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Bailing Out Your Partner Financially - What You Need to Know to Make the Right Decision

Should you bail out your partner financially? Our comprehensive guide helps you make the right decision. Learn about setting boundaries, protecting your finances, and avoiding common pitfalls that can lead to resentment and financial strain in your relationship.
Updated 7 September 2024
Summary
  • While many New Zealanders will (rightfully) prioritise connection, mutual attraction, and some deal-breaker values in their partner selection, finances are often a touchy subject (and can be a problematic talking point with many people).
  • ​Love and money can often clash, especially if partners are not on the same financial wavelength. While love stories in movies paint a rosy picture, real-life relationships require more than just being a 'fun couple' to thrive, particularly regarding finances. Understanding how to manage money together is crucial as it's one of the leading causes of conflict and divorce among couples.
  • Managing finances in a relationship can be particularly challenging when one partner struggles with money management. It’s not uncommon; financial compatibility and trust are vital components of a healthy relationship, and significant discrepancies in financial habits can lead to ongoing conflict.
  • Too often, the situation is arguably financially abusive – one person demands but doesn’t provide, and the other works to pay for everything but doesn’t benefit.
  • This guide focuses on bailouts – however, we continue to research in this area and will publish further resources in due course.  

Know This First: This guide won’t help if your partner is unwilling to work, contribute financially, or participate in managing your finances together. If one person consistently avoids responsibility, whether by refusing to seek employment or simply ignoring financial discussions, the issue goes beyond a financial bailout. In these cases (which are not uncommon), it’s a deeper conversation and requires a different approach and, in some cases, the consideration of a separation. The reality is that no financial plan can work if one partner is unwilling to engage or make the necessary effort.
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Our guide covers:

MoneyHub Founder Christopher Walsh shares his comments about bailing out your partner financially:

"If you're in a relationship, it's critical to talk about money. Too many relationships fall apart, and people's finances get destroyed because no one wants to confront the awkward truth about spending and debt. I've seen it, and it's a zero-sum game. If your partner struggles financially, don't just bail them out and hope things improve - please get real and have the tough conversations. It's the only way to get it under control. 

Start by getting a budgeting app that links with your bank accounts. This isn't optional. You need to know exactly where every dollar is going because throwing money at the problem won't fix it if the root cause isn't addressed. Be clear about the expenses, the debt, and the plan for fixing it. Ignoring the issue or assuming it'll sort itself out is a fast track to resentment and financial disaster.

The brutal truth is that bailing out your partner without a plan is a one-way ticket to financial and emotional burnout. Money issues cause endless drama; if you don't get on the same page about finances, you're setting your relationship up for failure.

Some relationships lean on parents to 'make it better'. Getting your parents involved to 'help' with your financial mess is not only a bad idea - it's irresponsible. Parents may have a mortgage-free home, but life in New Zealand is expensive, and cash is king. Demanding cash sums risks their financial future just because you're avoiding the hard conversations or refusing to face your financial mess.

Dragging your parents into the problem doesn't solve it - it just shifts the burden. And worse, depending on how much money you need to sort your relationship, it risks jeopardising their financial security at a stage in life where they might be unable to recover. The last thing anyone needs is to see their parents struggling in retirement because they bailed out their adult children".
Christopher Walsh
MoneyHub Founder

Examples of Financial Bailouts

​There are many instances throughout New Zealand where someone has been in relationships with their partner for many years and have lived together with them very early on (usually for financial reasons or logistical reasons).

Normally, one partner may have a stable job (that they’ve likely had for many years) with a good salary that enables a comfortable lifestyle. In contrast, the other partner may be in between jobs, unemployed and workshy, and/or refuses to talk about money (or is not great at knowing where everything is and what cash flow is coming in or out), takes on excessive risks in shares, sports betting or cryptocurrencies (which results in significant financial losses). Or they may just do nothing but spend money in whatever form it comes in - from their partner, siblings, parents and friends etc.
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Usually, this leads one partner to “bail out” the other partner financially. Bailing out your partner financially is a significant decision that should not be taken lightly. Bailing out a partner financially means providing financial assistance to help them overcome a difficult financial situation. This can involve various forms of support, such as:

Paying Off Their Debts

Paying off a partner's debts involves taking on their financial liabilities to help them achieve a clean slate. This can include settling credit card balances, personal loans, car finance, or other financial obligations. This act can significantly reduce their financial burden and stress, giving them a fresh start.

