Marriage is normally a time of immense joy, heady romance and the celebration of an exciting new future together – all of which can be short-lived if there exists a lack of harmony when it comes to money. Although far from being the most important matter in a relationship, discord over money has the ability to test even the most robust partnership. Due and careful attention to the following ten considerations can undoubtedly help prepare any couple for their future financial journey.
- A history lesson
Before planning one’s joint financial future, it is imperative that each partner understands their spouse’s history with regard to money, and how that history impacts on their financial behaviour today. Was there a scarcity of money during one’s childhood? Was money the cause of heated conflict and anxiety in the family? What spending habits has each partner acquired as a result of their upbringing? Is one partner a spendthrift or the other a compulsive spender? These seemingly endearing ‘money personality’ traits can be the cause of untenable financial discord as the relationship advances. Understanding each other’s history will help when planning the future.
- The great reveal
The next step is for each partner to reveal the full extent of their financial position – including all assets, liabilities, accounts, collectibles, inheritances, credit cards and investments. This process would include revealing one’s incomes to each other in a non-judgemental environment. Full transparency and open communication are absolutely critical at this point, as any undisclosed information can undermine the integrity of the joint financial plan going forward. Be intentional in one’s communication with each other, for as George Bernard Shaw was cautioned, “the single biggest problem in communication is the illusion that it has taken place.”
- One direction
Jointly setting the financial goals for the partnership will ensure that as a team you are headed in the same fiscal direction. Essential components of the plan would include the creation of an emergency fund which should be sufficient to cover 3 to 6 months of essential bills. A savings account for medium-term goals should be set up, with these funds ear-marked for purchases such as a deposit on a home, an overseas trip or the purchase of a new vehicle. It is highly advisable that each partner sets up a retirement fund and maximises their tax-deductible contributions to this fund as early as possible. Working together as a couple towards a shared dream serves to strengthen the relationship through common purpose – or as someone once noted, ‘teamwork makes the dream work’.
- Do the maths
Mapping out one’s monthly expenses is an essential part of running a joint household efficiently. Essential costs, such as housing, transportation, groceries, medical aid, electricity and water, need to be prioritised in the budgeting process. Thereafter, discretionary expenses can be reviewed and adjusted so as to fall within the constraints of the joint income. Prioritising and agreeing on costs such as gym membership, cell phone contracts, entertainment, DSTV and other nice-to-haves can prove to be a challenging exercise in compromise.
- TEAM (Together Everyone Achieves More)
Another important step towards fiscal harmony is agreeing on how one’s bank accounts should be set up. Generally, married couples tend to operate with a combination of separate and joint bank accounts. For instance, each spouse would operate their own cheque account and then have a joint credit card. Where couples marry later in life or in the case of blended families, couples often choose to continue operating completely separate accounts. The practical construction of the bank accounts should not, however, detract from the underlying principle of financial unity.
- Minister of Finance
Although it is imperative for each partner to know exactly what is going on with the finances, it is often practically easier for one partner to assume responsibility for paying accounts. Online banking is an effective tool for keeping both partners informed of household finances, ensuring that both partners have full knowledge of all transactions.
- Over the threshold
In order to avoid any tension over purchases, our advice is to agree on a pre-determined spending threshold. The idea is that all purchases over this threshold should be discussed and agreed upon first. Agreeing on a spending threshold is a very powerful tool in reducing post-purchase animosity between spouses, whilst at the same time providing a safety mechanism to ensure that no single purchase can derail the joint financial plan.
- A friend in need
If statistics are to be believed, couples tend to fight over money more than any other issue – and this is very often a result of one or both partners being placed under pressure to assist family or friends in need. Our advice is for the couple to jointly develop a policy for dealing with friends and family in need of money, and then adhere to it resolutely. This approach will ensure that the couple have a common and unified response to requests for financial assistance – bearing in mind that lending money to cash-strapped friends can have the effect of derailing one’s own financial plan, which in turn can cause marital tension and resentment.
- Risk and rewards
Whilst young and in the process of accumulating wealth, one’s most important asset is the ability to generate an income. It goes without saying that this income needs to be protected against unforeseeable events such as the death or disability of either spouse. Appropriate risk cover will ensure that in the event of one spouse’s death, the surviving spouse will be left in a financial position to continue his or her standard of living. This will include ensuring that the correct beneficiaries are nominated on each of one’s policies and investments. Be intentional about securing each other’s futures should tragedy strike.
- Where there’s a Will
Once married or committed to a long-term relationship, it is important that each partner’s Will is updated so as to bequeath one’s assets appropriately. More importantly, if there are minor children from the relationship, the Will should make provision for their guardianship.
Successful financial planning within a marriage is underpinned by the quintessential concept of teamwork. It is fortified by full transparency, intentional communication and dual commitment to a common goal. As Henry Ford so aptly noted, “Coming together is a beginning; keeping together is progress; working together is success”.”
As a couple, go for full-blown success.
Have a wonderful weekend!
Categories: Financial Planning