By Tan Yi Lin
Marriage is the time when two people become one.
But does the same apply to their finances? How much of your money should remain yours and how much should you share with your other half once you are married? How can you avoid letting money issues become a source of unhappiness and a cause for arguments between husband and wife?
Mr Ong Khai Chien, Head of Distribution, from Global Millennium Financial Services advises, “The key to financial management for couples is to agree on a common philosophy in family money management.”
He adds, “The wedding is just an event whereas marriage is a long journey. Most couples plan and budget for their wedding but may not necessarily be financially prepared for marriage.” For family financial management to be a success, both husband and wife must have common priorities when it comes to managing money. To identify what these common priorities are, both sides must be prepared to be completely honest and openly share information on personal income, spending habits and financial goals with each other. “The little secret to such success lies with one word: Candor - or open sharing”, says Khai Chien, “This is what holds the plan together.”
There are a few factors to consider when planning how to manage finances as a couple.
1. Financial Planning
The phrase “a man is not a financial plan” has been said one too many times to newly-married females and young women aspiring to get married. Similarly for men, while you may no longer need to be the sole breadwinner in a modern marriage as compared to marriages in the past, you still need to execute care and responsibility in managing your finances to support your new family.
If you haven’t already done so, a good starting point would be to draw up a financial plan. While you can attempt this on your own, there are professional financial planners who can help you. If, prior to marriage, each or both of you already had in place a personal financial plan, you should review and adjust it to apply to your financial journey as a married couple, and not just as individuals.
What is financial planning?
The Financial Planning Association of Singapore (www.fpas.org.sg) describes financial planning as “the process of meeting your life goals through the proper management of your finances.” The financial planning process consists of specific steps to help a person objectively assess his financial health by examining his current financial status, identifying what he may need in the future, setting life goals and drawing up a workable strategy to realise these goals.
How do I start?
Khai Chien further explains, “Make a list of all the objectives to be financed, and discuss the importance and urgency of each before prioritizing them. As each objective comes with a price, put a price tag next to it, with inflation factored in.”
“Next, engage a financial planner to craft out a savings and investment strategy to help you achieve your objectives. The best financial blueprint is one that suits the couple’s current and desired lifestyle and will guide the couple in their spending and saving patterns. This alone will remove unnecessary disputes.”
Can’t I just purchase insurance or investment plans on my own?
Financial planning differs from the purchase of individual insurance or investment plans, which are usually offered by a particular insurance agent or bank. Financial planning takes into account the big picture and views each financial decision as part of a whole, with its short and long-term effects on your life goals. Besides savings and investments, the planner can also advise on taxes, insurance and retirement planning.
Eileen, 32, and her husband have been engaging the help of a professional financial planner since they were married in 2005. She says, “Before seeking professional help, my personal finances were rather disorganized as I was buying insurance policies from different insurance agents and had separately bought investment funds through a bank. I had no clear picture of my financial situation and outlook. After marriage, my husband and I decided to approach a financial planner to draw up a comprehensive and holistic long-term strategy for our family financial needs. This included building up joint savings, servicing debts for the house and car, enhancing our insurance coverage and growing our money through investments. Together with our consultant, we review and update the plan every two years to take into account changes in our income levels and short-term financial needs. To date, the plan still serves as our personal financial guide, which we consult every time we need to make a major financial decision. It is also very convenient to approach just one financial planner instead of different insurance agents or bank representatives whenever you need financial advice. ”
2. Other Considerations
As you can see, going through the financial planning process together and coming up with a financial blueprint for the family compels a couple to tackle both personal and joint financial matters at the onset before they become thorny issues later on in the marriage.
However, engaging a financial planner to guide you in your financial journey does not absolve a couple of all responsibilities when it comes to managing their finances. Couples should still take the initiative to discuss and handle simple financial matters such as:
a) Monthly cash flow arrangements
Agree between yourselves how household bills and other joint expenses should be paid. Some couples choose to open a joint bank account. Each person agrees to contribute a fixed amount from their monthly salary towards this joint account to pay for the bills. Other couples prefer to keep their money in separate accounts and instead, agree on which bills each person should pay. Besides expenses, couples should also agree on how much to channel towards savings and/or investments every month and either deposit this amount into the joint account or set it aside in their respective personal accounts.
b) Exercising responsibility, discipline and self-control
While there is no need to seek permission for or declare every little purchase to your spouse, you should be upfront about your spending habits and clear off any personal debt on time (e.g. credit card bills). Consult each other before big financial commitments, be it for personal use or for the home. Agreeing beforehand what each other is “allowed” to spend on him/herself will also help avoid arguments down the road. For example, if both agree that he can continue buying comics on a weekly basis and she can treat herself to a monthly facial, no one can nag at the other about “always spending money” or spending too much on “unimportant things”.
c) Educate yourself
There are many Government agencies and learning institutions that organize talks and seminars on various aspects of personal financial management. For example, the Housing Development Board (HDB) offers talks on flat ownership and the Central Provident Fund Board (CPFB) holds public education events on estate and financial planning. There is also a host of useful information readily available online, such as the MoneySENSE consumer guides (www.moneysense.gov.sg) and IM$avvy (www.cpf.gov.sg/imsavvy/default.asp), a personal financial planning educational website run by the CPFB.
Start Planning Early
Marriage is a lifelong commitment and so are the financial obligations that come with it. Khai Jian advises couples to think ahead and plan early how you want to manage your finances, so as to ensure that both you – and your marriage – are in good financial health, now and in the future. “What young couples discover and learn about their current financial habits and their consequences on their future financial situation will have a deep and lasting impact on the way that they handle money today.”
Mr Ong Khai Chien is the Head of Distribution from Global Millennium Financial Services