In this episode we tackle the hot topic of finances in blended families – covering everything from joint versus separate finances, protecting your assets and preventing conflict when it comes to expenses relating to children who are not your own.
Whether you’re a newly blended family or have been living together for years, you’ll certainly be left with plenty to think about as we hear from Helen Baker, an experienced and award-winning Financial Adviser, Speaker, Author and founder of On Your Own Two Feet.
Helen Baker (00:00): If I say to somebody, “If you passed away today, where do you want your money to go?” Most of them would say their own children but if you are buying the house together and if you buy it as what’s called joint tenants, the house upon passing away moves to the other partner which is maybe not what you want.
Laura Jenkins (00:21): In the Blend is a podcast series that helps parents navigate life within a blended family. Join me as I speak with experts and guests to get practical advice on how to have a harmonious blended family life. This series dives deep into the unique dynamics, logistics, and challenges of raising a blended family. From new partners to juggling mixed finances, we will help guide you through it.
(00:50): Hello and welcome to In The Blend. Well, today, we explore the unique financial challenges and opportunities that come with blending families. Whether you’re a newly blended family or you’ve been living together for years, this episode will provide practical tips and strategies for managing your finances as a team. My guest today is Helen Baker, an experienced and award-winning financial advisor, speaker, author, and founder of On Your Own Two Feet. She’s written two books about managing your finances including one relating to managing them during a divorce and she has a wealth of experience when it comes to managing finances in complex family situations.
(01:32): In today’s episode, we will discuss everything from joint versus separate finances, protecting your assets and preventing conflict when it comes to expenses relating to children who are not your own. In my own personal situation, navigating the financial world better together as a blended family is something that we’re always working to do so I have been very much looking forward to this chat with Helen. I hope you enjoy it.
(02:00): Well, good morning Helen and thank you so much for joining me today on In The Blend.
Helen Baker (02:05): Thank you very much for inviting me along. It’s great.
Laura Jenkins (02:08): Helen, I’m so excited to chat with you today. I know money management is something that in my personal situation, it feels like it’s an item that’s permanently in my mind and I’m thinking of ways that we can do things better all the time so I have got a lot of questions that I’m keen to ask you today.
Helen Baker (02:31): Yay!
Laura Jenkins (02:31): Yeah. Looking at your bio and background and having heard you speak before, I know you’re absolutely the right woman for the job here so let’s dive in, Helen. So look, first up, can you share any tips or advice for couples who are just starting to navigate finances in a blended family situation?
Helen Baker (02:49): Yeah. So that’s massive loaded question to start with because I could talk for hours straight on that question. I think the things to think about is type of blend. So is it a, he’s come in and she’s come in with children of their own and then you are having children together or is it not having children together but there are children outside from your previous relationships. So it starts to get complex and I say his and her but obviously, it can be his and his and her and her as far as that goes. But I think getting down who’s working, are you both working, how long have you been together is one of the keys, I think, in terms of financial decisions that you would make because that’s the one that alludes to the protection side.
(03:44): We talk about sexually transmitted debt. It’s not wise to go in and put all your finances in together if it’s a very new relationship. You want to do slow and steady wins the race and protecting around that. Other things you need to consider around the money values. Everybody has different money values. So my phrase is people have money for what they want to have money for. People have time for what they want to have time for.
(04:09): So what some people see as important with their money, the other may not see and that’s definitely in a relationship and you see sometimes where one’s a spender, one’s a saver so this value that underpins the money decisions that are being made. So it’s yet another great thing that you get to navigate as a couple. It’s like, “Ahh!” but the thing is to recognize that finance to me is a tool that services all your dreams, that services what you’re trying to do together. It services the fun side and the bits that you’re trying to do. So I think rather than looking at finance as something as in, “Yuck,” look at it as something that, “This is actually what fuels the life that we want to live,” and then you manage that as a tool or a fuel to get you to where you want to be.
(05:00): But I think there’s a lot to unpack when it’s couples around credit history and all of those and I think avoiding a mistake is key, that’s what I see. We often don’t know what we don’t know in the finance world. My mom will say, “If it’s so easy, why do you have to have all these degrees and things like that?” It’s because the more layers that you go down, the more complex it becomes and we might do this but we might forget to tweak that last little bit over there and then the consequence of that becomes a big mistake for the other side. So yeah, lots to unpack.
Laura Jenkins (05:38): So no, it is a big question to start us off. So let’s come back to the point that you made around protecting yourself, especially if it’s a brand new relationship and I think I’ve heard you on a previous interview mention that if you’ve been de facto for two years, that you are entitled to each other’s money at that point?
