Cut once, measure twice
In many hands-on professions – carpentry, tailoring, DIY, framing – there is a valuable saying : Measure twice, cut once. All of us have been there – been too quick to measure, cut and regret at leisure. This saying extends to all aspects of our life and wealth, no more so than financial compatibility in a marriage. By the time a couple decides to move in together, they will often have uncovered the other compatibility issues, but it is only when they merge their finances for the first time that financial incompatibility comes out. Let’s face it, it’s difficult to talk about. In the early days of a relationship you want to make a good impression, so you’re not going to talk about your maxed out credit cards or nasty little retail therapy habit.
If you do an ante-nuptial contract properly, (if you missed my blog on marital regimes, you can read it HERE), then you should both be disclosing your net assets going into the marriage. If these assets and liabilities aren’t disclosed, then it assumed to be zero. If liabilities are greater than assets, it is zero again. In other words, it is not negative, a spouse’s accrued assets can only go down to zero. Those declared assets remain your property in the marriage, and your spouse cannot make an ‘accrual claim’. Remember to include the current value of any retirement funds. These assets will be appreciated by CPI every year, (zero multiplied by CPI is still zero). This would be a good time to get a financial coach involved – to help you navigate the thorny topics as a third party, so you can go to the lawyer who is drawing up your ANC with a list that doesn’t have to be negotiated. Because your financial advisor/coach takes a holistic view of your combined finances, they will be able to give you holistic advice from which medical aid to use, how to merge your household contents insurance, what life cover you need to increase/decrease, how to invest the extra money from merging 2 households etc.
Although there isn’t any research specifically for South Africa, our divorce rates mimic most of the western world, so much of the research done elsewhere is likely to apply here. In twin studies done by Jeffrey Dew and Sonya Britt for the ‘Development of National Marriage project (USA) have come up with some great stats and indicators – but they make depressing reading. If a couple argues more than once a week about finances, they are 30% more likely to divorce. Those arguments are usually longer and more intense. Money arguments are more indicative of imminent divorce than any other ‘hot topic’ including in-laws, children, chores etc. Financial strain often coincides with having children, and can trigger severe marital strain. Higher net worth individuals are also more likely to divorce.
One of the most important things to uncover is whether you are a ‘consumer’ or a ‘saver’ or somewhere in between. If the couple are at opposite ends of the spectrum there are going to be problems. Big problems. Can this behaviour be changed? Yes, I think it can. It may require the help of a psychologist and financial coach, but it will be money well spent. A divorce will be far more expensive, and the ‘saver’ is going to come off second best. The other dangerous mismatch is the financially ‘clued-up’ versus the ‘clueless’. If either partner abdicates the personal financial planning to the other partner, there is a good chance that the clueless will be the one screwed over (and not in a good way). Never abdicate that responsibility to anyone else. Stay involved, learn, ask questions. If you can’t understand your joint financial advisor, get your own. More on marriage and money HERE.
Actions:If you’re moving in together, getting married or are fighting over money, get your advisor/coach involved (perhaps with the help of a couples counsellor) and take the emotion out of the discussion.
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Author Dawn Ridler