Get­ting in­ti­mate with your part­ner’s fi­nances

Finweek English Edition - - INSIDE - BY BUHLE ND­WENI ed­i­to­rial@finweek.co. za

It is not un­com­mon for cou­ples who de­cide to live to­gether to have a ro­man­tic idea about how their f i nances will mirac­u­lously fi x them­selves now that they have some­one to share half of their monthly ex­penses with. But do not be fooled, the rosy pic­ture may soon sour if you don’t have a con­ver­sa­tion about fi­nances be­fore the move.

Fi­nan­cial ed­u­ca­tion con­sul­tant Iona Min­ton says that one of the most i mpor­tant t ips for li v i ng to­gether be­fore mar­riage is to get the awk­ward c on­ver­sat i on out of the way by dis­cussing whether there is likely to be a mar­riage down the line or not.

“Don’t move in un­less both of you are se­ri­ous about living to­gether. Living to­gether should not be seen as a trial run for mar­riage. Look at it as a prepa­ra­tion for mar­riage be­cause both of you are al­ready pre­pared to com­mit to each other,” she says.

GET IN­TI­MATE WITH FI­NANCES

Head of FNB con­sumer ed­u­ca­tion Eu­nice Sibiya says a l ack of open com­mu­ni­ca­tion about each other’s cur­rent f inan­cial sta­tus may con­trib­ute to cou­ples strug­gling to make ends meet each month.

Whether you are new to hav­ing moved in to­gether or you have lived to­gether for quite some­time – it all starts with a de­lib­er­ate seated con­ver­sa­tion, she says.

“With the de­ci­sion to move in to­gether comes a whole lot of re­spon­si­bil­i­ties a nd one of t hem i s bei ng tr a nspa r ent a bout your f i nan­cial po­si­tion as you are now du­ally re­spon­si­ble for the up­keep of a house­hold,” says Sibiya. “While you don’t have to share your bank state­ments with each other, if you so pre­fer, share your bud­gets so that your part­ner is aware of what you are able to con­trib­ute and how much room you have for un­fore­seen ex­penses and emer­gen­cies.”

Min­ton says you only re­ally get to know who your part­ner is af­ter get­ting in­ti­mate with their f inances.

“It is only when you live with some­one and start shar­ing the f inan­cial and house­hold re­spon­si­bil­i­ties that you get a true ref lec­tion of their f inan­cial and emo­tional in­tel­li­gence. What if you have main­tained an im­pec­ca­ble credit record, re­sort­ing to pilchards and toast to make sure you have enough to pay your cloth­ing ac­counts, but you re­alise that your ‘soon-to-be’ house­mate is not nearly as care­ful as you? They need to come clean about their debt lev­els,” she says.

PAY­ING RENT OR CON­TRIBUT­ING TO THE BOND COSTS

If you, as a cou­ple, are still look­ing for a place to rent or buy to­gether you need to en­sure each part­ner can af­ford to meet their share of the rent or a monthly bond in­stal­ment. Min­ton says if your part­ner al­ready owns the home that you move into, the rent you pay should be ac­crued to you if you de­cide to leave. “Many in­di­vid­u­als fall into the trap of pay­ing for the gro­ceries, phone bill and elec­tric­ity while their part­ner pays off the bond. If the house be­longs to the part­ner, they get the ben­e­fit of hav­ing their bond paid off, while the other has noth­ing to show for their ex­pen­di­ture. A way of safe­guard­ing your­self is to work out how much you may be sav­ing by l i ving with your part­ner and in­vest­ing it. There are economies of scale when shar­ing ac­com­mo­da­tion, so take ad­van­tage of it to save and grow your net worth.”

TAKE RE­SPON­SI­BIL­ITY FOR YOUR OWN DEBT

Sibiya says co­hab­it­ing part­ners should re­mem­ber to stick to the de­ci­sions they have made re­gard­ing the man­age­ment of their f inances.

“You need to leave room for a month where one part­ner might need an­other part­ner’s help, but too much f lex­i­bil­ity and r ule bend­ing in your f inan­cial ground r ules can lead to f i nan­cial prob­lems such as over-in­debt­ed­ness, in­abil­ity to stick to in­di­vid­ual bud­gets and, most stren­u­ous on a re­la­tion­ship, money f ights.”

She says when it comes to debt, it is ad­vis­able that each party man­ages their debt separately and con­tin­ues to re­pay their monthly min­i­mum in­stal­ments in­di­vid­u­ally. But what hap­pens if those are part of your shared bills as a cou­ple with an in­te­grated life?

Min­ton says it is im­por­tant to share the f inan­cial re­spon­si­bil­ity. She says pay­ing bills should not be left en­tirely to one part­ner.

“It may be eas­ier to trans­fer a lump sum ev­ery month for your share, but what if your part­ner has a shop­ping ad­dic­tion and fails to pay im­por­tant bills? You could be clean­ing up the mess. Pay your share of t he bi ll s per­son­ally and keep copies of t he re­ceipts. If you pay on­line then for­ward the con­fir­ma­tions to each other.”

MAKE PRO­VI­SION FOR ILL­NESS/ EMER­GEN­CIES

Some­times l ife hap­pens and il l ness or other un­fore­seen oc­cur­rences hit the one part­ner, or both at the same time. The co­hab­it­ing cou­ple should also look at im­por­tant risk cover like med­i­cal aid, life in­sur­ance and in­come pro­tec­tion, so the bur­den is not placed on the healthy part­ner in case one of you gets il l, says Min­ton. “Med­i­cal ex­penses can wipe out sav­ings and plunge one into debt. If you are buy­ing a home to­gether l i fe in­sur­ance will en­sure that the other per­son gets the house and will not have to move due to af­ford­abil­ity is­sues.”

“WHAT IF YOU HAVE MAIN­TAINED AN IM­PEC­CA­BLE CREDIT RECORD, RE­SORT­ING TO PILCHARDS AND TOAST TO MAKE SURE YOU HAVE ENOUGH TO PAY YOUR CLOTH­ING AC­COUNTS, BUT YOU RE­ALISE THAT YOUR ‘SOON-TO-BE’ HOUSE­MATE IS NOT NEARLY AS CARE­FUL AS YOU?”

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