Helen Baker (05:57): Yeah. So it’s scary sometimes.
Laura Jenkins (06:00): It is. It is. So knowing that, should people be thinking about prenups or other steps to help protect themselves at the start of a new blended family relationship?
Helen Baker (06:12): So a lot of my clients are female and so if the guy has more than you, then maybe don’t bring it up. But no, it’s a joke. I remember saying that once on TV and I got this hate mail so please don’t send me hate mail. It’s a joke. It’s a joke. Yeah. So obviously, that’s one of the key ways that you can protect. So the other thing that’s quite different and a family lawyer will be able to guide you better on the actual nitty gritty but the theory is in this big world, you don’t actually have to be living together anymore to be considered de facto because we have our own houses and we might do sleepovers but technically, it’s still considered to be a de facto relationship so there is some complexity that underpins it but don’t be frightened. Again, there are things that you can do to protect all of that sort of thing.
(07:04): So yeah, the prenup or the binding financial agreements that we talk about can be ways to separate out but even if you don’t need to go to that level, some people can come in quite close with what they’ve got, it’s just different. It might be packaged in different ways. Somebody might have a home, somebody might have an investment, or somebody might have that and someone might have a business so there’s lots of different things to unpack.
(07:29): The key is, I think, getting it all out on the table, understanding who’s got what, what happens in these scenarios. So then, when you play out the scenarios and you see where the ducks fall or where it falls, then you can start to put in some preventative measures to protect yourself that align and actually protect the other person as well. So there’s a bit of care going on in making sure that both of you go through this. Obviously, we want it to go well but sometimes it doesn’t. And so, it’s about protecting all of that, especially if there are kids involved and it’s just another layer of complexity again.
Laura Jenkins (08:09): Definitely. If you’ve had your own children as well, then in many cases it makes sense to have some joint finances as well because you’ve got new children together of your own. So thinking about that scenario, would you advise against having combined accounts where it makes sense but then still maintaining some separate accounts as a couple?
Helen Baker (08:35): Yeah. This is where it does get complex. I mean, obviously, if you are second time around but didn’t have children from the previous one and then you are going with this, but technically then are you actually a blended family? Because we’re really talking about the blend of all of it together. So for me, I like to step it out in stages. So I think in, there’s three, in my mind, of stages. The first stage is that initial teasing out where things sit and you want to be very protective of what you have and what they have. And so, one joint account or one account that you both put money into for that’s servicing perhaps the mortgage or the bills or the rent or things like that, those chunky items and then keep the other separate.
(09:25): The second stage is probably where you are actually having maybe children together that starts to blur the lines a little bit more and can be complex if either party or both party have children from previous relationships as well and then they’re paying child support or how does that all work? So then, you really got to try and break it up and also try and make sure that the one or two or however you have together is going to make sure they’re taken care of in certain scenarios.
(10:02): So this is where we start to look at those five foundations around the estate planning, around insurances, around where your superannuation nominations are. And then, the third level is look, you’ve probably been together for that long now and everything’s happy and great and you probably want to be more inclined to leave money to each other rather than directly for the children which changes, again, the amount of insurance that you have, where it goes, the superannuation, the wills, all of that. So you step through those and there’s no right time. It depends on the relationship and where everybody is, right?
(10:36): So everyone that I would see in this is different but I do see a lot of potential mistakes, particularly when they’re buying houses together and how that falls if something goes wrong. The other one is around superannuation. So to give you an example, there is a lovely lady who met up with a gentleman and they were together, he had not finalized his divorce and he left his superannuation to his former wife and was in a relationship with this new partner and they had a mortgage together and so on.
(11:15): So you’ve got this split between taking care of children from your former relationship as well as building this new life and this mortgage. So the problem for many women, obviously, is they generally can’t service a really big mortgage on their own unless they’re earning a really good salary which is where the insurance and the super comes in. And so, what this gentleman had done was he had left the super nomination to his ex, his former wife. So when he passed away, that’s where it went which was quite a shock to this lady then because in the end, of course, she had to sell a house because she just couldn’t service it and had no other money coming from anywhere. So it’s little things… Well, they’re big things but they seem like little things that can catch you out. Again, as the relationship continues on, as the money changes, the dynamics change, that’s where you’ve got to keep getting these reviews and making sure everything’s still. We talk about keeping the financial house in order because everything changes all the time. Yeah.
Laura Jenkins (12:25): I can imagine even a more complex scenario in the one that you just described, if the ex-partner then tried to claim assets from the new partner in addition to getting the superannuation as well which I’m sure may happen depending on the circumstance again.