However, it’s crucial to understand the total amount of debt, the interest rate and the reasons behind it. This approach requires a detailed discussion about financial habits and long-term strategies to prevent future debt accumulation. Equally, there’s no point in paying off your partner’s debts if they’re just going to get right back into it.

​While this can be a very supportive gesture, it is essential to ensure it does not compromise financial stability or enable poor financial behaviour. 

Covering Their Living Expenses (Or at least their portion of living expenses)

Covering a partner's living expenses entails providing funds for essential costs such as rent or mortgage payments, utilities, groceries, transportation, and healthcare. This support can be vital during unemployment, illness, or other financial hardships. By taking on these expenses, you relieve your partner from immediate financial pressures, allowing them to focus on finding a job, recovering from health issues, or stabilising their situation.

Often, if there's a huge imbalance in incomes between partners, it's common to have an unequal split of living expenses. For example, if one partner earns $150,000 a year whilst the other is on $75,000, the higher-earning partner might offer and pay 75% of the rent (rather than the typical 50/50 split) even though they live in the same room/space.
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However, this type of assistance should be approached with clear boundaries and timelines to avoid long-term dependency. It's important to communicate openly about how long you can provide this support and encourage your partner to take steps toward regaining financial independence. 

Offering Them a Loan

Offering a loan to a partner involves providing them with money they are expected to repay over time. This can be a more structured form of financial assistance, often accompanied by a formal or informal agreement outlining repayment terms, interest rates (if any), and a repayment schedule. This arrangement helps maintain a sense of responsibility and accountability for the borrowed funds.

However, lending money to a partner can introduce complexities into the relationship, particularly if repayment is delayed or if financial disagreements arise. It’s crucial to have a clear and honest conversation about the terms of the loan, potential repayment challenges, and the impact on your relationship should issues occur.
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In many cases, one partner will extend money to the other without putting any terms down on paper, leading to a very unclear repayment structure (or the partner may not ever ask for the money back at all). This slippery slope can lead to heated discussions over money (especially when the partners disagree about other issues). Our guide to lending money to friends and family has more details.

Co-signing a Loan or Being a Guarantor

Co-signing a loan or becoming a guarantor on a mortgage means agreeing to be legally responsible for a partner's debt if they cannot make payments. This can be a significant commitment, as it involves a legal obligation to repay the loan if your partner defaults. Co-signing can help a partner secure a loan they might not qualify for on their own, potentially at a better interest rate.

However, this also ties your credit history and financial health to your ability to repay the loan. It's essential to thoroughly assess the risks and have a detailed discussion about the responsibilities involved.
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Before co-signing, ensure you’re comfortable with the potential financial implications and clearly understand the loan terms and repayment plan. This decision should not be taken lightly, as it can have long-lasting effects on your financial situation and relationship.

In other words, if you don't think your partner can genuinely repay the loan, don't co-sign or be a guarantor to them. Our guide to acting as a guarantor has more details about the risks. 

Should I Bail Out My Partner Financially?

​Deciding whether to bail out your partner financially is a complex and highly personal decision that depends on various factors. Make sure you fully understand all the potential risks of bailing out your partner financially: 

Understanding What Impact Supporting Your Partner Will Have on Your Finances (Quantitative)

Understanding the impact on your finances is crucial before deciding to bail out your partner. If you've got the cash and feel like doing it (and most importantly - it's unlikely to impact your finances to a large extent negatively), you are best positioned to go for it.

However, before making any decision, it's essential to evaluate your financial situation, including your savings, investments, and long-term goals. An adequate emergency fund must be in place to avoid the risk of being dragged down as well with unexpected costs.

