Even if you’ve been together in a stable relationship before marriage, getting hitched opens up a host of legal, tax and financial questions that couples overlook in the whirlwind of wedding planning. We have spoken with Jason Tan, a Financial Service Manager from Phillip Securities to give us some insights on financial planning for couples.
1) Update your will or CPF nomination.
“You don’t have to leave everything to me, but please don’t leave nothing to me.” Passing on without a will not only causes inconvenience and delay in claiming your estate, but it’s also subjected to Intestate Succession Act. For more information and understanding, you can refer to section seven of the Act. Also, unknown to many, be aware that marriage makes any previous nomination invalid.
2) Have a mortgage insurance for your new home.
“Please don’t feed our children and me with bricks and mortar.” A new love nest or home is what newly-weds will get when they tie the knot but to most of us, our property could be our greatest asset, and possibly our greatest liability as well. Having a mortgage insurance to take care of the outstanding loan will ensure that your family will still get to stay in the same place, even when you are not around.
3) Review your insurance coverage (life, disability, illness and hospitalisation)
“I have to take up a second job or a weekend job to pay for your medical bills and your treatment.” Previously, you may not need much or any coverage at all because you are single and possibly only your parents are your dependents. However, things definitely change now and it will be a heartache to be lying on the sick bed and seeing your spouse struggling to pay off your medical bills. Adequate coverage could replace income lost, eliminate debts and allowing surviving spouse to maintain their lifestyle. Do it because you choose to be responsible and you want to eliminate the burden on your spouse.
4) Work out a mutually acceptable way of managing expense.
“If you can spend $8,000 on a watch, why can’t I spend $5,000 on a handbag?” Individual perception of value is different. What is cheap to you could be expensive to others. It would be a good idea if you agree to discuss any expense over a certain amount. This will definitely avoid any unnecessary argument. If you splurge on an expensive handbag just solely because your spouse bought a new watch, it could do more damage (financially and emotionally) than good.
5) Have a common financial goal
“I want to go Europe while you want to go Japan for a vacation. Let’s go separately.” Having a common financial goal doesn’t just involve planning your holiday trip or what type of property to buy. Having a common goal, such as which university (local or overseas) should your soon-to-be born child attend or your retirement lifestyle and age, will enable you to have an objective to work towards together and this also fosters your relationship further.
1) Assume your new spouse will handle finance.
“I thought you would do it or manage it, not me.” We all have our strengths and weaknesses and one of you may be better in managing the finances than the other. It is important that both of you are aware of the decisions made and are equally involved in the process. Most importantly, learn to work as a team.
2) Hide or cover anything.
“Please don’t keep it a secret and in the end, give me a rude shock.” Be honest with your income, assets and debts. Most couple find this tough as they do not wish their spouse to know their little secret or they thought they could pay off their debts themselves. Remember, two is better than one and it is important to pay off any “high interest debt” as soon as possible. Failing to do so is Financial Infidelity.
3) Ignore the importance of Emergency Fund.
“We’re fine, we don’t have to worry about money.” It is quite common for both spouse to be gainfully employed and even to be drawing a high income. Gone are the days where an entire family can survive one a sole breadwinner. If one of you is jobless, either by choice or by force, it might cause a strain on the family’s financial situation.
4) Manage your bank account or finances separately.
“Your money is your money, my money is my money” Yes, we understand that you sacrifice your weekend soccer matches or your usual hang out out with your friends to earn that income. However, by coming together, you’ll be able to better handle family expenses. Some couples practice contributing a percentage of their income to a joint account and pay off any family expenses from this joint account, while some handle it otherwise by splitting the responsibilities.
5) Don’t start off without a plan.
“We overspent this month, let’s use our credit cards” It may be painful or tedious to work this out but it could possibly save your marriage. To start, list down all expenses and categorise them as household expense; personal expense; insurance premiums; savings; and also discretionary expense. By doing so, it will ensure that you do not over-spend and live within your means. Giving each other a little space in your own finances can go a long way.
Jason Tan Choon Seng
Certified Financial Planner (CFP) Practitioner, Chartered Financial Consultant (ChFC), Associate Estate Planner Practitioner (AEPP)
All Image Credits: Lightbox Weddings
As produced in Ideal Weddings Issue 2