When two people become a couple, they
confront a myriad of financial choices and decisions. Are you engaged?
How much do you know about your fiance’s financial situation? After the
excitement of the wedding ceremonies, it will be time to face your
financial future together. Research shows that money matters have some
part in most divorces yet, most couples go into marriage without ever
broaching this subject. It may not be romantic, but it is important.
Here are some of the money issues that you should discuss with your
fiancé or your spouse.
What is your attitude toward money?
You do not just develop good or bad
money habits by chance; attitudes to money are formed very early on in
life and usually develop over many years. You may not even realise the
full effect of your childhood experiences, circumstances, and your
parent’s attitude towards money. Indeed, many people simply assume the
savings and money management habits of their parents. Were they very
frugal, disciplined savers, or were they spendthrifts? Your attitude
toward money can have a significant impact on the financial decisions
you make.
What are your financial goals?
What are your short, medium, and
long-term goals? Where do you see yourselves five, 10, 20 years from
now? Financially, this can mean owning your own home, educating your
children and planning for your retirement.
In relationships, there may be
different goals and priorities. One may be averse to debt whilst for
the other debt is a way of life. He might want a flash car, whilst she
feels more secure with money in the bank. She might spend all the
housekeeping money on jewellery, shoes and bags whilst his priority is
to give the children a sound education. He may view the new home cinema
as their greatest new asset, whilst her priority is to make a down
payment on their own home. If the differences are fundamental, this
will be a source of conflict. At the same time, be conscious of the
fact that it shouldn’t be all about scrimping and saving towards the
future; treat yourselves as well.
Who will manage the family finances?
Women often enter marriage assuming
that their spouse will handle all money issues and thus delegate almost
total responsibility and sit on the sidelines without being involved.
Determine who is best able to manage the routine everyday financial
matters. Teamwork is essential and shared duties work well for some
families, but even if one party is more involved, both should have a
general overview of the total picture. Periodic meetings are important
so you know where you stand financially and can see whether you are
actually moving closer towards your family goals.
How do you feel about budgeting?
It is surprising how many married
couples get by without a budget. Through budgeting, you have a better
idea of what is coming in and how much can be spent. You should both
know how much you pay for your rent or mortgage, utility bills,
insurance, and so on. Budgeting responsibilities should be shared such
that neither partner should feel that they have to shoulder the entire
responsibility. Periodic meetings, say at least once a month are useful
to review bank balances, any outstanding debt, routine expenses as well
as any major expenses that need to be carefully planned for.
How much debt are you bringing to the marriage?
Many people do not discover the full
extent of their spouse’s financial obligations until they are married.
Debt brought into marriage can be a major source of strife if not well
handled. Each partner should know the debt load the other one carries,
as once you are married, that debt load is shared. Whilst you are not
legally responsible for the loans opened in your spouse’s name, it
could certainly affect your eligibility for joint loans such as a
mortgage. It should be a priority to try to deal with it together and
bring it under control.
Who pays for what?
Something as basic as the handling of
everyday household expenses is a source of friction in many families.
How will you handle routine household expenses? You both earn, but how
much should each person contribute? Are you both doing your “share”?
Should it be equal amounts no matter what each person earns, or a
certain percentage? If you earn significantly more or less than your
spouse, it seems only fair to contribute amounts in proportion to your
respective incomes to reflect this imbalance.
Some couples assign expenses – you pay
the rent and school fees, whilst I’ll pay for groceries, utility bills,
and so on. Other couples use one partner’s income for all expenses and
apply the other income to build up savings and investments.
Will you have separate or joint accounts or a combination of the two?
Will you open a joint account and pool
both incomes or have separate accounts? Having a joint account combined
with individual accounts for personal expenses is a good compromise as
each partner takes some responsibility for the household budget, yet is
still able to retain some autonomy. Partners contribute a certain
amount of their monthly salary into the joint account to cover routine
household expenses such as food, utility bills and so on. Some couples
decide to pay their salaries into the joint account and then pay
themselves a monthly allowance.
Remember that parties to a joint
account have a right to withdraw all the money in the account. It is
for this reason that the use of joint accounts is usually limited to
people who have built a solid level of trust. Look critically at the
options and try to come to a compromise that will suit your
relationship.
Will you set spending limits?
Do you have to account for everything
you spend to your spouse? If you show up with an expensive new TV or a
car, could this be a cause of tension? Everyone needs some personal
spending money that doesn’t have to be accounted for. The amount will
vary depending on the couples’ resources and lifestyle. Some couples
set spending limits on how much either can spend without consulting
each other.
Even though there may be the occasional
conflict about money, it is really about how best these conflicts can
be resolved. With careful planning, clear communication and compromise,
you can avoid many frustrating conversations. There is no one size fits
all when it comes to finances in relationships; even the best system
may not always be appropriate so be prepared to modify your system as
your relationship and financial situation evolve. Try to find the right
balance that works for your situation; if one option doesn’t work, try
another. The financial decisions that you make now can have a lasting
impact on your financial future as you go through life together.
Happy Valentine Day!