Helen Baker (12:41): Yeah. Exactly. Because the issue can be if that person was funding child support, so let’s just say there was no life insurance and that leaves that person in quite the predicament. If you’ve got young children that are being managed by the former wife, or I shouldn’t say managed, that’s not a very nice, no. You can edit that bit.
Laura Jenkins (13:04): We know what you mean.
Helen Baker (13:04): Yeah, yeah, yeah or we leave it as it is. Yeah, exactly. So again, this is where the thought process has to come in to go, “Okay. Under this scenario, what happens and how do we make sure that everyone’s taken care of where they are?” Because again, if there’s more children coming in the second relationship, you want to make sure they’re protected as well. You don’t want your new partner and children out on the street.
Laura Jenkins (13:29): Coming back to an earlier point that you made, Helen, around when one person in the couple might be paying child support or the like, what are some ways that couples can reduce conflict in that scenario where there’s a large sum of money that might be coming out of the blended family pot as such to go to an ex-partner to cover either maintenance or maybe it’s private school fees?
Helen Baker (13:54): Yeah.
Laura Jenkins (13:54): Yeah.
Helen Baker (13:58): Yeah. That’s a really great question because obviously, this is quite common and as I say to some of my clients, if it did go south for some people and the relationship breaks down, this is for the happier couples to start with, when the separation happens, that’s one of the biggest issues is the other person saying, “Why are we giving all this money over here?” From an outsider perspective, it’s because they’re your children and you need to look after them.
(14:33): So there are a lot of people that feel like the child support how it’s managed, how it’s calculated is unfair. I doubt that too many people would go, “Yeah. That’s really great.” That both sides say, “Yeah. That’s really great,” so it is a very icky conflict-based. My thing is, you know what? It’s not forever. It’s about the kids and I think we need to be careful that we don’t make life difficult for kids because they have enough going on dealing with the fact that parents have already broken up. It’s already a tragedy for them, it’s a destabilize, it’s really hard for kids so I think we want to do that. I think it’s just simply as accepting that there are these costs, there were promises made to people.
(15:26): Now, I say that with a disclaimer because I have seen people who, particularly the women, and they actually have not been able to afford to continue the private school and the child support or however it’s played out, they haven’t got enough to make all of this work and they continue to fund private school themselves often to their own detriment. They’re so lean, they’re not putting anything away for their long-term future, they’re struggling with trying to keep the mortgage. So I do talk about some of this in the books as well about things you need to be realistic and I think that’s where advice comes in.
(16:09): Get some guidance from somebody who’s not emotionally attached to the situation about what is right for you, how you should live your life going forward. Do you get a smaller home because private school is really important to you or do you make other changes around that? Yeah. It’s a complex situation but I think this is where you have… The money values that we were talking about before, this is where it has to be laid out and there has to be an agreement between both parties to recognize, “You’re okay. They’re your kids. These are mine. This is it. This is how we’re going to make it work,” and get a positive approach around it knowing it’s not forever. It might impact some things or you choose not to have it impact them. You might say, “Well, we’ll just put you in public school but we’ll go on holidays every year.” I don’t know. It’s about those values and being transparent, I think.
Laura Jenkins (17:03): I love that. I think that’s a really good reminder to think positively and remember that it is all a mindset. Regardless of if private school fees are coming out of the bank account, if you know you’ve still got things that you’re able to fund that are important to you, then I think that helps as well. So having that balance, if you can. Just thinking about day-to-day expenses so things get complex as we know when you’re in a blended family and is there a way that you can ensure that everyone is contributing fairly to the household expenses or able to prioritise those expenses to ensure that everyone’s needs are met?
Helen Baker (17:44): So again, I think for that one it comes back to the word fair and what does fair mean to anybody like it will definitely be different. So for example, if one partner is contributing a lot financially to their children that maybe don’t live with them that often, there can be a resentment that comes in on that basis. So again, it’s about the values and the understanding and the transparency and sometimes, money coaches.
(18:15): So from a financial advisor perspective, we are the technical people who get in and make sure those things we are talking about with super and insurance and estate planning and investments and whose name do we put it in for trusts and buying the house together, that’s all us. That’s all the technical piece that the layers down here with the money values and some of that, if it’s not a very complex situation, you may just be okay with the money coach to get this all out.
(18:46): But again, I think the only way to deal with it is actually getting it out there and being honest enough to say, “You know what? I’m not comfortable with that. I have an issue with that,” and having some coach or a counsellor help understand that because if you don’t deal with finances properly, it becomes the thorn in the side of everything. And then, for women, often, they start to withdraw because they’re unhappy.
