Episode 49 – Money Tips For Second Marriages

 
Getting married for a second time can cause complications financially, especially if there are children from a previous marriage. It should be something that is discussed so that everyone is on the same page and therefore avoids problems in the future.
 
In this episode we discuss some things you should be thinking about in relation to your finances if you are getting into a second relationship or marriage. We talk about things such as:
 
  • Estate Planning including wills and binding financial agreements.
  • How to have a discussion about your finances with your partner
  • Yours, mine, ours approach to money
  • Working towards joint goals
  • Superannuation death nominations and 
  • much more!
 
Have a listen in the player above and follow along with the transcript below!
 
 
Zac:
Hey everyone, welcome back to the 49th episode, nearly at 50th of the Wealth Collective podcast. It’s Zac Masters here. And today I’m joined by Pete Pennicott.
 
Pete:
Hey, back again, good to be here.
 
Zac:
I know. Perfect weather today. Bit too hot for you to walk down from the top end of the city too?
 
Pete:
Was some sort of protest was happening there … Or no trams coming down Collin street. So I probably could have done with a walk but yeah, the sweaty back and the armpits were probably not a great look. Yeah, so apologies to anyone that saw me strutting there, really struggling.
 
Zac:
Oh it’s a good time of year round here now, we got the whole unofficial long weekend this weekend, the Melbourne Cup.
 
Pete:
Yeah, the Melburnians, a lot of them will take the Monday sick day or sort of, hopefully if they’re a good team player, they’ve actually taken annual leave day. Just note to my team, so.
 
Zac:
No Monday morning call ins? .
 
Pete:
But it’s good. It’s good to celebrate something. And if people get to spend time with family and friends over a four day weekend, it’s fantastic. And the best thing is it’s Melburnians and Victorians get to celebrate it, and everyone gets to watch on from all the other States. And I just envy how great it is down here. ‘.
 
Zac:
It’s the time of the year that everyone knows something about horse racing. So have you got a tip for the Melbourne Cup.
 
Pete:
Yeah, the internationals, that’s my tip. I don’t know how many there are. But I have heard. Have heard they’re the ones to go with. I know Tom Waterhouse was really pumping them up on some radio show I was listening to in the car this morning. So that’d be my tip. Otherwise, save your money. Invest in good quality mix of Australian and international shares would be my tip there. What about you, Zac?
 
Zac:
Not going to give a name of one horse?
 
Pete:
[crosstalk 00:00:01:42]? That’s all I keep hearing about. It’s not allowed to race.
 
Zac:
I might go with, heading into today’s episode, Vow and Declare, an Australian one.
 
Pete:
That’s good. Who trains that one? Is that Chris Waller?
 
Zac:
I have no idea.
 
Pete:
Jeez, really. That’s how knowledgeable I would have been at horseracing. Well, that’s probably a good sign anyway.
 
Zac:
So on today’s episode, following on from my Vow and Declare, well that’s not advice by the way.
 
Pete:
But very good though. A very good segue is that, so.
 
Zac:
We’re going to be talking about money tips for second marriages. So second marriages, or second relationships, I guess don’t have to be married nowadays.
 
Pete:
I guess probably just capturing where you’ve been financially established in one form of a relationship. And you’re doing it all over again, so fresh start, exciting times. But if we can, yeah, do a little bit of prep work and set the groundwork early about how we want to approach it, I think a lot of heartache can be saved, a lot of stresses. And it sounds like I think a lot of … It’s actually one of the main causes of divorce and relationship breakdown. Actually, financial stress. So if we can help alleviate that with everything we’re going to cover on today’s podcast, we might be up for some sort of Nobel Peace Prize or something if we do it really well. So Zac, I hope you brought your A game.
 
Zac:
Well, pressure now, jeez.
 
Pete:
It’s a big deal, so we could be solving a lot of problems here, so.
 
Zac:
So probably the first part is to talk about your finances and get them out in the open. So Pete, you talk about STDs quite a bit.
 
Pete:
Yeah, all the time. Always talking about STDS. Get me out for a beer on a weekend, straightaway, STDs.
 
Zac:
So that’s Sexually Transmitted Debt. So this is when you’re getting into a new relationship with someone, it’s important to make sure that you’ve got all your financial world out on the table so you’re not getting into anything that you’re not aware of. But also that you know you’ve got a plan going forward, and how things are going to work from there. Because you don’t want to necessarily a few years down the track find out that your new partner has a lot of debt sitting there and now suddenly you’re potentially liable for some of it and different things like that. So you want to make sure that you’ve got everything out on the table and that you’ve got some sort of a plan going forward.
 
