23 Jan Getting married: tying the financial knot, too
Between ordering champagne and debating the merits of phyllo vs. puff pastry canapés, it’s easy to forget that marriage also involves long-term financial implications. Here are some
things to consider before the big day arrives.
In community of property or not?
In South Africa, you are married in community of property by default. So, your assets and liabilities become 50% owned by your spouse and vice versa.
The alternative is to put in place an antenuptial contract 6 weeks before the wedding day. The options are:
1. Without accrual – all your assets (whether brought into or accumulated during the marriage) remain your own, or
2. With accrual – existing assets at the time of marriage remain your own, but all assets accrued during the marriage are shared equally by the spouses.
Clearly, this has tax and estate-planning consequences, which you should discuss in advance with your financial planner.
Setting joint financial goals
Finances are cited as the number 1 cause of stress in relationships and the third largest cause of divorce. Knowing each other’s current financial situation and money mindset is a good place to start, and then some big picture planning is in order.
Will you use separate bank accounts or manage your finances from one? Where will you live? Do you want children together? Where do you see yourself in 5-, 10- and 20-years’ time? At what age would you like to retire?
Setting retirement goals together increases your chances of achieving long-term financial security together.
Although one of you may do more of the nitty-gritty, it’s important that you are both aware and fully informed about your financial situation, especially your retirement savings strategies.
Budgeting is critical to achieving long-term financial independence. Without the feedback of a monthly eye on the rands and cents, you are unlikely to stick to your financial plans. Regular check-ins and open, honest conversations about spending help keep your finances on an even keel.
When buying a home, you are usually required to have life cover as surety for the loan. You’re not obliged to accept the standard life cover offered by the bank, so shop around for the right deal. Similarly, once you start a family it’s a good idea to consider additional disability cover to provide an income for your family if you become unable to work. Risk cover applications involve medical underwriting and the younger you are, the less chance there is of exclusion or loading due to adverse health.