Power of two: Going from ‘mine’ to ‘ours’

MONEY is often cited as a top stressor in relationships, but it doesn’t have to be. Discussing financial goals as a couple can strengthen your relationship and help to ensure you are on the same page.

Besides, the power of two is not to be sniffed at. Having dual income streams can lead to a faster rate of wealth accumulation – through big-ticket purchases such as home ownership and joint investments – and enhanced financial well-being.

Follow these tips as you embark on your financial planning journey together.

1. Map financial goals

Discussing finances with your significant other is not a walk in the park because your individual upbringing and experiences shape how you manage money. Have empathy when starting the money talk with your partner, and aim to understand each other’s money habits and aspirations.

These goals will usually tie in with expectations on parenting – including whether to have children and the type of tertiary education for them – house ownership, care for elderly parents and desired retirement lifestyle.

When a couple has clearly stated goals, they can avoid unnecessary, impulsive expenditure that could add stress to the relationship. Having common goals will help you proceed as a team and set the parameters for a household budget, insurance protection and a comprehensive financial plan to achieve objectives.

2. Avoid financial infidelity

Top money lies include hiding a bank account, failing to mention a significant expenditure to your spouse, not being upfront about debts, and under-declaring your income.

Such dishonesty can undermine trust and even lead to a relationship breakdown. For instance, if you have chalked up a mountain of debt, it is better to transparently disclose it to your partner and seek to clear the debt as soon as possible.

3. Assign financial duties

It is useful for partners to assess their differences in income and money management strengths to determine their division of financial duties. The one who is financially savvier may assume the role of evaluating investment options for the family, while the other could manage bills and bank accounts.

Even if one partner decides to take full control of all financial decisions, it is prudent for the other to have access to the accounts and be kept abreast of the money flows, investments and any estate planning tools such as wills, lasting power of attorney and Central Provident Fund (CPF) nominations.

4. Split household bills

As your lives intertwine, there will be more items to pay for, such as groceries, petrol and mortgage. Some common ways couples split their household bills include:

• full merger;
• 50-50 split;
• proportional split based on percentage of income; and
• by item (for example, one takes the mortgage while the other pays for utilities and groceries).

With many shared expenses, a joint account could come in useful – and while you are at it, you could get one that maximises the benefits for both of you.

Consider an account that offers attractive interest rates for income crediting and bonus interest for transactions in other categories, such as grocery spending on a credit card, buying life insurance or making investments.

There is no one solution that fits all households. Consider which expenses you want to keep separate, and which you want to share. One advantage to this method is that each person retains some degree of personal space and financial autonomy.

5. Ensure insurance coverage

For most married couples, this is likely to be a financially challenging period, especially if they are from the sandwich generation – that is, they are looking after their ageing parents as well as their own children.

Ensure that you are adequately insured so the family can carry on with their lifestyle even if you are no longer around. This means having insurance cover for hospitalisation, critical illnesses, home loans, cars and children’s tertiary education.

6. Plan for retirement

Some parents tend to prioritise their children’s education needs and well-being, but this should not be done at the expense of retirement planning.

Embark on a financial plan early, and build multiple income streams that can fund both short, medium and long-term needs such as retirement.

Let the long investment time horizon and power of compounding work for you. And as couples advance in their career, continue to save and invest, especially when there are pay increments and bonuses.

To fund your desired retirement lifestyle, build multiple income flows from a diversified portfolio of savings and investment tools such as stocks, unit trusts, exchange-traded funds, bonds and real estate.

Consider using government schemes such as CPF and the Supplementary Retirement Scheme to grow your nest egg while enjoying tax reliefs.

At all times, keep diversification in mind to ensure that your portfolio has a suitable mix of assets to meet your goals and is aligned with your risk profile.

7. Avoid a false sense of financial security (for Dinks)

Studies have indicated that couples who have “dual income, no kids” – or Dinks – tend to put retirement planning on the back burner until they are in their 40s. This is compared with couples with children, who usually start thinking about retirement in their 20s or 30s.

Dinks often perceive that they enjoy greater financial freedom and more disposable income for travel, luxury or savings. However, this could lead them to lag in wealth accumulation.

Keep talking

Financial harmony doesn’t mean you have to agree on everything, but having a road map to navigate potential disagreements is important. Consistency is also key.

This Valentine’s Day, schedule a “money date” with your partner, focus on the life you are financing together, and keep the conversation going.

The writer is head of financial planning literacy at DBS, and author of bestsellers Money Smart and Retire Smart