Our View: It's best to avoid additional debt to assist your partner at all costs. You're effectively putting yourself in a significantly weaker financial position to improve someone else's. It doesn't work, it's expensive, and it's not fair on you. Furthermore, protecting your savings and investments is vital, as these are the pillars of your financial future. Sacrificing them could lead to significant setbacks in your financial journey.

Understand the Impact of Financial Support on Your Relationship (Qualitative)

Evaluating the impact of financial support on your relationship is vital. Financial issues almost always create tension and strain, potentially affecting the dynamics of your partnership. Providing financial help can sometimes lead to an imbalance of power, with one partner feeling disempowered or dependent. 
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It’s important to make sure that your partner doesn’t feel diminished by the financial support. Additionally, consider whether providing financial assistance could lead to resentment or tension in the relationship. Maintaining open and honest communication about financial matters can help build trust and prevent misunderstandings, although we concede this is easier said than done.

Investigating the Root Cause of Their Financial Habits and Behaviours

'Bailing out your partner' is a quick-fix solution that won't solve a deeply rooted problem. To ensure you don't have to continually bail someone out, it's essential to understand the root cause of their financial instability. You’ll need to be realistic about this – too often there’s a belief that “things will improve” or “next year it will be better”. This doesn’t address the issue – instead, the causes remain in place and your finances worsen.

Investigating the root cause of your partner's financial difficulties is essential for addressing the issue effectively. Understanding the underlying reasons can help your partner develop better financial habits and avoid future problems. The best approach is to get a budget app and identify areas where they can reduce unnecessary expenses. Addressing irresponsible spending habits is also crucial, as these behaviours can lead to repeated financial difficulties.

​If employment is the issue, the reality is that some people are workshy or simply don’t want to work. While this may appear illogical to most, the level of stubbornness and absolute refusal to get a job has a terrible effect on the finances of a relationship. You may encourage them to seek stable job opportunities or explore additional income sources, but if there’s no willingness to get a job, the options to get ahead are limited. ​

Setting Clear Boundaries and Expectations

If you’re going to support your partner financially, make sure to set clear boundaries. You’ll need to discuss and agree on the amount of help you’re willing to provide, the duration of the support, and any conditions attached. For example, if you’re covering living expenses, agree on a timeline for your partner to regain financial independence. This means if you’re offering a loan, establish clear repayment terms and insist on a consistent regular payback schedule. Setting these boundaries helps prevent misunderstandings and ensures both parties are on the same page.
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The purpose of boundaries is to ensure both you and your partner are looked after (and neither of you suffers). Similar to how prenups are intended to ensure an amicable breakup and leave both partners in the best position in the (hopefully unlikely) event they break up, setting clear boundaries during the relationship ensures there are clear guardrails in the (hopefully unlikely) event that you decide to part ways. 

Exploring Alternative (Non-Financial) Ways to Support Your Partner

Supporting your partner doesn’t always have to involve direct financial aid. There are alternative ways to provide support that can be equally valuable. Encouraging your partner to attend financial literacy workshops or get debt help can empower them to manage their finances more effectively. Helping them network to find job opportunities or additional income sources can also be beneficial.

​Sometimes, emotional support and encouragement can make a significant difference, helping your partner feel motivated and capable of overcoming financial challenges.

Consider Joint Financial Planning

Joint financial planning involves creating a comprehensive budget for both of you, setting financial goals, and developing strategies to manage money effectively. This collaborative approach helps both partners understand their combined financial picture and work towards common objectives.
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It can include setting up savings plans, investing in future goals, managing debts, and ensuring that both parties agree regarding spending habits and priorities. This process provides immediate financial relief and strengthens the relationship by fostering trust and transparency. Successful financial planning requires ongoing communication, regular review of financial progress, and adjustments as necessary to stay on track. We suggest a budget app to get things moving. 

