How marriage affects your pocket
JOHANNESBURG - The tinsel has come down and made way for the red and white month of love. According to The Knot 2015 Real Weddings study, a staggering 38% of couples get engaged between the months of November and February; making it the true “proposal season.”
With romance in the air, possible pressure from partners or getting swept up by the Valentine’s Day spirit, a lot of people are planning to get down on one knee and ask their lovers for forever.
“In the past, marriage was used to acquire land, create alliances or to keep the wealth and resources within the family. The notion of love in marriage was only introduced around the 18th century. By historical standards, love in marriage is relatively a new thing”.
Today, when we look at finances in marriage it can become complex. It’s not only about the wedding but about the social roles we take on that can sometimes play out through couples finances, which can add additional strain. Says Tasnim Alli, Anthropologist at Metropolitan
From a financial perspective, societal pressures mean that people spend a lot of money on engagement rings, lavish proposals, and sometimes lobola; often going into debt to create these fairy tale moments.
This begs the question, is it cheaper to stay single or to tie the knot? There are a few financial factors to consider before making the step towards marriage; namely: Insurance, living expenses, children, taxes, retirement and debt. This mostly applies to couples who both have a steady income. So, who has it better? Single or married people?
“In the case of car insurance, the savings impact is greatest for young people in their twenties if they tie the knot. If you are in your thirties, you are less likely to receive a decrease in your premiums,” explains Alli.
In terms of home insurance, some insurers use marital status as a factor in determining your rate. Ensure that you compare multiple quotes and ask what your benefits are as a married couple.
Married couples are more likely to take care of each other when ill, thus long-term care insurers are more likely to give big discounts to couples who register on the same plan over a single person.
Medical aid is another big saver when it comes to joining a scheme as a married couple. If one or both parties is employed by a company that offers health insurance benefits, it is worth studying the plans and gauging what is the best plan for both parties.
Day to day living
Living expenses such as bond repayments, rent and food will be cheaper if the couple chooses to both contribute to the bills. In the case where one spouse is unemployed or making a lot less income than their partner, the other party will have to take care of themselves and a second person which may cause additional financial strain as opposed to catering for one person as a single.
If both parties have a steady income, rearing children will be far cheaper than it would be for a single person. According to National Debt Advisors, raising a child in South Africa costs around R90 000 a year. A hefty price for one person to take on solo.
If you are wed before the end of your tax season, you must indicate that you are married on your tax return. Although individuals are required to file their returns separately, SARS does treat certain incomes differently according to marital status. Tax laws generally favour married over unmarried couples.
According to SARS, “Taxpayers who are married in community of property are taxed on half of their own interest, dividend, rental income and capital gain and half of their spouses’ interest, dividend, rental income and capital gain, no matter in whose name the asset is registered (except for assets excluded from the joint estate). All other taxable income is taxed only in the hands of the spouse who receives that income.”
And if you are married out of community of property, you can also “enjoy the double exemption but the difference is that the spouse who earned the interest remains taxable on that interest. This means that the benefit of a double exemption would be lost where only one spouse receives interest income.”
Another option for a couple that doesn’t want to get married, but want recognition as a spouse in terms of the Income Tax Act and Estate Duty Act is to apply for a civil union. A civil union can also be used for same-sex couples who want the same legal rights as spouses under the Marriage Act.
“Using the above info, ensure that you fully understand the financial implications of getting married before you make this decision – divorce is also rather costly for both parties,” concludes Alli.