Pete:
Yeah. Because even really, really lovely human beings who seem like the nicest people ever can have skeletons in their closet from a financial perspective. Because people make mistakes. But those mistakes can follow that person around. And if you don’t structure your finances well together, they can actually start to impact you as well. So really, really good one. And I think you’re going into a relationship so you should be able to be open and frank with each other, and it’s a good starting point. So you can make a fun thing of it and sort of sit down over the table-
 
Zac:
Like a financial date night date.
 
Pete:
I love my financial date nights. So could do that. Crack open a bottle of wine or whatever your favorite drinks are. Kombucha for some, whatever floats your boat. But just have a sort of really open conversation. Okay, this is what’s happened. Don’t be embarrassed. There shouldn’t be any judgment. By that stage you’ve seen each other naked, it’s all-
 
Zac:
Potentially.
 
Pete:
Oh, sorry. I’ve jumped the gun. Well yeah, you shouldn’t be ashamed of whatever’s happened. You are who you are. So if we can all embrace that and be a little bit vulnerable and just be open to it, I think that goes a long way to just getting that comfort factor there and going, “Okay, this is where I’m at. It doesn’t matter if you’ve got more than me or I’ve got more than you. We’re in this together. And let’s talk about how we move on from here.” So that’s really a good starting point.
 
Zac:
So once you’ve had that discussion then like as you said, now we move on from here. Do you normally recommend with clients as a yours, mine, ours approach? Or how do you go about how they move forward?
 
Pete:
Don’t be eager beaver and roll in all of your finances and just get all mushed up together. I feel like that’s a recipe for disaster. And just too much pressure on our relationship. But there’s plenty of time for that. And I think really maintaining some sort of financial independence makes sense. Because you should be able to go and spend money on whatever you derive pleasure from or joy from. That without judgment. And you want judgment free spending. Because I think that’s really important. But also you want to have a pool of money that you’re contributing to on a regular basis. That’s working towards joint goals and joint expenses, and running your household.
 
Zac:
Holidays and investments.
 
Pete:
Yeah, not just the boring stuff. Yeah, build investments together. Yeah, start planning for future holidays or travel or, oh we need to do an extension on the property, or whatever it might be. But just start to plan on those goals together. Because then those financial discussions become a positive conversation and not just going, “We’ve got this bill in. You paying it or am I paying it?” And I think one of the key takeaways from here that I think resonates and hopefully can alleviate some pressure and stress, is focus on being equitable, not equal.
 
Pete:
So a lot of people go with equal and going, “Okay, everything’s 50/50.” That’s not always the most appropriate structure. Especially when there’s a disparity in people’s earnings capacity. There’s nothing wrong with that. We all do different roles. And that financial income is only one measure of what someone brings to a relationship. So if someone’s earning, out of the household sort of income, 70% of it, and the other person’s earning 30, it’s unfair or sort of places too much pressure and it’s going to breed resentment underneath the surface if you’re both contributing 50/50 yeah.
 
Zac:
Yeah, because the person who’s on the lower income is going to be left with potentially not much at the end of the day.
 
Pete:
Yeah. And that weighs and wears and grates over time. So you can avoid it because that’s not fair. And what we want is equity not, not equal. So I think that’s an important sort of distinction to know. And I know people that have rolled this percentage form there out with great success over the years. And really, really happy about it because now they, in the past one of them, the person who had less income, was actually going, “Now let’s not go on the holiday,” and sort of holding off those lifestyle things that-
 
Zac:
Like couldn’t afford it.
 
Pete:
Really they wanted to do but were too embarrassed to say actually I after I do the things that I had need to do on my personal side, and pay for those, I haven’t got any money left to contribute to this.
 
Zac:
And a lot of the time the other partner was willing to pay and put more towards it but then they didn’t want to be seen to be going, “Oh, look, I’ll pay for you,” and things like that.
 
Pete:
And I think unless you’re speaking about it, there’s all this unspoken stuff in our heads that never gets out there. So I think that’s a really good one. And lesson learnt that’s I’ve seen it work over and over and over again.
 
Zac:
So then moving on, unless you’ve got anything else from a cashflow perspective that you think people should be? Credit cards, I know you’re-
 
Pete:
Credit cards. Don’t be signing up to joint credit cards early on in a relationship. Yeah, down the track then it might be appropriate. Be really wary about who you give an additional card holder to because ultimately you’re liable for that. So really be really careful about that. Loans as well. Unless you really need to, just make sure you’re comfortable and confident that you need this debt and use for joint purposes. Don’t just go signing on as guarantor for loans. Because you will be … Yeah, and that’s why you should seek advice from someone impartial because you’re going to be blinded cause you like or love this person. So yeah, you want to help them. And you think it’s obviously you’re in there and you’re hoping it’s going to last forever. But yeah, a lot of the times that debt that you’ve signed up for might actually last longer than the relationship.
 
