I Do, I Do, I Do Until Finances Us Do Part!

I Do, I Do, I Do Until Finances Us Do Part!

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Gone are the days where the man was the bread winner and his spouse was the home maker. Where the husband would hold onto the purse strings while his spouse played the submissive homemaker.

No, today’s modern couple is very different. It’s common place for both spouses to be working and for both spouses to share and take joint responsibility for all matters related to married and family life such as raising the children, washing the dishes, making dinner, paying the bills and planning the future.

Intimacy and money are the two leading causes of divorce and generally if there is no money there is no intimacy. In light of this, and considering today’s stressful economic times, good financial planning and financial discipline is one of the most important aspects to a successful and lasting relationship.

Here are a few key elements to avoid the “I do’s” turning into “I don’t!”

Pay yourself first – save

You are the most important person in your life so make sure that you pay yourself first and secure your own and your family’s financial future.

This can be done by putting money in a bank account, a retirement annuity, a pension fund or any other approved financial instrument before paying any of your household bills.

But how much is the right amount to put into those accounts? Saving 15% will ensure that you will be financially secure in your retirement years. You need to speak to a professional financial planner who will most appropriately invest these monies into the correct savings vehicles based on aspects such as liquidity, flexibility and tax efficiency.

Related: Are You Financially Secure?

 

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Budget

The cornerstone to any financial plan is a good budget. The budget should be realistic and can be done by setting up a simple spreadsheet for fixed costs (bond, car repayments, school fees etc) and variable costs.

It’s normally with the variable costs where we tend to overspend on things like gifts and entertainment. It is important to keep these variable expenses under control and I find the best way of doing this is to set a maximum monetary amount for these variable expenses and then to update one’s spreadsheet daily (this will take less than five minutes to do) by entering the day’s expenses.

This can be done by keeping the receipts of each purchase.  The will give you a clear idea of where your money is going and allow you to save towards a healthy financial future.

Bank accounts

A key suggestion and consideration is to have both separate and joint bank accounts. “A man is not a financial plan” and it is important that each spouse is financially independent, yet jointly financially committed.

What does this mean? Have a joint account for all your fixed monthly expenses (bond and car repayments, rates and taxes, debit orders, utilities etc.) and separate accounts for variable expenses such as entertainment and personal spending.

Related: Smarter Wills in 4 Steps

Emergency fund

An important part of your financial plan is to set up an emergency fund. This should be equal to three to six months of your joint monthly household expenditure. There are many ways of structuring this fund.

You can save additional money in a money market account, a savings account or simply pay more into your access bond. The important thing to note is that the money must be very liquid (as in you have easy access to it) and that you get a respectable rate of return.

Tip: By paying more money into your access bond you’re effectively saving at your bonds lending rate with no tax or risk aspects to worry about.

Grow your wealth separately, together

It is important that each spouse accumulates assets in their own name, not only because they’re each contributing to the general welfare and success of the family unit (contributions from a non monetary source are equally as important) but there can be certain tax advantages in doing so.

It also creates less financial stress should one of the spouses die.

Evaluate your financial position

At least once a month spend an evening over a nice dinner that you both have made and review your month’s budget. See where you may have gone wrong and reward yourself if you’ve stuck to your guns.

Also spend time talking and discussing your financial future – where do you want to be in 5, 10, 15 years from now, where do you want to retire, what kind of lifestyle do you want to live?

Communication and boundaries

For any relationship to succeed, romantic or otherwise, communication is the essential ingredient and never more so than when it comes to one’s finances. It is important to be completely honest and realistic about your financial situation and your financial goals.

Once you have set up your budget and put a financial plan in place it will take financial wisdom, discipline and shared responsibility towards sticking to the plan in order to make it work for you.

Coming together is the beginning. Keeping together is progress. Working together is success. ~ Henry Ford

Colin Long
Colin Long CFP ® is an executive financial planner at Consolidated Financial Planning KZN, an authorised financial services provider. He holds a Post Grad Dip Fin Plan. For more information visit www.consolidated.co.za.