So you’ve collected the keys to your HDB flat, and you have a deadline looming over your head—to register your marriage. Congratulations!
If this is the first time you and your partner will be living together, there’s a lot to get used to. From splitting the household chores and grocery bill to deciding who gets to clean the toilet, you’ll have a lot on your plate.
Now that your finances are going to totally or partially merge, you might be sweating at the thought of your partner squandering all your savings, or plotting your transition to taitai-hood.
Okay, we jest, but no matter what the financial status of you and your partner, life has a funny way of not turning out the way we think it will. Here are three things couples must not neglect when it comes to financial planning.
Both of you should have a retirement plan, not just one
I’ve noticed a trend amongst Singaporeans who marry someone who is relatively well-off. After tying the knot, they become distinctly more relaxed about their finances, to the point where they don’t really bother watching their spending, monitoring their savings or investments, or even caring about how and when they’re going to retire.
They assume everything will be taken care of by their higher earning spouse, or worse, they expect their kids to support them financially in old age. In the Singaporean Mums Retirement Aspirations Survey 2015, 44% of the 600+ mothers surveyed said they planned to rely on their children post-retirement, while 75% had not done any retirement at all.
Just because your spouse is loaded doesn’t mean you can delegate making plans about retirement to him or her. The sad fact is that marriages can and do fall apart—20.3% of marriages registered in 1998 had been dissolved 15 years later, while 16.1% of those couples who married in 2003 had their marriages dissolved by 2013, according to this 2015 news report. Apart from that, there’s also the chance that something unfortunate could happen to one of you (choy!).
That’s why it’s so important for each of you to have a plan. Just because your spouse is bringing in the bacon doesn’t mean you shouldn’t maintain your own savings and investments. You want to know that you’re covered, with or without your spouse.
That doesn’t mean you sneakily sock away half of your salary in a secret account without informing your spouse. But it could mean agreeing to keep some portion of your finances separate, and not spending money irresponsibly just because you’re not the one earning most of it.
Never assume your burden of shouldering the expenses will always remain the same
When you first get married, it can be easy to think of the difference in your incomes as something that will remain the same forever. If you’re both earning similar salaries, you might think you only need to foot 50% of the bill for the rest of your life.
Still, it’s never a good idea to get complacent and spend all your disposal income on maintaining your midlife crisis car or getting botox, even if your spouse is there to help out with your household expenses. When you’re just one of two earners in a dual income household, it’s true that you get help with the bills. But it also means that you might have to shoulder your spouse’s liabilities should something happen to him or her.
Young couples may not lose too much sleep over the prospect of retrenchment, but when you’re in your forties and fifties you’re at greater risk of retrenchment and, worse, not being able to find a job which replaces your lost income.
A recent report about retrenched PMETs was filled with cautionary tales of middle-aged people who, after losing their jobs, were forced to take up work which paid a mere fraction of their precious salaries.
This isn’t just something that happens in fairytales. Just off the top of my head, I can name at least five friends whose fathers or husbands were out of work for more than a year after being retrenched.
It’s easy to get complacent when one person in your household is earning a high salary. But avoid inflating your lifestyle to crazy levels, because you never know when that income source is going to run dry. Should something happen to one of you, the other one is going to have a hard time shouldering the expenses.
Know how to much you need to downsize your lifestyle before you add kids to the equation
In the old days, people tended to think of children as their retirement plans. They therefore spared no expense in bringing up their children—after all, the more kids who made it to university or managed to get good jobs, the better the parents would be looked after in their old age.
These days, thanks to changing cultural norms and the rising cost of living, nobody should be having kids to avoid having to plan for retirement. It’s not cheap to raise a child in Singapore, and you want to start planning for it before the kid is out, not after.
That’s because in order to raise a child and still have a shot at retirement some day, there’s a good chance you’ll need to downsize your lifestyle and live more simply. I know many young couples who continued living the high life after having kids. More than a few of them have trouble paying off their credit card balances each month, and their kids aren’t even in school yet.
Whether to have kids or not is a choice you should make with your eyes open, and having done the math. If you don’t bother thinking about the money since “love is all that matters”, a few decades down the road your child could find himself struggling to support his own parents in their old age, all while coping with a crazy high cost of living and trying to start his own family.
What else should married couples look out for when planning their finances? Tell us in the comments!
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