Money Management for Couples

This is a delicate subject to advise on as every marriage is unique. And I don’t consider myself Dr Phil so I will refrain from advising on how couples should go about managing their finances together.

If a couple is getting along just fine and if money isn't something they fight about often, then that’s great! On the other hand, if finances are causing problems between two partners, I would suggest they contact their trusted and qualified financial adviser or alternatively, feel free to contact myself. An outside perspective from a financially astute professional can most definitely offer couples some guidance in terms of money management within the household.

In my experience, I have often found that the root of the problem isn't as much the lack of money as it is a lack of communication, a lack of sound financial guidance and most importantly a difference in spending personalities. One partner is probably a saver while the other is a spender. Or because one partner is a big spender, the other partner is forced to become the saver. This difference is what usually causes problems, at least from what I have observed.

Alright, that’s my short “Dr Phil” assessment.

That aside, what I would like to share with you today is a few general points that married couples or couples who are about to get married, should keep in mind. This applies to all couples, regardless of personal circumstances. Simply put, it is to help couples ensure sound financial planning for the benefit of both partners.

Whether an individual is married or is about to get married, it is worthwhile to be aware of the different marital regimes. Marriage is a contract in itself. If couples do not draw up an ante-nuptial contract, then by default, the couple will be married in community of property and as a result, all past and future assets and liabilities are equally shared.

My suggestion: Enter into an ‘ante-nuptial contract (ANC) with accrual’. The reason is not to protect the spouses from each other. When couples are married in community of property, they are treated as one entity. So if one partner decides to get involved in business and goes insolvent, the other partner is also liable. Or if one partner gets blacklisted, the other partner will be blacklisted as well. When couples are married with an ANC, they are treated as separate entities and assets and liabilities can belong to one partner only, which financially speaking, is more prudent. The ‘with accrual’ part is optional but I recommend it. It simply means that all assets and liabilities accumulated from date of marriage will be split equally on death or divorce, which I think is fair.

Often, I will have a married client decide by himself how much life cover he requires or the client may ask me how much cover I think they should take out. For couples, the primary purpose of life cover in most cases is to provide financial security for the surviving spouse and children. If I am considering life cover for a wife, I would discuss with the husband what his financial requirements would be should something happen to his wife. Things to consider would be the loss of his wife’s income as well as additional costs of managing the household and children as a single parent. So depending on the information that the husband provides, I would then calculate the amount of life cover that should be taken out on the wife’s life.

Essentially, the message I am trying to convey is that couples, especially those with young children, need to discuss the household finances with each other and not be making financial decisions on their own. And through proper financial planning, should prepare adequately for the what-ifs in life.

In my marriage, I manage all the finances and my wife is somewhat in the dark when it comes to the household finances. And from what I have observed, this dynamic exists with many couples – the one partner manages the finances while the other partner doesn't really know what is going on. In the event of divorce or death of a spouse, a partner who has been in the dark regarding finances struggles tremendously to get their finances in order again. I have recently observed this first hand and hence the reason for writing about it.

Partners who manage the household finances should make an effort to discuss with their spouse regarding all the policies, investments, savings and accounts that they both have. They should provide their spouse with documents if necessary as well as the details of the relevant financial adviser. Ultimately, the goal is to ensure that the spouse is not in the dark.

Retirement Annuities (RAs) are wonderful investments. If you have only just started following my page, read my previous articles to understand how and why I consider RAs as one of the best ways to grow one’s wealth. In a nutshell though, RAs offer the individual the benefit of saving tax. The amount of tax that an individual can save is dependent on the tax bracket that the individual falls into. The more an individual earns, the higher the tax bracket they fall into and the more they can save on tax.

So how can married couples maximize on tax savings? The partner who earns the higher income should be making most of the RA contributions. Simple. The one important point to bear in mind when implementing this strategy is the marital regime. The partner who earns the lower income can lose out in the event of a divorce, therefore this strategy should only be implemented if the marital regime is ‘in community of property’ or ‘ANC with accrual’. Of course, there are other factors to consider as well but generally speaking, married couples can benefit greatly from tax savings using this strategy.

Questions? Let's chat.