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Bringing debts and savings to a marriage - how to approach this?(11 Posts)
I've posted about this in relationships but would love a financial view rather than an emotional one please...
DP and are moving in together, and have discussed marriage too. I believe in pooling finances with your partner, definitely your spouse, but second time around things are more complicated.
DP has a large debt to pay off. It was run up by his exW when they were married. He is paying it off as fast as possible, but obviously there is interest to pay on it too.
I have savings equal to the size of his debt. They don't attract very good rates of interest in the current climate. So :
Do we pool our finances and I effectively pay off his ex's spending?
Or do I "loan" him the money and ask for interest equal to whatever I could get from a long term savings account, which is way more favourable than the interest he's paying. It may become a bit pointless him "paying" me if we share our finances though?
Or I could keep it separate and for the purpose it was intended for, which is dcs' education / foot on housing ladder / whatever they need. Ultimately DP earns and will earn more than me so arguably will put more into our combined pot over the years. My dc do not have a father who provides for them and DP will be 'taking them on' for want of a better phrase.
I absolutely want to share with DP - I think it's the origin of the debt that's getting to me, it's not like he ran it up studying for qualifications or similar when I'd feel much happier about pooling our respective debt and savings. FWIW DP hasn't asked directly or indirectly for a penny and doesn't know that I could pay off the debt in full.
Thanks for any practical thoughts about how to approach this without emotion but making sure I get the best outcome for everyone!
You might find some of the thoughts here helpful: debtcamel.co.uk/snapshot/his-hers-debt/
Does he have any children?
(I don't make any money from any links in my posts)
Could you repay the debt, with a view to him making the payments he's currently spending on servicing the debt into a long term savings plan - ISA or similar? It would mean he's not paying unnecessary interest, but that the savings would be rebuilt (as long as this can be achieved so there is enough for when required - clearly if DC is due to go to uni in 2 years or so this may not work).
This is what I would do (I think!). It would boil down to what he was like with money generally. If we had the same outlook, he is responsible, likes saving, the same friviolity, then I would pay back half, and get him to pay this back to you with a bit of interest.
The reason I would choose half is because it is galling having to pay back someone else's debts (let alone someone else's debts). If its all going well maybe 6-9 months in I might review it. If it's all going well, maybe just pay a chunk more off, after all you do say he will be supporting your DC's. Also are all his finances totally transparent? BTW what is the amount of debt?
You could also look at it long term. If he paid you back x amount per month, when will the debt go?
Absolutely not! While your intentions are admirable I think it would be extremely foolish on your part. By all means pool things once married but until then whats yours is yours and what's his is his..
Are you really considering going from living separately to fully combined finances all in one go? I think that's mental. I mean (and sorry if this comes over a bit pessimistic) isn't moving in together a very high risk time for a relationship? If I were you, I'd be trying to keep finances as simple as possible, so it doesn't contribute to the upheaval and, yes, so it's easier to extricate yourself if the worst does happen. Which I'm sure it won't, but just in case it did...
To be honest, your comment about these debts having been run up by his wife triggers alarm bells for me: it just sounds like such a classic ex-spouse moan. Maybe she did contribute, maybe he thinks she contributed more than she did, but it suggests that he's not the most financially savvy person on the planet. Either he's been hoodwinked into taking out somebody else's debt in his own name, or he's blitzed a load of money he didn't have and then lied to you about it, or quite possibly a combination of the two. Either way, that's not the person I'd hand over my house deposit to without having clear evidence of his stability.
I think the fact that you have DCs is important here. They are your prime responsibility and you've single-handedly accumulated and earmarked the money for their benefit. Grim thought but if you died tomorrow, that money would be theirs. Give it away and it's gone.
Thank you for all your views. I was looking at this purely from the monetary angle, eg, if I can get interest from DP at the same rate as a bank and then the lump sum is returned at a later date (not going into details but there is a long term option there to do so), all tied up with proper agreements etc etc, would it still be insane to do this? I had thought along similar lines to sunshine
But it's Cogito's comment that seals it - I can't risk what's there for my dcs in the event that I wasn't here, or things don't work out. I do appreciate words of caution about DP but it's not an issue. I don't want to go into the full back story as it's about other peoples' marriage / finances / situation but I'm clear that DP is a good 'un and this debt was not of his making.
Moving forward I reckon the rule of thumb is that we keep what we have now for ourselves and from the point of moving in or marriage our income is in a joint pot, with back up from our own savings for our respective dcs' education / deposits etc. It just seemed daft that one half of a partnership could be servicing a debt at higher rates of interest than the other half could earn from savings. Thanks again I've been thinking about this for ages and just needed a bit of objective advice, I didn't want to even mention it to DP as it would put him in an awful position.
Monetarily you could do all kinds of things and have contracts of repayment drawn up etc. However, you say he is a high earner so he can presumably service & repay the debt in a reasonable amount of time. If he has an ounce of self-respect and decency - which I'm sure he does - he would see it as morally wrong to take money off you.
Personally I would not be using my savings to pay off my partners debt I'm afraid. Particularly if it was incurred by his ex wife.
I would postpone the marriage until you are both in a better financial position then go into it as a team.
Thanks cogito. He's not a very high earner, but more earning potential than me. He will by dint of this end up being the main provider for a household which will include my dc. He is a great man, with tons of self respect & decency who's been shafted by an exW he trusted when married.
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