It is not uncommon for couples living together to take out joint loans and enter into financing arrangements to pay for items that are considered equally belonging to both parties.

Legally, while cohabitees are only liable for debts that have been accrued under their individual names, joint credit agreements will mean that each partner will be 50% responsible for debt that is accumulated as a couple; both during and after the relationship (should it come to an end).

Providing her perspective on how this has played out over the past few years, Collin says, “7.54% of our client base are individuals who are over-indebted and under debt review due to being married in community of property to another over-indebted person.

“This number is alarmingly high when compared to the number of clients who are over-indebted and apply for debt review as individuals rather than as a partner in a relationship/civil union.”

The effect that financial stress can have on romantic partnerships is well documented.

And while having conversations around money may be uncomfortable and difficult to initiate, they are necessary.

On the steps involved with securing one’s financial health when entering into a domestic partnership, Collins says that understanding how both parties in the relationship approach and deal with the concept of debt is an important starting point.

This is particularly true in vat en sit relationships, Collins says, where drafting a cohabitation agreement, which details how financial responsibilities will be met and managed as a couple, is a crucial part of protecting one’s financial wellbeing.

Cohabitation Agreement

Among other things, a cohabitation agreement should outline the financial position of each individual in the relationship, including any assets they may have, as well as any debt in the form of credit cards, retail store accounts or personal loans.

The agreement should stipulate how these debts will be paid off in regard to individual debt and any joint debt. It should also provide a description of the process that will be initiated should the relationship come to an end, in terms of settling any jointly accumulated debt and dividing any assets owned by the couple. 

Financial Cohesion

As Collins suggests, fostering a sense of financial cohesion will go a long way in building a relationship grounded in a sense of mutual responsibility, respect and cooperation. These are three of the steps she believes are vital in reaching such an agreement:

Communication: It is important for partners to be honest and transparent about their current financial situation and long-term goals. Being honest about money matters will build trust and nurture a sense of security. Communication about one’s financial needs, stressors, challenges and plans is vital in a vat en sit relationship where the cost of living is shared.

Joint budgeting and financial goal setting: Many cohabiting couples have found it useful to draw up a budget or plan outlining any joint income and expenses. Having a budget in place will allow couples to track their spend, weigh up whether debt is being managed effectively and whether a healthy debt-income ratio is being maintained.

Watch out for these warning signs: Over-indebtedness doesn’t happen overnight. Collins encourages couples to be on the lookout for the below warning signs before committing to a vat en sit relationship:

• Living salary-to-salary and struggling to make ends meet;
• Constantly needing to borrow money (from lending institutions or family and friends);
• Dishonesty about how much they earn; and
• Avoiding phone calls from debt collectors.

“There is no denying that cohabiting can ease the financial burden on individuals. But, like in any other relationship, it is all too easy to find yourself heavily indebted due to a partner’s dishonesty or bad financial habits.

“There is a strong case to be made for tackling financial matters upfront and ensuring that each party’s goals are aligned before committing to a vat en sit relationship,” she says.

• NDA offers debt counselling to struggling customers and helps them become debt-free.