No one likes considering the worst-case scenario for a relationship, but when it comes to finances, it’s good to be prepared for anything. As the old adage goes, “Prepare for the worst, but hope for the best.” Like getting insurance or writing a will, such preparation is more to prevent an even worse scenario from occurring. If you are married or are in a relationship with shared assets, take note of these five tips you can take to ensure a smooth transition to financial autonomy.
Set aside some money each month in a high-interest checking or savings account that you have access to if the need arises. In the event that you have to set up house in a new place or take over an apartment, make sure you have enough money in that rainy day fund to cover first and last month’s rent and security deposit for an apartment. You’ll also want to think about what other kinds of payments are shared that you might have to assume full responsibility for, such as car payments, insurance, and cosigned credit cards.
Make sure you also have your own bank account as a safety net; this could easily be the same account as your rainy day fund. When emotions run high and money is at stake, it’s best to have an alternative to a joint bank account to jump to immediately. Have your paychecks set up with direct deposit into your account and transfer all or part of it into the joint account each month for shared expenses. That way, your own money will land safely in your account if the relationship should end.
Having credit in your name only will help to build your FICO score, which lenders use to determine whether you are likely to pay your debts. It is also a good safety net for covering expenses in case you don’t have enough in your rainy day fund. If you have no credit established in your name, or if you have bad credit, you might find obtaining a credit card to be difficult. In that case, look into getting a secured credit card to help you build your credit.
If you find yourself on your own and need to rent an apartment, a good credit score will be your best friend. You should be able to cover the move-in costs with your rainy day fund, but if you have bad credit or no credit, that won’t be enough to get you an apartment. Follow NerdWallet's tips for building credit, and check your credit history regularly to make sure everything is accurate and report any discrepancies.
It’s important to know your health insurance options if you’re on your partner’s plan. Check with your employer to see if and when you can sign up for an insurance plan through your company and what options are available. If you are unemployed or your employer doesn’t offer health insurance, check your state’s marketplace to see what options are available for you under the Affordable Care Act. Check out NerdWallet’s Health Insurance Guide for help figuring out what you’ll need and where to get it.
Even if you grow old with your partner, many of these tips will still be useful. But if you someday find yourself needing them, they will be indispensable!
NerdWallet, a consumer finance website that promotes financial literacy, is forever looking for the best ways to keep Benjamins in your wallet. Be it investments, saving, health care, education, housing, or travel, NerdWallet uses data-driven tools to help you make the best decisions about your money — yep, they do the homework for you.