Shannon* was in love. She’d met her partner in high school. They’d been together for four years. They’d even moved in together. In truth, she couldn’t have imagined a future that didn’t involve her partner. Then, without warning, and right after they renewed their lease for another year, things started to sour. As their fights gained momentum, and their distrust in each other grew, Shannon quickly found herself in a relationship that wasn’t going to last. When things finally came to a head, in the form of an epic three-hour argument, Shannon was faced with a new reality. The partner whom she’d come to rely on, a person with whom her life was so deeply intertwined, was no longer going to be around.
Breakups are hard. The emotional and awkward process of two people attempting to pry their lives apart is painful and difficult for both parties. And if you’ve been together for a while, there can be a lot to separate from each other — furniture, housing, friends, and even money.
In Shannon’s case, one of her first thoughts post-breakup was about their shared financial responsibilities. They had a lease, money she’d loaned her partner, and shared furniture that they’d now have to figure out how to separate. While Shannon uncomfortably stumbled through the process with her partner, her story is not unique.
In my work at Zeta, a company focused on family finances, I’ve been privileged to spend time with thousands of couples. And while our goal is to help families stay together, many of our couples have kissed a few frogs before finding their prince or princess. As part of those adventures, couples have recounted countless stories about breakups and finances -- some that have driven them to bankruptcy.
But this doesn’t have to be your story. I want to take this opportunity to share some advice on how to navigate separating your assets in a breakup, having learned from the hundreds of stories I’ve heard first-hand.
Understand what you have (or owe) together and what future responsibilities you have together.
Often, in the emotional turmoil of a breakup, it’s not always easy to think rationally. To the extent that you can, the first thing you’ll want to do is to understand the state of your shared finances. If you were previously the money manager in your relationship (and even if you weren’t), you’ll want to create a comprehensive list of all your assets and liabilities that your partner can see and edit. This can include everything from bank accounts and credit cards to furniture or a car. Take the time to itemize these shared assets and assign a dollar value to each of them if you can. If you have pets or children together, consider how those responsibilities will affect your finances in the future, and include those costs in your list.
Make a plan to divide your shared things fairly, but not necessarily equally.
When you’re heart-broken or angry, it can sometimes be hard to figure out what’s fair. Money often becomes a weapon in a break up, used to push that final button, or as a punishment from one partner to another. And while that can be tempting to engage in, remind yourself that irrespective of the terms of your break up, your partner is someone who you once loved. To the extent possible, look at the list above and come up with an arrangement that is fair to you both. It’s important to note that fair doesn’t necessarily mean equal, and finding your definition of fair may require some outside help, so don’t be afraid to ask a neutral friend or arbitrator to step in.
Document any future agreement.
The ugliest stories I’ve heard could often have been avoided with clear documentation of what was agreed upon. So while it might feel like a strange request, make an effort to document your decision between you and your partner. Some couples keep it simple by sending an email to each other acknowledging their decision and confirming any future responsibilities. Others, especially those with large sums of money on the line, will want to formalize the agreement in a more legally binding way. The important thing here is to remove any confusion and make sure both people understand what they’re agreeing to, now and in the future. If necessary, consider adding some consequences in the agreement if you or your partner don’t follow through on your commitments. That way, if one of you relies on the other’s contribution, you’re not left in a lurch.
When possible, have a cutoff date when you declare your debts settled.
If you have the ability to do so, consider an “end date” to your arrangement, even if it’s several years in the future. For example, in the event that you lent your partner some money and would like to be repaid, agree that your partner will send you a $X monthly payment for a total of X years. Even if that doesn’t cover the full debt, it gives you both a clear structure, timeline and total repayment amount. Obviously, this is much less feasible when negotiating around kids, but for everything else, ask yourself how long you want to stay financially tied to this person.
While this advice can be helpful, there are certainly instances where things may not go according to plan. Unfortunately, it can be hard to correct for a bad breakup after the fact, so tools like prenups or postnups are especially helpful when first making major financial decisions together. In Shannon’s case, her biggest takeaway was to think things through before signing onto a financial arrangement with a significant other. In telling her story, she reiterated that in subsequent relationships, she’s been much more thoughtful about taking on financial burdens that force her to rely on her partner. Lucky for Shannon, she’s since found a prince to build a future with.
*Name has been changed.
Aditi is the founder and CEO of Zeta, where she’s on a mission to help couples master their money. She dreams of one day being the Indian Oprah and keeps her skills sharp on The Money Date, a podcast she co-hosts with her husband where they interview couples about love and money. You can find her at aditishekar.com.