Then, they have a joint expense account for their household bills that they each put money into. Sharing the joint account can be as simple as having each person responsible for different bills, or figuring out the bill totals and having each put in their half. Some people base the joint account total on a salary percentage (this works great when one spouse earns more money that the other). And, of course, some people merge everything and all accounts are joint.

You need to think about what type of financial people you are.  Here are 3 questions to think about that will help you decide (and could possibly save some financial squabbles):

1. Are you a saver and your spouse a spender?  Having one person be the fall back for financial emergencies can be challenging financially and to the marriage.
2.  Are you both spenders? What will happen when there are no reserves for emergencies?
3.   How do you each handle bill payment? Are all your bills paid on time?  Do you have bills that have slipped through the cracks? 

Answers to these questions can be tricky, but worth the discomfort.  Proactive thought can be a financial life saver for your future.  Double check your answers by looking at your account statements and credit reports. You may not be as good at finances as you think you are, or you might be better than you thought. Discuss your habits with each other, as well as any outstanding issues that could affect you both.

I am a firm believer that you both should participle in your finances. You have joint goals in your future, so you should do the financial planning for this together as well. Don’t let the responsibility fall to one person.  If something were to happen to the “responsible” one, then the other party would be left completely in the dark, not knowing anything about the accounts or how to deal with them. I have seen many situations like this. It may seem kind, or convenient, to handle the money if your partner doesn’t know how, but it’s not.

Whichever way you choose to handle your finances as a married couple, make sure it’s a mutual decision based on real knowledge of your habits and goals.