The must have ‘money’ conversation before you say “I do”
“When you get married it is not just your hearts that become one, but also your money. Even if you are a financially independent couple where ‘his is his’ and ‘hers is hers’, when you start to build a family, there is an inevitable merging of finances that you need to be prepared for,” says Faeeza Khan – Legal Marketing Specialist from Liberty.
According to Khan these are some of the topics that you and your partner need to discuss before you get married:
Have an honest discussion about your debt
Debt is one of the biggest financial challenges couples need to deal with. It could be worse for new couples planning to commit to a long-term relationship if one person brings in a lot of debt into the relationship, which the other partner may need to help settle before they start building their wealth.
The debt situation could be a legal issue if you marry in community of property.
“Marrying in community of property is the default marriage contract in South Africa and under this regime both spouses will be jointly liable for any debt. So before you get married, you may need to settle your debt or consider which marital regime will best suit you and your partner,” says Khan.
Discuss how household finances will be managed
On a practical, day-to-day level, you need to figure out how you are going to pay for all those joint expenses – should you have a joint bank account or contribute to your expenses separately?
If you decide to run your finances separately, then you need to have an agreement as part of your monthly budget as to who covers which expenses. For example, one spouse could pay the mortgage/rent and household insurance whilst the other pays for groceries and utility bills. This arrangement only really works if you have worked out a proper budget.
Khan adds, “it is not uncommon to hear arguments between spouses about their expensive food or drink tastes, as such, in order to successfully manage your household finances, you need to know realistically what your expenses cost each month and what you expect to pay for electricity and water and apportion these expenses fairly amongst each other.”
If you decide to have a joint account to manage your household expenses, you then need to look into the pros and cons and implications of this on each of you as joint account holders.
What personal and financial risks do we need to cover in our marriage?
As soon as you say, “I do”, your lifestyle and responsibilities change. Your spouse becomes your responsibility both personally and financially. It also means that the risks you faced as a single person will change significantly. If something happens to you, your spouse will be left to deal with the financial risks. So make sure that from day one you have a Last Will and Testament in place that clearly outlines what must happen to your money in the event of your death or disability. Speak to a financial adviser to implement the right risk cover that will replace your income and cover the financial needs of your family if tragedy strikes.
How will you build wealth together?
The start of a marriage is a good time to meet with a financial adviser to discuss your retirement plans, and to make sure your risks are covered. “Often times we don’t think about what would happen if one spouse is saving money for retirement but the other is not. And if a spouse takes time off work or a takes a lower salary to care for the children, how will his or her retirement funds and investments be affected by this? You need to have these discussions right at the beginning of your engagement to make sure you are on the same page and to give your marriage the best chance of success,” concludes Khan.