Marriage & Money – All You Need to Know About Shared Finances
Money matters weigh heavily on most Singaporean’s minds. Yet, we are happy to ignore them until absolutely necessary. That’s an unhealthy way to approach your finances as an individual and it can be catastrophic to a marriage.
Whether you are about to get hitched and need a wedding loan, are a newlywed couple, or have been married for years, here are some shared finance tips to strengthen both your financial status and your relationship.
The First Rule
The first rule of shared finances is that you don’t lie about shared finances. That includes every variation of dishonesty from hiding debt generated by easy loans to exaggerating income to making secret purchases. Mutual honesty is the foundation upon which all successful financially-interdependent relationships are built.
Not every act of financial dishonesty in a relationship is based in malice, though. Sometimes, it arises because one spouse wants to ‘protect’ the other from the stress and discomfort of their debt or credit loan situation.
If you feel tempted to go down that route, remember that two heads are better than one at finding solutions. Adversity tends to bring people closer and the temporary discomfort of unpleasant discussions may strengthen your relationship in the long term.
Your Personalities Matter
Our life experiences with financial stability shape our saving and spending habits. Someone from a wealthy family may not necessarily understand the value of money nor appreciate the merits of scrimping to save.
On the other hand, a spouse who hails from an underprivileged background may fail to recognise the advantages of investing because they simply have never had the opportunity to invest.
Another clear divide is between spouses who like to be involved in every financial decision and those who are happy to leave it entirely in the hands of their partner. In financial matters, conscious involvement by both partners is important. The inherent advantage is that everyone in the loop knows where they stand individually and as a couple.
It is possible – even though difficult – to unlearn bad lifelong financial habits. We sometimes get defensive when our spouse points out our shortcomings. A good alternative is to consult a financial advisor for their external perspective. Their conclusions can feel less like an accusation and make it easier for each of you to accept suggestions and make personal changes.
Joint Account? Pros and Cons.
Of all the indicators of financial liquidity, the most accurate is your bank account balance. Every couple should have a plan for how to merge their accounts (if they wish) and manage expenditure through them.
This is especially important if one spouse earns significantly more than the other, and certainly the case when one is a stay-at-home parent. Here, the act of creating a joint account is symbolically meaningful. It demonstrates the desire to be on an equal footing regardless of earning capacity.
One of the greatest advantages of joint accounts is transparency. Both spouses are immediately informed of transactions (through notifications) and have access to all records. Moreover, a single, large account can be easier to manage than multiple small ones.
Remember, of course, that transparency can also become the root of conflict if you have dissimilar spending habits. The best approach is to always discuss unplanned purchases instead of making unilateral spending decisions on a whim.
There are two alternatives to joint accounts. The first is to maintain your independent balances and the second is to augment your personal accounts with a third, shared one. Naturally, agreeing on who contributes to what and in what percentage is an issue in itself. Openness and communication are the keys to finding a happy compromise.
The Bottom Line
Remember, there is no magical one-size-fits-all solution to finances, shared or individual. Even if you find a perfect way to manage your finances today, it may need to evolve as your relationship matures and your circumstances change.
Strategize together. Pay off debts as soon as possible, create an investment plan and set up an emergency fund. These actions and conversations will help you learn about each other and understand the fears and motivations that drive your financial choices. With that understanding comes the basis for a strong and lasting relationship.
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While many couples focus on direct money matters when they think ‘finance’, a robust well-rounded financial plan should also cater for unexpected changes such as the death of a spouse.
Spare some time to work out auxiliary issues like wills and insurance. This is particularly important if you have recently married or are about to soon. The odds are that you will want to make your spouse the beneficiary of the relevant policies.