13 October 2017
But even worse is when an individual diligently saves for the future, only to find that their better half is racking up debt. Financial differences can cause problems in a relationship, but couples can avoid these by planning their finances together, says Kenosi Magosha, Head of Savings Client Solutions at Sanlam.
She says the journey starts with creating a non-intimidating environment where open conversations about money can take place. “Talking about money can be a sensitive matter, but it is important to bring it to the table and allow it to be a regular discussion in your relationship.”
Public conversations about money – spanning from what some people earn, how much they owe and stories about celebrities who have become broke – are common. It therefore appears that talking about money is not a problem – as long as it is not our own money, says Magosha.
“Reflect on this. How much time do you spend talking about your money in your relationship? Ask yourself if you can build a friendlier environment to have these conversations more often.”
Magosha says you should choose a time that works for both of you.
“Choose a moment when you are both not tired or stressed. It is not advisable to kick-off the discussion with fire-fighting. Rather start by acknowledging your partner’s good financial habits. Also frame problem areas positively. For instance, after highlighting the positives you can suggest ways to reduce the overspending on the latest fashion to ensure you can afford to go on holiday. A non-judgemental approach to money discussions will allow both of you to be honest about existing financial obligations and future expectations.”
Here are Magosha’s suggestions on how to discuss money and establish a harmonious financial life as a couple:
1. Lifestyle aspirations and drawing up a financial plan
A key part of any committed couple’s
financial life is having a financial plan which covers goals varying from short to long term. A financial planner can help you with prioritising your goals and creating a plan to reach those goals. It is advisable to have a discussion with your partner before your meeting with the financial planner to make the most of the time with the planner. Your discussion should cover the kind of lifestyle you would like to live as well as goals such as saving for emergencies, retirement, children’s education, deposits for big purchases or a wedding - if it’s in the pipeline. You should also discuss how to prepare for unforeseen events such as death, illness, disability and unemployment. Planning for unforeseen events should empower both partners to run with the finances if something happened to one of them.
You need to align your future aspirations because the amounts you need to reach your goals is dependent on these. For example, your idea of retirement may include international travel while your partner may be content with moving to the countryside with occasional local trips. Similarly, the schooling you choose for your children – public or private schools – or the suburb and size of house you aspire for can require a very different financial commitment than what your partner envisaged.
2. Managing extended family responsibilities
As a couple you may come from different financial backgrounds. One partner’s family may need support while the other doesn’t. It will be beneficial to discuss how much support will be provided to the respective families. Be reasonable and transparent when discussing this issue to avoid resentment and problems in the relationship in future. Extended family’s expectations will need to be managed as your financial situation changes e.g. when children are born or if one partner loses employment or take a lower paying job.
3. Budget for monthly savings, spending and donations together
Budgeting is an essential tool to understand where one intends to spend money and how much. It is also useful for tracking past spending. Discuss with your partner how much is available to save, what you can afford to donate, but also look at where you can free up some cash. Set up time to discuss your budget on a regular basis to ensure that you are spending as planned but also to plan ahead for additional future expenses to your budget e.g. child care when a child is born or additional money for transport when taking up a job further from home.
4. How to formalise finances in your relationship to allow for unforeseen events
A will and antenuptial contract are some of the important legal documents that can help you manage the distribution of assets or debt in unforeseen events such as death, insolvency or divorce. Where married, the type of marriage contract you chose will affect how financial and physical assets as well as and debt, which existed before and after the marriage, is distributed. Your financial planner, working together with a legal advisor, can help you decide the best route to
plan your estate.
5. To unite or not to unite bank accounts?
There are pros and cons to both options. But whichever you choose, you must allow some level of independence in making financial decisions to maintain a healthy relationship. The typical banking account options to choose from are:
Magosha concludes, “Your responsibility to your partner is to be financially responsible for yourself and to communicate regularly. You should both be empowered to handle finances. Work on forging a financial future together, with the big picture in mind and guiding principles of transparency and trust.”