Financial Commandments for when you get Hitched (and Ditched)
Money matters. In most relationships, the issue of money and how we manage our finances, are likely to come up at some point. In South Africa, four in ten marriages don’t last until their tenth wedding anniversary. And, unsurprisingly, money issues are one of the top three reasons why marriages fail. Moreover, South Africa’s diverse demographic adds another potential dimension as couples may come from very different backgrounds with varied approaches to financial management. Whatever the reason for their money mindset differences, it’s crucial that couples tackle the taboo topic of all things finances upfront. And importantly, each party needs to protect his or her own interests, while building – or ending – a shared life together.
Lee Hancox, Head of Channel and Segment marketing at Sanlam, says financial self-introspection is probably the best thing anyone can do before making a big life decision such as getting married or divorced. “I’ve seen couples enter a marriage financially blind. People who get remarried or have a long financial history as a single adult will either have a good or bad financial track-record and this can have implications for the union.”
Here, Hancox gives guidance on getting to grips with finances before getting hitched or un-hitched:
BEFORE YOU SAY I DO:
Get frank about finances: It may not be easy. But now’s the time to really open up and air any ‘dirty laundry’ you might have – especially debt. Get your financial house in order first, then spend some time taking your partner through it. Consider family responsibilities as well. Your partner needs to know if you have any dependents or other financial commitments. Frame frank conversations like this as opportunities to align and get excited about setting future goals together.
Know your partner’s money personality: As part of your financial discussion, get to know your partner’s money personality more. Are they a spender or a saver? And more importantly, why? What’s informed their attitude? Delve back into each other’s childhoods. So much of how we view money starts there.
Get going on goals: Have a chat about some of the big things you want to achieve, individually or as a team. Do you want to buy a house? Have kids? Go on holidays? Study more? Set up a shared trust to give back to a chosen charity? How do you intend to spend your retirement? You might not know the answers yet but start having the conversations. A financial adviser can help you set goals and create a plan to achieve them.
Ask the uncomfortable questions: You need to get the legal side sorted. So, start thinking about whether you want to get married in or out of community of property, with or without accrual. Antenuptial agreements are essential, but can cause hurt, especially if you aren’t on the same page as your partner. Power dynamics may also come into play, if one person has significantly more assets and income than the other. Approach this sensitively and find a lawyer you trust to do the contract. You might want to create a joint will – or revise your individual ones – at the same time.
Discuss power plays: It can be very difficult when one person earns more than the other. Be open about this from the onset of your engagement. It can help to establish a set of values you share. Then apply these to money. For example, you both believe in equality and respect. So, apply these values to your finances, and treat one another as equal partners, irrespective of income.
Unpack the practicalities: Have you both got a retirement plan in place? Does it make sense to merge to one medical aid provider? Have you got a household budget? Have you discussed any ‘money rules’ you both want to abide by? Are you going to share an account? Have regular money dates to chat about your finances and ensure you’re still on the same page.
Hancox adds, “Have your money talks in neutral environments, at times when you’re both relaxed. Don’t ambush each other. Rather, set a time for the talk and create an ‘agenda’ in the week leading up to it. Make it a shared Google doc you can both add to. Don’t discuss any of the points on the agenda until your meeting. Then create a safe space to systematically work through what’s on each of your minds.”
BEFORE YOU SAY I DON’T:
When you know you want to get a divorce, Hancox says it’s best to stop, breathe and take it slow, if you can, “I’ve said it before, but avoid the dangers of a ‘quickie divorce’. It’s perfectly natural to want to get the unpleasantness over, but choosing a cheap, quick option can lead to extremely costly mistakes that could take years to correct. I strongly urge people to get the right financial and legal advice upfront, especially when there are children involved. It’s also often the case that one partner is savvier, leading to a divorce being drafted to the advantage of one and detriment of the other.”
Getting the right people on your team: A financial adviser and lawyer can help you understand the bigger picture and intricacies involved, to ensure you get the fairest possible settlement.
Consider your kids: This is obviously one of the biggest factors. Think about things like whether maintenance payments increase with inflation and whether the settlement makes provision for your child’s tertiary education. Remember, maintenance and visitation rights are treated separately, so your ex could refuse to pay and still be entitled to see his or her child.
Change your will: You have three months to name a new beneficiary or your ex will still inherit. Additionally, change the beneficiaries on your life insurance plans and relook at your estate plan with your lawyer and financial adviser.
Check what you’ve signed surety for with your ex: Unconditional surety can still be upheld after a divorce, meaning you might be liable for loans down the line.