The Ex-Files: Tips for couples on how to navigate the stress of high interest rates and unequal incomes

Question: My partner and I are going through a difficult time. We purchased a property two years ago and rising interest rates are causing financial problems for us. We’re struggling to pay the mortgage and the fixed interest rate ends in the middle of next year. We also bought European cars in our own names on hire purchase.

I earn twice as much as my partner, but all our expenses seem to go towards our lifestyle. There are golf weekends away to Queenstown and eating out many nights a week. My partner wants to go on holiday to Europe in the middle of next year but I realise we can’t afford it.

We are near the $20,000 limit of our credit card all the time. My partner also has a share in a horse that is expensive to maintain. Do I have any options to protect myself financially? I would like to sell my car.

Vehicle

I often get asked whether a party can sell an expensive possession such as a car. There is no reason why you can’t sell the vehicle, but it might cause difficulties in your relationship. If your debts are too great, then you need to take steps to sell the vehicle.

Consult with the motor vehicle dealer and how the debt is to be paid off.

It is important to communicate the reason for the sale to your partner.

Contracting out agreement

You could suggest to your partner that you enter into a contracting out agreement, which means that you would not be responsible for each others’ debts. You would need to have independent legal advice. Many people have such agreements before they enter a relationship and some also set these up this during a relationship.

An agreement could reassure you that your income would be retained for your own purposes. Having this conversation with your partner is a good start.

Work out how your mortgage is going to be paid.

For example, if you are paying more than your partner, will that be recognised later on? If you are going to do renovations on the property and you’re paying more than your partner, is that going to be recognised.

Separate bank accounts

You may have your own separate bank accounts. If you do not have separate accounts already it would be a good idea.

A suitably qualified financial adviser would give you advice to review the credit card. We often see clients who are asset rich but cash poor.

Approach a budget advisor

Your case would benefit from a budget adviser. You have some very expensive assets including the cars which appear to be unsustainable.

Conclusion

Financial issues are a major cause of separation. It is best to raise those issues as soon as possible.

Rising interest rates are going to create further stress in the near future.

Continue reading the full article on the NZ Herald website

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