Breakups are emotional, messy, difficult and can also have a big impact on personal finances. It’s time to start again - and splitting assets and moving out can be challenging. Make sure you help protect your credit and build a strong foundation with these five steps.
Step 1: Get Your Credit Score and Report
If you haven’t already, make sure you get your free credit score - you’re going to need it for this new journey on your own. Understanding where all your earnings come from, all the bills where all your savings and retirement accounts are and more will help you when it comes time to separate your finances.
Your credit score is calculated through careful analysis of information in your credit report by one of Canada's two credit bureaus - Equifax or TransUnion. Financial institutions use this information to help make decisions about the services and products they offer you, such as your interest rate and insurance premium. Credit scores range from 300 to 900 (depending on the scoring model) and the higher your score is, the easier it may be for you to access these financial products and services. Credit scores, in the eyes of financial institutions, reflect your behaviour when it comes to credit.
This information also relates to your debt: how much you have, how long it takes you to pay back, what type you have, and how long you’ve had it. You can check your credit score in less than 3 minutes with Borrowell and it won’t affect your credit score.
Step 2: Address Joint Debts & Accounts
Review your credit report and your bank account and make a list of any joint accounts or debts. In an ideal situation, each person should move debts they are responsible for into their name and transfer credit card balances if necessary. But, relationships don’t always break even, so make sure you consider the following:
- Review bank and credit card statements and note automatic bill payments. Make sure you transfer them to a new account or cancel them. You don’t want to have to repair your credit score because your ex stops paying bills that include both your names.
- Call your credit card company and remove your ex’s name as ‘authorized user’ from credit cards and lines of credit.
- If you have joint credit accounts such as lines of credit, credit cards, mortgage, etc., they still need to be paid.
- Be cautious and don’t close down lots of accounts at the same time, it could damage your credit score.
- This is also a good time to see if there are credit cards with lower interest rates or points packages that suit your new lifestyle.
Step 3. Create a Budget
Most couples split living expenses, which means your monthly costs are about to double. This can be a serious shock particularly if your ex was the primary earner. Here are a few ways to stick to a budget and save.
- Did you know that paying bills on-time accounts for 35% of your credit score? If your ex was responsible for paying bills, make sure you set yourself up for success by setting reminders on your phone or putting bills on auto-withdrawal. Or better yet, sign-up for Borrowell and use our bill tracking feature to send bill alerts and reminders right to your phone.
- Earn more and spend less. Think about taking on extra paid projects at work, freelancing on the side, or selling stuff you don’t use (Poshmark, Facebook Marketplace).
- Reduce unnecessary expenses that don’t bring you happiness, such as a large data plan for your mobile, digital subscriptions like Netflix, Spotify, or other apps. Look for no-hassle ways to reduce recurring bills and shop around for better deals for things like car insurance- or cash-back credit cards.
- It’s going to be tempting to buy new clothing, furniture, appliances, linens for your new life, but try and avoid putting it all on credit, it can add up quickly! Keep in mind that high credit usage — a balance to limit ratio over 30% — can reduce your credit score and limit your options when it comes to financial products and receiving better interest rates.
There are also some fabulous free budgeting and saving tools available in Canada, including:
- Mint: The budget tracking and planning app that helps you manage your finances. Mint caters to financial beginners by making the process as simple as possible.
- KOHO: KOHO is a modern no-fees alternative to your everyday bank account. The account comes with a prepaid Visa card that earns cash back on every purchase and an integrated app that helps you spend smarter and save more. You can use the code BORROWELL and receive an extra 1% cash back for 90 days when new users use this code on sign-up.
Step 4: New Accommodations
If you were sharing a living space with your partner, you’ll need to look for new accommodation. Keep in mind that you’ll need to budget for first and last month’s rent and moving costs, which can quickly get expensive.
- Ask your current landlord for a reference letter as soon as possible.
- Get a head-start and request a letter of employment.
- Download a copy of your credit report with Borrowell for free!
Chat with family and friends. Your network is a good place to start your search. Someone you know might know someone who is leaving town, or needs a roommate, or maybe one of your friends saw a for rent sign up the street. You can also set up Google Alerts with rental keywords relevant to your prospective neighbourhoods. Also see our blog about how to find a rental apartment on a budget!
Step 5: Rebuild Your Savings & Breathe
Regardless of your situation, having a safety net or emergency fund can make a big difference. Breakups can be pricey, between the increased costs and money spent to rebuild - you might need to relook at your savings.
You’re more likely to make steady progress towards your financial goals if you set up automatic payments and/or deposits. By doing this, you’re prioritizing your goals, and forcing the rest of your life to fit around them.
The Bottom Line
Lastly, in a world where we are surrounded by people trying to put on a front (e.g. being #couplegoals, #wealthy, # successful, etc.), it has become more and more difficult for us to admit that our lives aren’t perfect. Relationships are tricky, and nobody wants to admit that theirs has fallen apart or that they’re experiencing financial struggles. It’s these difficult moments in our lives that make us stronger and more resilient. Be sure to take the time to focus on friends and things that you love during this time of transition.