This is a collaborative post.
Whether you are getting married or going self-employed, it is important that you take time to protect your finances. This is because when you commit to large endeavours such as marriage or business, your personal money and other assets are also tied into the agreements. It is always an exciting new adventure, but you can only plan for so many risks. In the unfortunate event that your business doesn’t quite work out the way you planned, or your marriage falls apart, then your finances may be at risk. A marriage, or a business, is a long-term commitment, for which you are bound by law and one that can go in any direction.
While you don’t want to think the worst will happen, you need to be able to plan for all scenarios to ensure you don’t end up with nothing, and lose all of your money and assets. By planning your finances before signing any contracts, you can ensure you don’t run into any costly problems or paperwork. It can also help your partnership, whether that is a marriage partnership or business partnership, grow stronger, as you work together to disclose your personal information and come up with a plan for your future together.
If you are changing your circumstances, and want to protect your finances, here are some top tips to help you get started.
#1 Review your finances
In order to protect yourself, you should first understand what you are protecting. It is a good idea to fully know and document your financial situation, and keep this up-to-date.
You could use an application such as Google Sheets, that will enable you to create a spreadsheet that documents all your financial information. You should input data such as your income, your outgoings, debt and assets. You’ll be able to get a copy of your credit report if you wish, which is a great way to monitor your credit record and protect yourself even further. Your assets should include any properties that you own and the equity that you have in them, vehicles, and investments such as mutual funds, bonds or stocks. You may also have a retirement plan which you’ll need the details of.
Think about any changes that may occur in your personal life in the near future. This could be anything from having a baby, getting a divorce, getting married, buying a house, going travelling, moving house, receiving a large sum of money, making money on investments, etc. This is because you will need to protect what you have now, as well as what you can anticipate in the future, especially if it is subject to change.
Make sure all financial assets are in your name and hold all the correct information about you. This will ensure there are no problems later down the line. Understanding your financial situation, including both assets and debts is vital before entering any partnership, as your financial status will be impacted whether you are an individual, a couple or a business entity.
#2 Assess the risks
What many people don’t realise is that when you enter a commitment such as a marriage or starting a business, you are tying yourself and your finances to that commitment too. Unfortunately, no one can predict the future. Even if you have the best relationship or the most profitable business idea on the market, you never know what will happen in the future. Life is full of risks, and while many of these are worth taking, some may need just a little more thought. This doesn’t mean risks aren’t a good thing, because without them, you wouldn’t be able to live life or move forward. It just means that some risks require some protection.
Assessing the risks is a positive step to protecting yourself, your finances and your future. It will enable you to work out what level of protection you require. You should start by considering all the different ways your partnership could go. This will allow you to see where there are gaps or opportunities. From there, you can create a list of assets that need protecting and the steps you need to take to protect them. While this can be a negative subject to discuss with your partner, it can be an important and pivotal step to make a life plan together. You can consider all of your options, and make it easier if the worst does occur. This kind of thinking can help you avoid mistakes, and make sure you are both on the same page before moving forward.
#3 Seek legal advice
Depending on the type of assets that you have, and the level of protection you wish to invest in, you may choose to seek legal advice. Protecting your assets can be complicated to navigate alone. Once you have detailed all of your financial information and assessed your risks, a lawyer will be able to provide a professional, and fresh perspective on your finances, and help you to make the best decision for your life, and for your future.
A lawyer will be able to help you before entering any agreement, to ensure that the agreements are good enough for you to sign. They will be able to provide you with advice on what additional protection you should have in place before signing any contracts, such as a prenuptial agreement. You can also seek advice to protect your assets if something were to happen to you, to ensure you have the correct power of attorney in place, and your assets are divided as per your wishes.
If you are starting a business, a lawyer will also be able to help you protect your personal finances. Right from the start, they will help you choose the correct business structure, which will not only help with taxes but offer the right protection for your personal circumstances. They can support you in understanding the rules to follow in business that will help reduce any risks to yourself and your finances, as well as the correct level of insurance that you should obtain. This is important, as bankruptcy or lawsuits, or any other similar issues can be extremely time consuming and costly. Without the relevant protection, it can also damage your reputation and your life. A lawyer would also be able to help you diversify your income streams so that you are not relying on just one source of income, how to separate your assets and how to build up an emergency fund.
While it is best to put protection in place before getting married or starting a business, it doesn’t always happen. A lawyer can also help you in the event of a divorce or dissolution of business, and help you to act quickly if things go south and you do not have adequate protection in place. For example, property settlement lawyers will be able to help with the division of assets during a divorce.
#4 Talk to your partner
Whether it is the partner that you’re marrying or your business partner, it is important that you have a conversation about your personal finances. This will enable you to discuss your personal assets, how you want to protect them, how they can protect theirs, and share your dreams and goals together. These kinds of conversations are often neglected but can be an important step in any relationship. This allows you to plan for all scenarios, but also put a plan in place that works for both parties, and helps you reach your goals much more efficiently. If you are both happy and protected, then you can move forward in life or business with fewer risks and more confidence.
The conversation should start with complete honesty, and share your budgets, liabilities, debts, assets, lifestyle, future plans, etc.
#5 Obtain insurance
Once you have understood your financial situation, have obtained legal advice and are happy to move forward with your marriage or business, the last step is to ensure you have adequate insurance in place. While contracts such as a prenuptial agreement will protect you, insurance comes with many additional benefits you can’t turn down. Some of the most popular insurance policies are:
- Income protection insurance – This insurance covers you in the situation that you are unable to work. This will ensure you remain fully independent and keeps your finances well protected.
- Life insurance – This insurance covers you in the unfortunate event that something happens to you. This keeps your finances protected, your debts paid, supports your family, and will provide peace of mind for your company. This will also ensure that if your partner has debt, but has life insurance, you don’t have to take it on yourself.
- Liability insurance – This insurance covers you and your family if you are ever responsible for injury or damage to a third party or property. This is particularly important to have when starting a business, to ensure your personal finances remain safe from lawsuits.
Protecting your finances can be a long and complicated job to do, but it is a job that is worthwhile. It’s not always nice to think about the risks, or what could go wrong in a new marriage or business, but it is important to have these conversations and put protections in place to ensure that you can enjoy your new venture with peace of mind.
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