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Updating your financial plan after marriage

Practical steps couples can take to create structure and fairness when it comes to marital finances.

The first year of marriage is often the hardest as couples learn to merge two lives into one, make compromises, and bring their financial lives together in a workable manner. Merging finances, in whatever shape and form you choose to do so, can be somewhat emotive – especially where one spouse has financial commitments to an ex-spouse or children from a previous relationship or pre-existing debt. Let’s unpack some practical steps couples can take to create structure and fairness when it comes to marital finances:

Create a filing system

You will be required to provide a copy of your marriage certificate and your ID documents for almost all large transactions throughout your life so set up a filing system that works for the two of you and which is easily accessible. Make copies of your antenuptial contract (if you’re married out of community), marriage certificate, birth certificates, passports and ID documents. If you’ve been married before, keep copies of your divorce order and settlement agreement on file. Ideally, give each other access to your passwords, PIN numbers and login credentials as these will come in handy in the event of an emergency. If you intend changing your surname following your marriage, be sure to register the change with home affairs. Using your married surname without formally updating your surname with home affairs can cause endless problems when transacting or travelling.

Plan your accounts

Determine how you intend operating your bank accounts, bearing in mind that it is always advisable for each spouse to have a bank account in their own name. Not having a bank account can make it difficult to apply for credit at a later stage and can leave you financially exposed if tragedy strikes. Having revised your budget, determine who is responsible for what payments and then structure your debit orders accordingly, ensuring that nothing falls through the cracks – particularly credit card and loan repayments.

Determine roles and responsibilities

It’s never a good idea to let one spouse assume all financial responsibilities in a relationship. Not only can this give rise to power struggles within the marriage, but it can leave one spouse in a financially vulnerable position should the other spouse fall ill or pass away. While you may not be financially inclined and would prefer your spouse to take control, consider distributing the financial responsibilities between the two of you in a manner that is fair and equitable. For instance, if one spouse is responsible for day-to-day expenditure, let the other spouse take responsibility for paying the domestic worker or checking bank statements. Perhaps let one spouse take charge of the short-term insurance and medical aid, while the other attends to budgeting and recording expenditure. Find a method that works for both of you and which does not result in one partner feeling excluded from the process.

Review your life cover

With marriage comes a duty of support and now is a good time to review your life cover to ensure that you are both provided for in the event of one spouse dying. If you are both employed, keep in mind that you are likely to have group life cover in place, so be sure to take this into account when determining your life cover needs. Give careful thought as to what each of you would require financially if the other were to pass away. Would you want to be able to settle the home loan? Would you like to provide your spouse with a capital lump sum to purchase a home? Would you want to provide them with an income for a period of time following your death?

Update your beneficiary nominations

When updating your life cover, be sure to amend your beneficiary nominations to ensure that the proceeds of any policies are paid to the intended beneficiary. If you have bond cover in place, ensure that your estate is the nominated beneficiary so that the executor can use the proceeds to pay off the home loan as per your intentions. Where you have nominated your spouse as a beneficiary on a policy, the proceeds of that policy will fall outside of your estate and will be paid directly to them in the event of your death. Remember to also update the beneficiary nominations on your retirement funds, although keep in mind that your beneficiary nomination will only be used as a guideline for the fund trustees. While you may nominate your spouse as the beneficiary on your retirement fund, the trustees will take into account anyone who is financially dependent on you at the time of your death, and this could include an ex-spouse, children from a previous relationship, or even your elderly parents.

Merge your medical aid and gap cover

If you are each on your own medical aid, you may want to consider joining onto one plan. This means that one spouse would become an adult dependant on the principal member’s medical aid. While there is not likely to be a huge cost difference, being on the same medical aid and gap cover policy makes sense from an administrative perspective. Ideally, seek advice from an experienced healthcare advisor to choose which medical aid is suitable for your needs as a couple.

Update your wills

One of the most important undertakings after getting married is to update your respective wills. Bear in mind that the matrimonial property regime you have chosen will impact on your estate planning, and your will should ideally be drafted by an expert. For instance, if you are married in community of property, only 50% of the net joint estate is yours to bequeath. If you’re married with the accrual system and intend bequeathing assets to a third party, keep in mind that your spouse will have a claim against your estate for their share of the accrual.

Review your short-term insurance

Now is also a good time to completely review your short-term insurance cover, especially if you have recently combined the contents of two homes into one. You may also have been given valuable wedding gifts that need to be insured, together with your wedding rings.

Have those difficult conversations

Don’t hesitate to have those difficult financial conversations early on in your marriage. Is there a financially demanding ex-spouse or child that is causing tension in your relationship? What happens if you need to provide financial assistance to your elderly parents? What is your attitude towards lending money to friends or family? What type of education do you envisage for your children? What is an acceptable amount of money to spend on hobbies and interests? Should one spouse stop working when you have children? Don’t wait until the circumstances arise before finding out that your views are widely disparate. Rather have these conversations upfront so that you are on the same page if and when the time comes.

Create a shared vision of retirement

Working together towards a shared vision of retirement is so much easier than going it alone. Start talking now about what financial freedom means to you, when you want to achieve it by, what your dream retirement would look like and to what extent you are willing to make sacrifices in the present in order to achieve them. You may find that you have completely opposing views on where and how you want to spend your retirement, so start unpacking your thoughts and ideas early on so that you can find common ground along the way.

Consider saving one income

Many couples attest to this being the best piece of financial advice they ever received. If both of you are earning well, consider living off one spouse’s income and saving the rest. This works particularly well if you don’t yet have children or any other financial dependants and it gives you a great head-start to your marriage. If and when you do have children, these funds can provide you with options in terms of staying at home to raise children for a few years.

Settle debt

If you have debt, particularly high-interest, unsecured debt, make it a priority to settle it as soon as possible. Remember, if you are married in community of property, any debt that either of you incurred before your marriage forms part of the joint estate, and you are both responsible for repaying it. If you’ve taken out a loan to pay for the wedding, do whatever it takes to pay off this debt as quickly as you can. Debt can cause unnecessary worry and tension in a relationship, so try to avoid it as much as possible.

Prepare a joint budget

Having reviewed your life cover, medical aid, gap cover, short-term insurance, and set up a home together, take time to develop a joint household budget so that you have a clear picture of how your money is being allocated every month. You may want to consider agreeing on a spending limit, especially in the early stages of your marriage when boundaries may be somewhat unclear. For instance, you could agree that any expenditure above R1 000 should be discussed jointly, whereas anything below that value is at each of your discretion. Talk about your respective hobbies, interests, memberships and charitable giving, and find agreement on what is acceptable to both of you.

Be a team

Ideally, seek the advice of an independent advisor who can prepare a joint financial plan for the two of you. Attack your financial planning as a team working towards a common goal.

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