Protect Your Legal Interests (If you decide to provide financial support)

If you decide to provide financial support to your partner, focus on ensuring you're protected and your assets are structured correctly. The goal of a joint partnership is to support each other towards financial stability and independence, ensuring a healthy and balanced partnership. So, while trying to improve your partner's finances, protecting your legal interests when money is involved is non-negotiable. This is most likely to include a contracting out agreement, also known as a prenup.

Be aware of the De Facto Partner Rules (Under New Zealand Law)

Aside from creating a formal loan agreement if you decide to lend money and generally being cautious about opening joint accounts or co-signing loans (as these actions can make you liable for your partner's debts), the most important thing is to be aware of the de-facto partner rules in New Zealand.
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If you don’t have a prenup and you’ve been in a relationship with your partner for two to three years, they may be entitled to half of your assets. Additionally, it’s important to consider how financial support might affect shared property or assets (as once you “mingle” funds together, it likely becomes much murkier and potentially is deemed shared assets (which may get divvied up 50/50).

​Our resources explain more:

Seeking Professional Advice from an Independent Third Party

If you're unsure after considering the above, speak with an relationship counsellor. Seeking professional advice can be beneficial if the best course of action is uncertain. Relationship counsellors can offer guidance on navigating financial issues within your partnership, ensuring that both partners feel valued and respected. If you want to protect your assets, consulting with lawyers (generally family or property lawyers) can help you understand the implications of financial support and safeguard your legal interests.

Must Know Facts Related to Bailing Your Partner Out Financially

Recognise That Everyone Has Different Financial Habits and Behaviours (and that’s okay)

Couples often exhibit different financial behaviours and priorities from varied backgrounds and experiences. One partner may prioritise saving and financial security due to past experiences of income insecurity, feeling a deep need to maintain control over their finances to feel safe.
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On the other hand, the other partner may find comfort in spending, possibly due to a lack of financial discipline or a habit of living in the moment without much thought for future consequences. These fundamental differences can cause significant friction if not addressed, leading to one partner feeling burdened by the other's lack of financial foresight.

Be Cautious and Careful of Financial Self-Sabotage (And Past Trauma Your Partner Might Have)

Some partners may be trapped in cycles of financial self-sabotage. Such behaviour often stems from deep-seated issues where some New Zealanders struggle to accept success or financial stability because they feel undeserving or lack positive role models. Fear of success and the potential envy it might provoke can also be factors. While this sounds at odds with common sense, it does happen.
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In some cases, a partner will unconsciously place themselves in situations where they need rescuing because it provides a sense of being cared for. This dynamic can be rooted in past traumas and is often perpetuated within the relationship by both partners. Recognising your role in this dynamic is crucial, as you can change it.

Financial Transparency and Trust (Honesty) are the Best Policies

Honesty about financial situations is crucial for maintaining trust in a relationship. A partner who repeatedly fails to plan and budget can create a sense of insecurity and distrust. The lack of transparency, such as hiding debts or misrepresenting one's ability to afford certain expenses, can severely undermine the relationship's foundation.
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Regularly discussing finances, including income, debts, and spending habits, getting a budget app that shows spending patterns, can help build a culture of transparency and mutual understanding. Both partners must be open about their financial realities to create a situation where financial decisions are made jointly and responsibly.

Talking About Finances Openly is Essential to Move Forward

Financial avoidance, where a partner ignores bills or allows debts to accumulate unchecked, can exacerbate existing financial problems. This behaviour often leads to more severe consequences, such as sending accounts to collections (e.g. BayCorp) and damaging credit history and financial stability.

Addressing this avoidance requires a direct approach. It's critical to encourage the partner to confront their financial situation and work towards better habits. This may involve creating a detailed budget, setting up automated bill payments, or seeking professional advice such as debt counselling.
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Know This: Many couples are unaware of each other's salaries or spending habits. Studies show that leaving all financial decisions to one partner can make the other more vulnerable if the relationship ends. An equal financial partnership means sharing costs, bills, worries, and joys, ensuring both partners are engaged in financial planning and management.

