Getting married? Important financial steps to take before the big day
He finally asked, you finally said yes. Now the time has come to start planning your future together, starting with your wedding. However, there are some financial steps you need to take before you get married to ensure that both of your futures are sound for every eventuality.
Being financially prepared might not sound romantic but it is a vital step to take on your journey to a better life together. Outlined below are some important financial steps to take before your wedding day.
Talk about and take out life insurance
If you are young and healthy, you might not think about getting life insurance, but it is vital to have if anyone does or possibly will rely on you financially. It is not expensive, with companies such as African Unity Life (AUL) offering affordable packages for all incomes.
Taking out life insurance in South Africa involves having to take a medical exam to see how healthy you are and to ascertain if you have any underlying conditions that may or may not be covered. You will need to speak about what to do should one of you die, including where the money for the funeral arrangements will be coming from. African Unity Life limited offers a lump sum payment upon death, as life insurance companies know that a funeral can become highly expensive.
Prioritise shared financial goals
You will need to talk to your partner about their financial goals in order to prioritise ones that you both share. Your future husband might want to retire early, which means that you will both need to make sacrifices by spending less and saving more.
You may want to explore a freelancing career, meaning that the same sacrifices will need to be made. An easy way to begin this discussion is for each partner to list their goals and financial worries from most important to least important. This will help you to see where your goals meet and what to prioritise with your shared finances. Be sure to set realistic goals, such as purchasing a house in five years.
Show and tell about all of your debts
It is vital to enter into a marriage with all debts clearly laid out on the table. If you are not prepared to be honest about your financial situation, your partner might be wary of sharing their with you, causing friction and unhappiness before the big day.
You will need to show them last year’s tax return, your current credit report, your payslip and all statements including loan statements. It might seem unnecessary to show them all of these reports, but once you both know where the other stands financially, you will better be able to plan your futures together. You should also have an honest discussion about each of your spending habits and how these could impact planning for the future, especially if one of you is more liberal with their credit card than the other.
Joint or separate accounts
When it comes to cash flow in the marriage, the options usually come down to choosing between joint or separate accounts. This is based on spending and financial goals.
- Joint account: A joint account is arguably the most transparent way to organise your money. Both partners are aware of all incoming and outgoing funds. All bills will be paid from one checking account and all future goals would be funded from this account.
- Separate accounts: You will both keep your separate accounts, but designate specific financial obligations to each spouse, such as paying the rent or buying groceries. Credit cards and car loans will be paid off separately, but may not work if you have house payments t be made on a house that has both of your names on the mortgage.
If one of you spends more than the other, it might be an idea to opt for separate accounts to avoid both of you entering into unnecessary debt.
Build an emergency fund
Many couples, especially if they are young, are caught up in the romance of a wedding or a marriage. While this is an exciting time, you do need to be conscious of the fact that life can throw curve balls at any time. This makes having an emergency fund essential to your financial well-being.
Build up a cash reserve that you can tap into when times get rough, such as a car accident, a burst geyser or a break in. It might not be pleasant to think about while you are planning your big day, but being financially prepared will help you to have a stable marriage. Your emergency fund should be something you contribute to on a monthly basis, keeping your emergency fund going so it has enough money to cover any eventuality.