(19:13): For women, finance is a source of security and if we are feeling insecure financially, we start to wobble and if we start to wobble, we start to withdraw, we start to react which is obviously going to impact other parts of relationship. And so, it’s almost terrible to say but it’s almost like a self-fulfilling prophecy. You keep going down that track and eventually the relationship is torn apart from all of this angst and the very life that you wanted to live as this second time around, third time around however many times, blended is now an unhappy one and you are going through another situation.
(19:52): So really stopping it early, the whole prevention is better than cure for health issues. This is a really good one to get on the front foot for. Again, I would say it’s about the stages in life and managing the difference in protection because to me, there’s two types of protection. One is if the relationship breakdown and obviously, we want it to go well but protecting around that and people will have different burning experiences from what they’ve come out of. So some people are happy out of a relationship, some people are not so they’re taking that into the next time around.
(20:30): The second aspect is about health or if somebody loses their job because if they can’t work, that’s going to impact both of you together. It’s going to impact all the situation. So again, it’s about covering all of those bases and getting all your ducks in a row to make sure if this happens, this is our backup plan. So I think it all works together to… One of the things we do in our second meeting is what we call a discovery process which pulls out all of these issues about what are your values, what’s important to you about that, and then what does the family tree look like? If something happened to you today, who’s going to look after you? Who’s going to look after the kids?
(21:14): Guardianship is also a great one for nothing like throwing that one on the table and making everybody go, “Aaack! I don’t want this one.” Because often, we don’t have these kind of conversations, right? So I think that might be a really long-winded answer so please stay awake if you’re listening. But yeah, it’s more about finding out what the other person really, really thinks and I would argue that’s best done in front of someone else who’s neutral so you can really say what you think and understand what are the pros and cons of that if you took that way, does that work? Again, is it seasonal? Do you do that for now and then after you’ve been together for a long time it changes again and then again that third stage that might change it again.
Laura Jenkins (21:59): I was going to ask you about that. Just when people should be revisiting the plans or how long it should be when they’re in a new relationship until they put a plan like this in place because there really is a lot to think about and so many different aspects that are going to be quite unique to the individual couple or circumstance.
Helen Baker (22:18): Because one of the things I see a lot that people do not seem to be aware of, which is fine, I mean, if I popped in your industry, I’m sure there’s loads of things you would know that I don’t know, right? That’s fine. That’s what we do. The one I really see is around the houses. So let’s just say, you’re dating, someone’s got children in that house on or off, however many days a week it is and vice versa on the other side. But then, you decide, “Actually, let’s Brady bunch this and we are going to live together happily ever after in the one place,” which is usually a bigger house because we need lots of rooms to take care of everybody and find some quiet spaces for the parents.
(23:04): So this is where the number one issue I try and highlight with people. So for example, if you are buying it together, likely that it’s maybe got a mortgage or maybe a bigger mortgage or maybe you don’t, maybe you come in with different amounts which adds another level of complexity. Generally speaking, if I say to somebody, “If you passed away today, where do you want your money to go?” Most of them would say their own children but if you are buying the house together and if you buy it as what’s called joint tenants, the house upon passing away moves to the other partner which is maybe not what you want. So the alternative is you can buy it as what’s called tenants in common which means my 50% share is mine and goes to where my will says and the partner’s is 50% and it could be different numbers depending on how it’s structured goes to that side of the family so it’s getting to their children directly.
(24:12): So that’s often in that early stage what you want. The complexity comes when you then have children together and then how does it work and where does the super go and where does the insurance go and how do we tie it all in together? So then, to your point, the children might be 18 which means they might not need as much or dynamics might change. See, that’s another one that you have to think about. Some people have children who are the 18’s or 16’s up, the other partner maybe has family with children, that’s 9’s and then you’re going to bring in some little ones. They’re all different which goes back to that child support. And so, all of it is different so that’s what makes the jobs fun in finance.
Laura Jenkins (25:04): Absolutely. That’s that’s why there’s people like you, Helen, in the world to help people like me navigate all of this.
Helen Baker (25:12): Yeah. Exactly. It’s great fun though because it’s really nice when you know that everybody’s happy, everyone can see how it’s all going to work. Because one of the other aspects when we see, we all know about gender pay gap and superannuation gap and what I call career choice gap which is a lot of women choose to do aged care or nursing or kindergarten or childcare that don’t… Hairdressing even where they don’t even get paid massive amounts of money but that’s what they love to do which is great.
