Money is the root of all evil.
It’s a phrase thrown around by grandmothers whenever an apt situation arises. So how does one combat that notion when they find themselves in a relationship?
Well, Vicky Theron, co-head of Institutional Administration, suggests that there are ways and means of having a constructive relationship and working together for the best way to make it work.
Speaking to MoneyWeb, Vicky laid down the easiest ways to get around money issues in relationships.
Basically? It’s all about having a conversation.
[Yup. Cue another few of those age-old pieces of advice.]
First off, before couples put their money together, there are a few important issues they should consider:
- Does your partner have existing debt and/or a high-risk financial history? If so, it may be better to keep your money and investments separately.
- What happens if your partner incurs debt during the marriage/relationship? Who will pay and how will this affect your couple’s investment plan?
- Are you going to contribute to your investment strategy 50/50, or will you each contribute according to what you earn? And if you do choose to pay according to what you each earn, will you split the end investment equally?
- What will happen to your joint investments if you split up before it’s time to cash out?
Then, you need to set a goal, suggests Vicky:
One of the biggest investment mistakes couples make is not setting clear goals. This is crucially important to manage the expectations of both partners. If, for example, one partner wants to spend retirement travelling and living large and the other doesn’t, then that’s a problem.
My two top financial tips for couples planning their retirement together:
- Review your investment strategy every year or every time something important changes, like having a child or changing careers
- Always visit your financial advisor together
Also, keeping money secrets are not the greatest life choice (just like keeping other kinds of secrets isn’t great either). If you have a gambling problem, or like to overspend, that’s just not going to get either of you anywhere.
You need to have a conversation and agree on boundaries.
Also, not saving enough for retirement is just not good enough:
- Couples often forget that they will be taxed on their retirement investment(s) and so they don’t include this deduction in their calculations.
- People tend to underestimate the medical cover and care they may need as they age. Remember that medical cover gets more expensive as you get older, so factor this in.
- Couples don’t give enough forethought to how they will adapt from an active to a passive income. The best way to adapt is to make sure you have as little debt as possible when you retire, so that your set monthly income is not eaten up by debit orders. So no new cars just before you retire!
- Up to 94% of South Africans do not save enough to retire on, according to a 2016 World Bank report. Not counting the millions of people living hand-to-mouth who really can’t afford to save, many South Africans are living beyond their means and think they can’t save another cent more. But if you look at your life with a microscope there are definitely things you can do without so you can save more for retirement. Also, be strict about saving a good portion of extra income, like bonuses and tax rebates. Putting this into your investments as lump sums goes a long way.
But the most upsetting ‘failing to plan, is planning to fail’ scenario is forgetting about emergencies:
Couples often do not plan for the unexpected, but what happens if one of you gets retrenched or is not able to work for some time due to illness – how will you keep up your investment payments? It’s important to set aside emergency funds for these unwelcome surprises, and if you don’t use it, what a bonus!
And just remember that while you may not be in a relationship now, the younger you begin to manage your finances the cheaper it will be to save more in the end.
If you’re thinking of your significant other right now and don’t want to lose them (adorable), why not take them on the most adult Valentine’s date ever and book a consultation with Consequence.
A team of financial advisors, they are on point when it comes to managing your wealth in terms of your goals (check), retirement (check), and emergency funds (check).
All that will be up to you is the communication side of things.
[source:moneyweb]
