Marriage and Money

Written by Tshepo Matseba
Monday, 19 December 2011 09:20

Tshepo Matseba, head of marketing at Momentum’s financial planning division, highlights the key issues that couples should consider before tying the knot.

What aspects of your partner’s financial affairs should you evaluate before getting married?


Their earning potential, as this will give you some indication of whether or not you are likely to have financial peace of mind. The starting point is survival, which is about having the means to fund basic necessities and day-to-day financial obligations such as a home, vehicle, medical expenses, and education for your children.

What are the key questions that you should ask your partner to help you understand their financial circumstances?


Ask about their priorities. What are the most important priorities that this person has in life? Is it the accumulation of material gains such as an expensive vehicle or is it investing in a property? If material wealth is more important, chances are they will loot their money for short-term gratification and compromise long-term gains such as investing in property.

The other critical question concerns life goals. What do they want to achieve in life? This will help you establish if they are driven and have meaningful goals in life. A third critical question concerns indebtedness. Just like you wouldn’t want to invest in a business that has serious financial problems, you wouldn’t want to get into a marriage with someone who has significant financial obligations that they cannot afford to maintain. Talking about debt is a crucial conversation.

What are the most common financial mistakes couples make?


Complacency – a lack of interest in their own and their partner’s finances.
A second common mistake is for one partner to try and do everything alone. It is important to collectively take responsibility for your financial affairs. This helps in eliminating debt, agreeing on big financial decisions such as buying a house, a car or saving money.

Another mistake is lack of communication. Couples need to openly discuss their finances. Money is one of the most common causes of arguments in a relationship, yet it should never become a secret. Mistake number four is a lack of budgeting. Drafting a budget is a basic step in the money management process. Monthly expenses should be tracked, and there should be a plan to make provision for these. Through budgeting, a culture of saving and cutting down on costs is cultivated.

A final common mistake is having no emergency fund. It is crucial to have one for times of need – such as when one of you loses income, for instance. When one party loses a job, it can take a long time to get back on track, so it’s recommended that you have at least three months’ worth of income readily available to bail you out.

How do I make sure my assets are protected from financial pitfalls my partner may fall into?


In a marriage, an ante-nuptial contract without accrual gives you an opportunity to regulate your relationship with your partner regarding property and other assets. It outlines terms and conditions for the exclusion of community of property. It means you are married out of community of property, and you both agree to have separate assets. In this case, whatever happens to your partner’s estate cannot affect your financial situation.

What are the most common problems that cause significant arguments between couples? How can they avoid them?


The most common one is keeping secrets about money or failing to disclose income. For example, if you receive a performance bonus or sign a major business deal that pays you a significant amount of money, you should disclose that to your partner pro-actively.
Another issue is over-spending. Whilst surprises are nice, you simply can’t arrive home with an expensive new car one day and expect your partner to be excited when you didn’t discuss the purchase beforehand. Honesty and the ability to plan things in advance through budgeting can minimise financial disputes in a marriage.

What are your top tips for retirement planning, risk planning, and other forms of saving?


You can’t retire comfortably when you have debt, but at the same time, you can’t retire without sufficient provision for retirement. The sooner you start saving for retirement, the better – and it’s never too late to start.

Here are some tips to consider when it comes to your financial plan:

 

• Set measurable goals.
• Understand the effect that your financial decisions have on other financial issues.
• Re-evaluate your financial plan periodically.
• Start with what you have. Don’t assume that financial planning is only for the wealthy.
• Look at the big picture. Financial planning involves more than just retirement or tax planning. It is a lifetime process and not a once-off event.
• Don’t expect unrealistic returns on investments.
• Take control – you are in charge of the financial planning process.