Love and money go hand-in-hand, or so the thinking goes. With millions of Canadians expected to celebrate Valentine’s Day, it’s fair to say the direction of Cupid’s arrow doesn’t always hit a romantic bullseye. The annual tradition typically conjures up tales of roses and proposals, but it can also bring heartbreak, loneliness or even an accidental lovechild into the world. Either way, there are financial consequences.
Addressing money matters is essential in the realm of love; especially when things don’t go to plan.
Here are some ways to survive through financial heartache.
50 shades of go away: Protecting finances through divorce
A large number of first marriages end in divorce. Divorce proceedings are often contentious, emotionally fraught, and never easy. It takes an average person 15 years to recover from a divorce financially – and some never do. When going through a divorce, it’s critical to remain calm about finances and property. There are three key principles to follow when protecting assets: get expert help in developing a plan; find and track important documents; know what is owned and what is owed.
When sharing a financial advisor with a spouse it is very prudent to have a clear understanding of what the financial circumstances are. Know both parties’ assets, how they are invested, and what risk is involved.
Be sure to have a solid relationship with a financial advisor, make regular contact with them for advice about big financial questions, including mortgages, loans, investments, or restructuring debt. Joint debt is not a 50/50 split – it’s 100/100. Know precisely how the ownership of assets are structured.
Bringing up Baby: An accidental lovechild
With the excitement of a baby on the way, parents-to-be often avoid talking about finances. How much will baby essentials really cost? Is it time to upgrade to a larger home? What about insurance, wills and tax breaks? Answering these big questions before baby arrives and making the appropriate adjustments will lift a load of worry.
Budgeting for a new baby isn’t cut-and-dried. But there are a certain number of must-have items that every new parent needs to consider: furniture, diapers, formulas and childcare. Remember to be realistic about income and spending. A baby’s arrival will mean a drop in income and an increase in spending at least temporarily, so adjust accordingly.
Left out in the cold? How to thrive on a single income
Many people find themselves a new member of the broken heart club around Valentine’s Day. After years of being part of a couple, the financial challenges of singledom can seem overwhelming. But there are lifelines at hand to help those teetering on the edge of financial chaos.
First and foremost, get a grip on income and expenses – never spend a nest-egg trying to keep up with the Joneses and the pressures of FOMO. There are budgeting apps and software packages available to help analyze needs and structure cash flow. Or a good financial planner can offer advice on how to afford the luxuries in life without denting retirement funds.
As a single person, save 10 to 15 per cent of income each year for retirement. Set up a Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) and arrange automatic deposits directly from a bank account.
Create an emergency fund worth three months of monthly expenses to cover against all unexpected costs. A single person solely relies on one income and if an unfortunate event like an injury or an accident occurs, a rainy-day fund can cover expenses.
Whether Valentine’s Day brings a classic, mythological dose of desire, love, attraction and affection, an unlucky tale, or even horror story, financial security should be protected against the whimsical joys or crueler fates of love.
Robyn K. Thompson is a personal finance expert and president of Castlemark Wealth Management Inc.