Insolvency and relationships

14 February 2017

It seems like an apt moment to talk about romance, relationships – and finances. While love is in the air, it’s easy to get carried away in the moment; however, the financial implications of relationships, particularly their endings, shouldn’t be overlooked, and being realistic and practical about money matters is vitally important to people’s long term stability and happiness.

In the UK, it seems that talking about love and money as necessarily connected is somehow viewed as being in slightly bad taste; British people’s general reluctance to discuss matters of personal finance is amplified when talked about in the context of romance and love, despite the enormous impact someone’s love life and/or relationship status can have on their economic wellbeing and resilience.

When R3 looked at gender and insolvency in 2016 (full report: PDF), several striking patterns made themselves clear: women are typically more likely than men to enter an insolvency procedure because they are struggling with the cost of living, the income of a partner has fallen, or they no longer have access to their partner’s income. Relationship breakdown was the number one cause of women’s bankruptcies in 2014 but it was only the 8th most common cause of bankruptcies among men. For men, meanwhile, they are more likely than women to enter into an insolvency procedure because a business they own has run into financial trouble, their own income has fallen, or they have taken out a loan that they cannot pay back.

Men and women were about as likely as each other to enter insolvency due to overspending, defying media stereotypes of ‘spendthrift’ women; and while the papers love to cover high-profile divorce cases in which one partner, usually a woman, receives a hefty settlement, the reality that divorce and relationship breakdown is linked to financial hardship and a loss of income for women is much less likely to make the news. As well as the disparity in the number of men’s and women’s bankruptcies caused by relationship breakdown, a survey of R3 members found that 22% said that “family-related costs” (such as childcare) were a leading cause in women’s bankruptcies, but only 8% said the same for men. Women are over 10 percentage points more likely than men to be economically inactive (26.7% of women compared to 16.6% of men).

As with all aspects of personal finance, facing up to the facts early on (rather than adopting an ‘ostrich’ approach) is key, and a little planning can avert or mitigate future problems. Talking to a regulated professional, such as a licensed insolvency practitioner, when money issues rear their head is also highly advisable – after all, strong and lasting relationships are built on stable and equitable financial arrangements. Relate has a section on money and work with lots of advice and guidance, and single parents’ charity Gingerbread has some useful factsheets, including one on making ends meet. It’s true that thinking seriously about finances may not really fit with the ‘hearts and flowers’ view of romance, but it’s vital nonetheless.