(25:46): So then, they’ve got this issue of contributing a smaller amount to what the other person has. And so, that leads to some things that need to be sorted out as well or the other one you see a lot is where, and it’s often the women, I mean, this is changing grossly over time, certainly from when I started out but the majority is that the woman often sacrifices her career to work part-time to get kids from A to B and also to take care of parents because we have this sandwiched generation now as well where you’re looking after parents or grandparents because they’re living longer, as well as kids and it just doesn’t work.
(26:32): To that point, in the pre-part of the divorce book I talked about where there was a couple that I spoke to and they were on second time around and had this disparity with ages. So some kids needed to be doing driving lessons and learning and driving to school and then they had the little ones that needed dropping off at school. Just the impact on the family when they actually brought the family under one household was just enormous, there was a lot of frazzle, for want of a better word.
(27:09): I said, “What if you just had six months off for the lady?” because when you worked out what that was less some tax, so on, it was maybe about $40,000 to have some time off and just get the house settled down. The gentleman was earning a really good income and they actually didn’t do it. Sadly, a year later that had happened where it just blew up and so it cost them way more than the $40,000 to sell the house, the stamp duty to buy another house, the legal fees in the relationship breakup, horrendous and apart from the fact that your heart just got ripped out and driven over. It’s awful. So we want to try and make these things work.
Laura Jenkins (27:55): Definitely. Definitely prevent all that if we can.
Helen Baker (28:00): Yeah.
Laura Jenkins (28:01): Well, Helen, let’s talk a little bit about your books. So you’ve written two books, is that correct?
Helen Baker (28:06): Yes. So there’s the holistic… Well, holistic, people probably don’t like that word but it’s looking at everything. So it looks at those foundations and look, no one’s ever passed my five foundation test so it is likely there’s something to tweak in there which is fine, that’s good fun. It talks about what happens in life events.
(28:26): So good events, I want to start my own business or I’ve received an inheritance but it can deal with some other things like aged care, widowed, breaking up, going back to work after having children. There’s a ton of different things to speak about in there and a little bit about who’s who in the zoo and what different investments you can think about so that looks at everything.
(28:50): And then, the divorce one is probably not relevant now but there might be people who are listening where it’s for their friends but what I found was a lot of people were divorcing without getting financial advice. They get the legal advice but they didn’t understand financial advice. They just think it’s about selling an investment, I think. So when I put that out to try and avoid a mistake because once you’ve signed on the dotted line for what you are going to walk away with in the divorce, it’s done. You can’t really go back.
(29:21): So it’s important for people to go with their eyes wide open, signing off on something that they understand they haven’t made a mistake or they can understand how to DIY or get advice on what they needed in their circumstances. So the books are relevant to either and look, I’m not buying a Porsche with the book, the money goes out to charities so we do a lot of-
Laura Jenkins (29:44): Oh amazing.
Helen Baker (29:45): Charity work with it. Hopefully, the book pays for itself. I would argue it does. I’d be surprised if it didn’t.
Laura Jenkins (29:52): I was just saying to you, Helen, before the recording today that I’ve read the first book which is called On Your Own Two Feet and I read it this week on my Kindle and powered through it and it really is an extremely helpful read and there’s so many useful nuggets of information that you’ll take away no matter your circumstance. Yes, I’ve got the divorce book on my list as well to get through.
Helen Baker (30:21): Don’t put it on your bedside table-
Laura Jenkins (30:23): No. That’s true. I better not do that.
Helen Baker (30:26): I’m researching! I’m researching.
Laura Jenkins (30:30): It’s all research. Oh, and Helen, looking at the clock here, where we are at time now. Where can people go to connect with you and learn more about the services you offer and all of the great information that you’re putting out into the world?
Helen Baker (30:48): Yeah. Thanks. So onyourowntwofeet.com.au is the hub where you can go out but if you google my name, even, Helen Baker, you’ll find there’s a string of articles and YouTube clips and bits and pieces that can just get you started with some things that might just answer your questions. Obviously, yeah, the books are there as well. Otherwise, you can just contact us directly and if we are not the right people to help you, we can certainly pass you on to somebody who might be more appropriate. The main thing is I think just take some action because there will be something that will make a difference, I’m sure, to your life.
Laura Jenkins (31:27): Very wise words. Thank you so much, Helen. It’s been an absolute pleasure chatting with you today.
Helen Baker (31:33): Go the blends!
Speaker 2 (31:35): Yay, the blends!
(31:37): Thanks for listening to In the Blend podcast. The show notes for this episode are available at intheblend.com.au and if you like what you heard, be sure to subscribe and please rate and review in your podcasting app. You can also follow me on Facebook, Instagram, and LinkedIn.