Zac:
And that’s where having an initial discussion with someone, either a solicitor or a financial advisor, or something like that, can be a good buffer sometimes if you’re not wanting to just go out and blatantly have a discussion with the other person.
 
Pete:
Yeah, use them as the bad guy.
 
Zac:
Because some people don’t like to talk about their finances hell of a lot. Like it’s in our world, that’s all we talk about so we don’t see the-
 
Pete:
You’re always flashing your bank account balance around, so.
 
Zac:
But for a lot of people it’s obviously a thing where they might be too comfortable speaking about it with the other person. So going to having an initial discussion with a advisor where it gets everything out on the table, and therefore you’ve got a buffer in between and you can kind of … You can ask the advisor questions that you might want to be asking the other person, but you don’t want to directly go there and things like that, can be a good way to go about it.
 
Pete:
Yeah, absolutely. And then I think once you’ve had that, then take that home and sort of start to work on your household finances together and make it a regular occurrence. Don’t just look at it once and forget about it. You need to maintain it. And if you need to get someone else into prod you to do that, fine. But you should be able to sort of schedule some time, at least on a quarterly or six monthly basis. Just to look at your finances so one of you is not sticking your head in the sands. Because in most relationships there’s one financial controller and the other person sort of yeah, takes a less active interest and active role in it. That’s pretty common.
 
Zac:
So moving on, once you’ve got the cashflow and everything under control, estate planning becomes a big issue for people getting into second relationships, especially if there’s children from a previous relationship. And then especially if both spouses are bringing children from a previous relationship.
 
Pete:
Yeah. Children and assets, complicated things. And the reason for that is if someone passes away, what happens to the family home? You’re all living, or both of you are living in the family home. Potentially the kids might be in there as well because adult kids tend to just live at home forever now.
 
Zac:
Or one kid might be from one, out of the four or something like that.
 
Pete:
So I think the best way to do this is pretend it happened yesterday. So we go, what if I died yesterday? What do I want to happen today? And how are all my assets that I’ve, in what we talked about in step one, we’ve laid them all out on the table and we go, these are my assets. What do I want to happen now? And that’s, an estate planning can help that happen and facilitate that.
 
Pete:
And then what you start to uncover is all these pain points and pressure points, and going, “Actually, hang on. We own this property jointly. It’s going to pass straight to my spouse. But hang on, I’ve got my adult child living here. They don’t actually get along very well. Actually how does that work? Are they going to boot them out straight away?”
 
Zac:
And if the remaining spouse is to pass away, it goes to their kids.
 
Pete:
Yeah. And it can be even complex here. Oh, I’ll give them a life interest. Well what if they live for 50 years? What if they’re the first person to live to 150? Well that’s awkward. Your kids have to wait around. They might actually outlive your kids. And these are all the things that you start to conjure up and you go to some dark and wonderful and crazy places. But it’s all really important because it helps you then. All those, the things we spoke about initially in terms of how to structure it. That changes how you might buy assets.
 
Pete:
Because you might say, “Okay, we want a new family home.” But the way you purchase it and the ownership decisions that you make in terms of the structure, they might change. Because it fits into your estate plan. And when we’re talking estate plan, this is things like your wills, your power of attorney, your binding death nominations or your death nominations to superannuation, insurances as well. They sort of sit outside and can be directed to particular beneficiaries. But also agreements like binding financial agreements are really important.
 
Zac:
Yeah, so do you want to run through a bit? Is that something you’d recommend for people getting into new relationships? To get a binding financial-
 
Pete:
Wouldn’t recommend anything without knowing their personal situations are.
 
Zac:
There we go.
 
Pete:
You should know that. But I would suggest that it’s worth entertaining the thought and actually having a conversation about it. It’s not for everyone, but for a lot of people it can give peace of mind, some structure and also provide a really, I guess, seamless solution when things go sour and you no longer love each other.
 
Zac:
Yeah. Because it’s much easier to talk about these things.
 
Pete:
Or you can laugh about it. You can go, “Oh yeah, what if you did this? Imagine if this happened.” It’s real funny.
 
Zac:
It’s different when it has happened.
 
Pete:
Yeah, and it’s like someone’s cheated on someone, and don’t worry, there’s a lot of visceral there. And then the lawyers in your ear going, “Stick it to them.”
 
Zac:
You should get more, you should get more. Yeah.
 
Pete:
And you should get more. Nah, I don’t know. I have no idea. But yeah, I think it’s much easier to agree to it up front because cooler heads prevail, and you can actually step it out and plan it out now, and something that fits and works. And as with any financial strategy or any sort of budget, or any goals, they need to be checked in regularly because the binding financial agreement you set out initially or your estate plan that you set out initially, might look completely different 10 years down the track.
 
