What money matters should you discuss before marriage?

Marriage is an important life event that many young couples look forward to. However, there were 7,522 Singapore couples who divorced in 2015 (Channel News Asia, 13 July 2016). This is an increase of 2.9% from 2014 and it seems that the divorce rate trend in Singapore is climbing.According to a recent study done by the Ministry of Social and Family Development (MSF), money is the main cause of divorce. Money can be a sensitive topic in an Asian society. Hence, most couples shy away from discussing money matters before marriage. They take it for granted and assume that their other half will take care of money matters on their own. However, given that differences over money matters contribute to the reason for divorce, couples should discuss these important financial matters before marriage:


1. Financial Situation & Obligations

Couples should understand each other’s current financial situation and obligations before marriage. If one partner has heavy financial obligations or liabilities, he/she may not be able to contribute as much as the other. The other partner must then be prepared to accept this and be willing to shoulder more responsibilities.


2. Goals

Having understood each other’s financial situation and obligations, a couple should discuss their long-term goals. It’s important to decide on the lifestyle that both want to lead, the kind of property to live in and so on. On family planning, a couple needs to agree on the number of children they want to have, the type of education for their children, parenting style etc. For retirement planning, they should discuss when they would like to retire, the kind of retirement lifestyle that they envisage and steps needed to reach that stage.

As most couples have limited financial resources, it would not be financially viable to achieve all goals. Hence, goals should be rationalised and prioritised.


3. Money Management

To fund the achievable goals, couples need a robust financial plan. This requires a good understanding of each other’s current income and expenses. To avoid planning based on unrealistic expectations, it is prudent to project a lower income growth rate. In order to save sufficient funds for their goals, the couple should plan early and manage their spending.


4. Buying a House

Marriage is the start of a new life together. Couples will be excited about the purchase of their new home. However, it’s important to plan your budget for your new home and find out how much you can afford. You should also check how much of your CPF savings can be used for the purchase and how much cash you have to fork out. By planning ahead, you may even consider using cash instead of CPF. When you do so, your CPF savings can grow over time with the power of compound interest such that you can have more CPF savings for retirement.


5. Investing

Depending solely on your savings may not be sufficient to achieve all your goals. Hence, the couple can consider investing their savings to generate a higher rate of return. The couple needs to agree on the investing approach – the acceptable risk level and key parameters such as asset types, rate of return, tenure of investment etc. It is important to understand that investing entails risk and there may be situations where the investment does not turn out as expected. In such a situation, it is important that the couple comes to terms with the loss and avoid actions that could sour their relationship e.g. blaming each other. For couples who are more risk averse, they can also adopt ways to make the most of their CPF savings. One method involves the transferring of your Ordinary Account savings to your Special Account so as to earn a higher interest rate. If you happen to have spare cash, you may also wish to top up your CPF account to enjoy the attractive, risk-free interest rate. Through the power of compound interest, these additional measures will lead to a greater growth of your savings so that you will have more during retirement.

2. Goals

Having understood each other’s financial situation and obligations, a couple should discuss their long-term goals. It’s important to decide on the lifestyle that both want to lead, the kind of property to live in and so on. On family planning, a couple needs to agree on the number of children they want to have, the type of education for their children, parenting style etc. For retirement planning, they should discuss when they would like to retire, the kind of retirement lifestyle that they envisage and steps needed to reach that stage.

As most couples have limited financial resources, it would not be financially viable to achieve all goals. Hence, goals should be rationalised and prioritised.


4. Buying a House

Marriage is the start of a new life together. Couples will be excited about the purchase of their new home. However, it’s important to plan your budget for your new home and find out how much you can afford. You should also check how much of your CPF savings can be used for the purchase and how much cash you have to fork out. By planning ahead, you may even consider using cash instead of CPF. When you do so, your CPF savings can grow over time with the power of compound interest such that you can have more CPF savings for retirement.


6. Planning for the Family

Both you and your partner will also need to take care of each other and your dependents such as your children and your own parents. It is important for the couple to protect the expected amount of income that could be generated from their working life so that the family is not adversely impacted by unfortunate events like pre-mature death, disabilities or severe illnesses. Hence, the couple should share their existing insurance plans and evaluate if it is necessary to increase insurance coverage for the family.


Joseph Kwok Wei Woon

Joseph Kwok Wei Woon
President,
Financial Planning Association of Singapore (FPAS)
2017 to 2019

Should a couple find it awkward to start the discussion, they may consider roping in a professional like a Certified Financial Planner (CFP) to facilitate a meaningful discussion. A professional can highlight the essentials of a comprehensive plan and get the couple to agree on key areas.

Getting married is an important life event that warrants careful planning and efforts to maintain. Couples who are willing to communicate with each other and have a consensus on important issues like financial planning will be able to face the obstacles ahead and enjoy a long and blissful marriage!

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