Breaking up with your significant other is a painful process, and most people want to get it over with as soon as possible – even if it means avoiding important discussions about possessions, finances, and joint assets.
But leaving issues unresolved can be a costly mistake – both financially and emotionally, and you might not truly realize the impact until several years down the road. This is especially true if you live together. I know first-hand how hard it can be! But I’ve learned from each experience, and I know to be a lot more cautious in the future.
Even though it sucks to think about the possibility of your relationship falling apart, but it happens sometimes. And in order for each of you to protect your finances during a break-up, you both need to put your differences aside and have a mature discussion.
Here are a few ways you can protect yourself and your finances:
Make a list of joint assets and liabilities
You will need to make copies of any joint bank account statements, Registered Retirement Savings Plan (RRSP) accounts, Tax-Free Savings Accounts (TFSA), and any investments. Don’t forget to include past tax returns, credit card statements, insurance and extended health policies, as well as mortgage payers or rental agreements.
If you have joint savings accounts or assets, talk about how you plan on splitting the money. Then, close the joint accounts as soon as possible. If you don’t already have one, open up a new account in your own name.
If you have joint debt, or if one partner owes the other partner money, you need to start talking about it immediately. Come up with a realistic payment schedule that both of you can agree upon, and don’t forget about any interest or banking fees that might accumulate as a result of holding the debt. The last thing you want to do is have to take (or be taken) to small claims court, garnish wages, fill out the endless amounts of paperwork – it’s a nightmare. I’ve been down that road, and trust me, it’s not fun.
Cancel joint credit cards and keep paying your bills
Make sure all joint loans and credit cards are canceled, and that you have a credit card in your own name only. Regardless of who owes what on your joint accounts, you are both responsible for paying it off. Interest charges can add up fast, so make sure you are both on the same page when it comes to creating a plan to get rid of your joint liabilities as quickly as possible.
Don’t forget to check your Equifax and Transunion credit reports a few months after breaking up to make sure that all of the information the credit bureaus have on you is accurate and up-to-date.
Have cash easily accessible
If you have been able to funnel cash into a savings account or emergency fund over the years, keep it where you can easily access it. You might need it for various expenses such as moving, rental deposits, furniture, and other miscellaneous costs.
If you don’t have cash available to you, consider opening up a low interest line of credit with your bank. It is not ideal, but it’s better than using a credit card, and it could help you out in an emergency situation.
Don’t make any huge financial decisions
Take your time and try not to rush into huge investment decisions or making big purchases right away. Chances are you aren’t thinking with a clear head, and if you don’t have a plan of action, you could end up making a costly mistake.
You need to make logical decisions that will help you reach your financial goals. If you’re unsure of how to handle money, get advice from an expert before going to friends or relatives.
Update your extended benefits, insurance policies and will
If your partner was listed as a dependent and/or beneficiary through your extended health benefits and insurance policies, you should update that information immediately. Contact your HR department as well as your benefits provider to advise them of the changes.
If your partner was listed as your emergency contact, make sure to go through your records and change that information as soon as you can.
Unfortunately, not all relationships last forever. This is especially true for 20-somethings who are still trying to figure out what they want from life. Make sure you’re talking openly about money and goals with your partner, and remember that it’s so important to always keep a sense of financial independence!