Conduct a financial planning date this Valentine’s Day
Rita Cool, Certified Financial Planner at Alexander Forbes Financial Planning Consultants says couples who make separate decisions about money argue the most about it.
“According to a UBS Investor Watch report, couples who truly share financial decisions feel the most confident about their future - but only one in four couples fall into this category.”
Cool advises couples to talk about money, saying “love gets lost if money is not sorted out”.
In many cultures it is considered bad manners to discuss money. “If you speak to your partner about money, the perception is that you are a gold digger. But if you’re marrying someone, you need to know not only what assets they have but also what debt they owe. Be aware that there is ‘good’ and ‘bad’ debt – long term debt such as a home loan is seen as preferable over high-interest short term debt like store cards.
Your future spouse’s financial standing would potentially determine the marriage regime you choose for example in community of property or ante-nuptial contract with or without accrual. Having a contract doesn’t mean you think you will get divorced, it is part of sound financial planning.”
Cool advises that those in a relationship should do the following:
- Plan a regular money date. Discuss your current financial situation and how your cash flow is doing. Were there any unplanned expenses recently? Are there any big purchases necessary in the future? How will these be paid for? How have your long terms plans changed or are you still on track? These items are not only for the mundane day to day items but also planning for treats and holidays and potentially houses and children.
- Set up a savings reserve- Financial planning isn’t just how to pay accounts each month. Make sure you have a plan to pay debt as well as to set up a financial safety net if something happens to either of you. What if one of you get sick or loses their job? How will that affect your combined budget
- Determine what’s yours, mine and ours. What would be the impact of holding assets in a different person’s name? For example what happens if your spouse’s business goes under and you are married in community of property? You will be liable for the loss even if you didn’t incur it. Should you buy a property in one person’s name to protect an asset in the event of a business going under and if you are married with an ante-nuptial contract? What happens if all your assets are held in the other person’s name and you have to split up? Are you entitled to some of those assets?
- Make it legal. You don’t have to marry someone if you are both comfortable with the status quo but what happens if you split up or one person dies? If you are living together get a partnership agreement to set out what happens to assets during good times and in bad. You might not get any of the estate if your partner doesn’t have a will that leaves assets to you. If you are married traditionally make sure you have registered the marriage at the court so that there can’t be a confusion about your position in the relationship in the event of death or separation. It is very easy to deny a benefit if there are cultural differences in the interpretation of a relationship status.
- Update where you are in terms of your family assets and protections - Do you both have life cover that would protect your loved one’s income in the event of your death? Or are you covered with an income benefit to protect you if you can’t work anymore? How would such an event impact on your household finances? If your income is dependent on an ex-spouse’s maintenance payment you can take out life cover to make sure that the income will carry on in the event of the person’s death. Are you sure that your loved one is still paying the premiums on the policy that you assume is still in place?
- Swap credit scores once a year to check if there might be something to be worried about or that needs to be fixed. You don’t want to only realise that there is a problem when there is someone at your doorstep to take away your house.
- Compare company benefits to see if you are sufficiently covered for death and or disability benefits. Also, discuss if you are both saving for retirement through the company or not so that you know what is happening with your long term planning. Know when your loved one has cashed in a policy and for what purpose and how that affects your overall financial standing.
“For better or worse, make sure what is for love and what is for money.”