Zac:
And especially you need to definitely looking at your wills if you are getting married for the second time, because that’s going to make your previous will, if you’ve got one.
 
Pete:
Well, it voids it.
 
Zac:
Yeah.
 
Pete:
So yeah, I think that’s important. So the whole estate plan, it is financial hygiene. But it’s so, so important. And the easiest way to do it is to really just go, “Okay, what if …” And you think of it in each of your situation. Go, “What if you died? Okay this would happen, this would happen, these assets would go here. The will would kick in and distribute this. Oh, the family home, that’s tricky. How would we like this to happen?” And you do it all while you’re still number one, alive and actually like each other. So that’s important.
 
Pete:
And also if you’ve lost capacity as well. So often we think about death but not loss of capacity. Because that’s important to note as well. And these are people that you’re partnering with for life. So you should be really partnering with them financially. But again, I’d make the distinction of don’t be so eager to put all your finances together. I think some of the most financially successful couples that we deal with have separate finances, and they do so because it works and it’s simple. And just be really comfortable. There’s no right or wrong answer to how you structure your personal finances.
 
Zac:
I’ve got some clients who, they’ve come into … This a second relationship. They’re not married, but they’ve decided just to … They rent a house together. They keep their other properties that they both had as investment properties, and they’ll go to their kids. But they will leave behind a bit of money for the remaining spouse for things like rent, future rent expenses and different things like that. But they live their financial worlds still fairly, pretty much separate. They just run the yours mine, ours, but keep their assets fairly separate. And that can work well as well. You don’t need to mesh your assets and everything together.
 
Pete:
No, they should always be a pool together. But I think independence, so, so important. And probably yeah, adds a lot of longevity to relationship and avoids a hell of a lot of stresses. Money problems are probably one of the biggest. They’ve got to be one of the biggest strains on a relationship.
 
Zac:
Yeah, definitely. So you also mentioned super nominations in there, and this is one that a lot of people are probably unaware of. So super nominations … Well, supers doesn’t form part of the estate, so it can’t be part of your will. So therefore you’ll have a nomination on the account and if you haven’t checked it in a while, it’s good hygiene to make sure you’re looking at that and seeing who you’ve actually nominated if you nominated anyone.
 
Pete:
Have I nominated anyone?
 
Zac:
No, if you have nominated anyone.
 
Pete:
of course. I’ve nominated Rihannon, jeeze, wow. I was like, put me on the spot, hang on.
 
Zac:
Hang on.
 
Pete:
No. Yeah, no, you definitely need to check that. Because it could be an ex spouse, could be your children from years ago that you’ve nominated. Could be your parents if you haven’t done it since you were a teenager. So save that. Save any errors and issues of the money getting to the people you care about. Because estate planning’s all about taking care of the baby you love and making sure that you don’t leave a hot mess behind. Unless you’re one of those individuals that drives a sick joy of going, “I’m going to live a hot mess behind.” And that’s what you want to do. And more power to you if that’s it. But for the rest of us, I think just making it clean, simple and detailing what you want to happen, and thinking about those people makes life easy.
 
Zac:
Perfect. So did you have anything else or any other tips that you think for people who are jumping into a second relationship?
 
Pete:
I think having some goals together. I don’t know if that sort of fits into the first one, just money conversations. But I think building a plan together. So especially, depending on what stage of life you’re at. If you’re in your starting out phase of the financial world, you might be going, “We want to plan for a wedding together and we’re going to plan for a family and these are the sorts of things.” Well, they’re conversations that you should be having just philosophically as a couple anyway. But there’s financial implications and ramifications to support those things. So I would highly encourage people to have money conversations, but looking at the big picture as well.
 
Pete:
So not just looking at the day to day routine and how do we manage our budget, and what are our expenses and liabilities? But those bigger picture discussions of when do you want to retire? Because these don’t instantly … Yeah, these don’t instantly seem like money discussions. But they’re really important conversations to have. And hopefully they’ll open up some wonderful conversations. And there’s great alignment between the two of you. And you can start to plan for those together because you should have then almost like a joint financial plan together that sets you on the same course.
 
Pete:
Because that’s something positive to work together on. And actually, yeah, if you keep hitting those financial goals and ticking off those bucket list items, I think that’s a pretty cool starting point for any relationship.
 
Zac:
Definitely. So as usual, if you’ve got any questions, email us at connect@pekada.com.au, or hit us up on any of our socials. We’re doing a fair bit on Instagram at the moment, so be sure to jump on and chuck us a follow.
 
Pete:
Doing some good stuff on insta. So, Zac’s doing nicely, he’s doing a good job.
 
Zac:
So yeah, chuck us a follow on there and otherwise we’ll see you next week and good luck if you’re having a little bet on the cup.
 
Pete:
Have a good long weekend, guys. Enjoy.

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