Encourage Your Partner to Learn Financial Literacy

Improving financial literacy can significantly help a partner manage their money better. Providing resources, such as reading Reddit Personal Finance NZ, enrolling in a free financial literacy course, or seeking couples financial counselling, will almost always help.

However, the effectiveness of these resources always depends on the partner's willingness to engage and take responsibility for their financial improvement. Some just won't want to know about it and this means no progress will be made.

As a Last Resort, Consider Ending the Relationship

Sometimes, after exhausting all other options, ending the relationship may indeed be the best course of action, but it should be approached with care. Having a firm conversation with your partner about how his or her financial instability affects you is important. Express your feelings and discuss ways to break this cycle without resorting to financial bailouts.
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Our View: It's essential to prevent history from repeating itself by setting clear boundaries and encouraging your partner to take responsibility for their financial decisions. Remember, you're there to help and support them, but you're also not an endless piggy bank for them.

MoneyHub Founder Christopher Walsh shares his comments about the risks of staying with someone who won't change their (financial) ways:

"The risks of not getting on the same page with your partner are enormous. Financial strain doesn't just disappear - it compounds over time, dragging you down for years, even decades. While your friends move forward, buying homes, building savings, and enjoying life, you could find yourself stuck in a cycle of financial stress, barely keeping your head above water. It's a frustrating and demoralising situation: working hard 9-5, yet having nothing to show for it, constantly worrying about the next bill, and feeling like you're always one step behind.

The emotional toll is just as severe as the financial one. Watching life pass you by while your peers achieve financial security can breed resentment and frustration within the relationship. Worse, you could miss out on opportunities - whether it's investing in your future, starting a family, or taking that dream holiday - because your life has become a financial mess. Instead of building a stable financial foundation together, you're stuck in a pattern of just getting by, with no money to fall back on in emergencies and no clear path to financial freedom.

Failing to align on financial goals doesn't just limit your opportunities - it robs you of your peace of mind and your future security. If you don't address the underlying issues now, the gap between where you are and where you want to be will only widen. It's not just about money; it's about living the life you deserve without being constantly weighed down by having no money in a country with ever-increasing costs".
Christopher Walsh
MoneyHub Founder

Frequently Asked Questions Related to Bailing Your Partner Out Financially

Should I pay off my partner's debts without a repayment plan?

No, paying off your partner's debts without a clear repayment plan could create dependency and prevent them from learning better financial habits. Always set terms before making financial commitments.

How do I know if bailing out my partner is the right decision?

Evaluate whether your partner is committed to improving their financial situation. If they are unwilling to make changes, bailing them out could worsen the problem and damage your financial future.

Can bailing out my partner harm our relationship?

Yes, financial support without boundaries can lead to resentment, power imbalances, and strain on the relationship. Open communication and setting clear expectations are essential.

What should I do if my partner refuses to contribute financially?

If your partner consistently refuses to contribute, it's time for a serious conversation about expectations and shared responsibility. If they remain unwilling, professional advice or relationship counselling may be necessary.

Should I lend money to my partner without formal terms?

No, lending money without formal terms can lead to misunderstandings and hurt feelings. Outlining repayment expectations in writing is crucial to avoid future conflict.

Is it a good idea to guarantee a loan for my partner?

​This is risky because you become legally responsible if your partner defaults. It's best to avoid this unless you are confident in their ability to repay.

What's the best way to financially support my partner without creating dependency?

Set clear boundaries and timelines for your support. Encourage financial independence by helping them budget, track expenses, and work toward a stable financial footing.

How can I protect myself financially while helping my partner?

Ensure you have a solid financial plan in place, including an emergency fund. Never deplete your savings or take on debt to help your partner. Always prioritise your financial security.

Should I bail out my partner if they refuse to discuss money?

Bailing out a partner who refuses to discuss money is a red flag. Financial transparency is crucial for a healthy relationship; without it, you risk ongoing financial problems.

When is it time to stop bailing out my partner financially?

If your partner repeatedly needs financial help without making progress or addressing the underlying issues, it's time to set boundaries and consider stopping the support.
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