Until debt us do part
When the excitement of the wedding day is done and the glow of a honeymoon has been replaced by daily routine, many couples find out that they still have a lot to learn about each other. Often, the discussions will centre on what is mine, what is yours, and what is ours. At the base of the problem is money and disagreements about how it should be spent and saved, says Old Mutual.
Ideally, says John Manyike, Head of Financial Education at Old Mutual, the money talk should have begun long before the walk down the aisle became a reality. But, he admits, when life is all about love, marriage, celebrations, and a great future together, the question of money is often not regarded as that important.
“However, the truth is that arguments about money disrupt and even destroy marriages. Avoiding confrontations about cash should begin before the wedding. Honest, open discussions will help settle potential sticking points before they become massive problems. Sharing views will help make the road into marriage and beyond to a life together much smoother.”
Initial discussions should settle points that include:
Marriage Regime: Deciding upfront what’s mine, what’s yours and what’s ours.
“Ideally, this should lead to a written document and an antenuptial contract that sets out what remains each partner’s property, who retains control over what assets and what assets will be shared,” says Manyike. “It may seem wrong to put things in writing when life together has not even started, but it can save tears and pain later if things go wrong.”
Credit History: Being honest about spending habits and debts.
Most people enter marriage with debts of some kind. Not disclosing that financial baggage is lurking in the background will almost always lead to arguments and accusations when individual earnings, spending habits, and who owes what are the topics of conversation.
It’s best to know all about your partner’s debt so that decisions about settling them can be taken together. It’s best until these issues are resolved that finances stay separate. This means that there will at least be one good credit history in the family if a loan must be raised or a major asset is bought.
Shared Financial Responsibilities: Deciding on how financial responsibilities will be divided and who should handle finances based on strengths and weaknesses.
Often, one partner in a marriage is better at budgeting, paying bills, and investing than the other. Acknowledging this and leaving the most financially able person to handle the money can make for a happy marriage. If financial responsibility is to be split, how this is to happen and who does what should be agreed. The discussion should include financial responsibilities before the marriage such as maintenance of children from the previous marriage, siblings, or extended family members and agreeing on how this should look like going forward.
“Taking time to work together with a financial planner, making financial plans, and discussing budgets and investment strategies will pay dividends for a marriage. Having a personal financial plan in place that both understand and support will ensure that you are working towards common short, medium, and long-term goals,” says Manyike.
Issues that should be highlighted include:
- Savings plans that can help with emergency funds, longer-term savings that are tax-efficient and investments.
- Annuity investments to cope with expenses during different stages of married life.
“An annuity is an insurance policy that is taken out so that money is available for a future event. The most usual is building funds for an education plan that pays out when children reach tertiary education age. Making sure that payments are adjusted annually for inflation means that their value is not diminished over the years that a policy is in place,” says Manyike.
Life insurance to cover life’s unexpected events.
Life insurance is an essential element in a financial plan. Nobody knows what lies ahead. Having life insurance helps make sure that money is available if a spouse is disabled or dies unexpectedly. Debts can be paid off, and the surviving partner can use the remaining funds to create a financially stable future for the family.
Setting up a retirement plan and having retirement annuities (RA’s) in place.
The sooner a retirement plan is put in place, the greater the future benefits will be. Taking out an RA while in your 20’s will ensure that you are financially secure and can enjoy a happy retirement when your working days are done.
Having a valid will.
“A will is a must-have feature of any financial plan. It ensures that your wishes are carried out and that the people you wish to benefit do so. If a partner dies without a will, life for the surviving spouse and children can become complicated as the law takes over and dictates where assets and money should go. A joint will, or separate wills, should be drawn up as soon as possible after marriage,” says Manyike. “It is a sensible precaution to take, particularly in these days of the Covid-19 pandemic when unexpected deaths have become more common.”
“Although definitive figures regarding the pandemic and divorce rate in South Africa are not available, countries around the world are reporting that the combination of the virus and financial issues are destroying marriages.”
“In some countries, the rate has increased by 30%, so there is no reason to expect that South Africans are not also finding strained finances and lockdowns are exerting pressure on relationships. Again, total honesty about money and debts can help find a way through, “says Manyike. “The easier it is to discuss finances, the easier it is to find a way out of difficulty and back to financial health.