MAKE LOVE LAST WITH FINANCIAL PLANNING |
Find out how your partner’s assets and debts may affect your financial well-being
IN MANY CULTURES, it is considered bad manners to discuss money. If you speak to your partner about money, the perception is that you are a gold digger. However, if you’re marrying someone, you need to know not only what assets he or she has, but also what debt he or she owes.
There is “good debt” and “bad debt” – long-term debt such as a home loan is preferable to high-interest short-term debt such as store cards.
Your future spouse’s financial standing may determine the marriage regime you choose – for example, in community of property, or an ante-nuptial contract with or without accrual. Having a contract doesn’t mean you assume you will divorce; it is part of sound financial planning.
People in a relationship should do the following:
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Discuss your current financial situation and your cash flow. Were there any unplanned expenses recently? Will any big purchases be necessary in the future? How will these be paid for? How have your long-terms plans changed, or are you still on track? These plans not only refer to day-today items, but also planning for treats and holidays and, possibly, a home and children.
Set up a reserve fund.
Financial planning isn’t only about how to pay accounts each month. Make sure you have a plan to pay debt, as well as to set up a financial safety net if something happens to either of you. What if one of you gets sick or loses their job? How will that affect your combined budget?
Determine what’s yours, mine and ours.
What would be the impact of holding assets in a different person’s name? For example, what happens if your spouse’s business goes under and you are married in community of property? You will be liable for the loss, even if you didn’t incur it. Should you buy a property in one person’s name to protect an asset in the event of a business going under and if you are married with an ante-nuptial contract? What happens if all your assets are held in the other person’s name and you split up? Are you entitled to some of those assets?
You don’t have to marry someone if you are both comfortable with the status quo, but what happens if you split up or one person dies? If you are living together, get a partnership agreement to set out what happens to the assets during good times and in bad. You might not get any of the estate if your partner doesn’t have a will that leaves assets to you. If you are married traditionally, make sure you have registered the marriage at the court so that there can’t be confusion about your position in the relationship in the event of death or separation. It is easy to deny a benefit if there are cultural differences over the interpretation of the status of a relationship.
Update where you are in 5 terms of your family assets and protections.
Do you both have life cover that would protect your loved one’s income in the event of your death? Or are you covered with an income benefit to protect you if you can’t work anymore? How would such an event impact on your household finances? If your income depends on an ex-spouse’s maintenance payment, you can take out life cover to make sure that the income will carry on in the event of the person’s death. Are you sure that your loved one is continuing to pay the premiums on the policy that you assume is still in place?
Swop credit scores once a 6 year to check whether there might be something to be worried
You don’t want to realise that there is a problem only when there is someone on your doorstep who wants to take away your house.
Compare company benefits 7 to see whether you are sufficiently covered for death and disability.
Also, discuss whether you are both saving for retirement through a company retirement fund so that you know what is happening with your long-term planning. Know when your loved one has cashed in a policy and why, and how that affects your overall financial standing.
Rita Cool is a Certified Financial Planner at Alexander Forbes Financial Planning Consultants.