Newly released ABS figures suggest that more than 40 per cent of marriages end in divorce – and that’s not counting failed de facto relationships.

In 2010, 121,176 couples married and 50,240 divorced (a 1.6 per cent increase in divorce over the previous year).

As Smart Investing has written in the past, the breakdown of married and de facto relationships is one of the biggest destroyers of personal wealth.

ASIC’s personal finance website has entered into the somewhat challenging area of couples and their finances in a recent feature headed Relationships & Money.

“It pays to go into love and money matters with your eyes open,” ASIC writes. Few people would probably debate that sentiment.

ASIC’s tips include:

• Talk to your partner about money in order to gain an understanding of his or her approach to money. Is your partner a spender or saver? What about your spending/saving habits? “Once you understand how your partner approaches financial matters, it will make it easier to create a money plan to suit you both.”
• Analyse both of your financial circumstances. Take into account your combined incomes, assets and debts. Armed with this information, then set out your joint goals and create a budget to achieve those goals.
• Decide how joint finances are to be managed. “Will one person look after the household expenses and the other the mortgage? Make sure you are both happy with the decision.”
• Be realistic about responsibility for joint debts – before signing on the dotted line. You may be held liable for repayment of a joint loan if your partner fails to pay his or her share – even if your relationship ends.

“Many people find themselves having to pay for their partner or ex-partner’s debts even though they had nothing they had nothing to do with the original purchase apart from a signing some papers,” ASIC warns.

By working carefully on their financial relationship, couples may, perhaps, help ease other pressures on their relationship.

By Robin Bowerman
Smart Investing Principal & Head of Retail,
Vanguard Investments Australia
15th February 2012