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Engaged? Here are financial matters you should consider before saying ‘I do’

By For Citizen Digital

This year you don't have to be a slave to the dollar sign if you're ...
This year you don't have to be a slave to the dollar sign if you're willing to put in a bit of thoughtfulness PHOTO/COURTESY

In 2001, a total of 101 divorce cases were filed at Milimani Courts. That number rose to 115 in 2002 and then nearly doubled to 206 cases in 2003.

The following years 2004, 2005, 2007 and 2008 recorded 296, 295, 357 and 369 cases respectively. Between 2010 and 2015, a total of 1,246 cases have been filed at the Milimani Courts.

On perusing through a couple of court files, two major reasons were cited for the rising number of divorce cases in Kenya; the old-age sin infidelity and money woes.

This revelation brings us to a very important question, are couples sitting down to discuss finances before making the ultimate decision of getting married? And if so, are they taking any substantial actions towards harmonizing their individual finances before tying the knot?

Financial literacy is unfortunately not given priority in our education curriculum, something that is of great importance in every adult’s life.

As we seek to help you make better financial decisions in the future, today we’re going to talk about 5 financial decisions young men and women in Kenya and beyond must make before they tie the knot and how these decisions play a big role in determining the survival of their marriage.

Money expert and financial adviser Margie Baldock, author of The Mother Lode Manifesto, says when it comes to your financial health, selecting the right partner is the most important decision you can make. “The wrong partner, financially speaking, can mean a life of stress, struggle and strain. It is no wonder, then, that 80 percent of divorce is believed to be based upon money disputes.”

Baldock recommends you not walk down that aisle until you’ve asked, discussed and are satisfied with how your partner answers these very important five money questions:

For example, do you believe money is easy or hard to make, retain, and grow? It could also be something to do with what type of investments to make, secure investments like real estate, which take some time to yield money or investing in a business with quick returns? And when you eventually get married, do you operate a joint bank account or do you continue maintaining separate accounts?

According to Shannah a CERTIFIED FINANCIAL PLANNER™ professional and a millennial money financial strategist, it is advisable to operate a joint bank account because when you get married, you are fusing together two different personalities and styles of managing money. Through her experience in managing different couples, utilizing one bank account helps reinforce the partnership element that is critical in marriage. You make joint decisions, you evaluate pros and cons of spending and saving together, and you have open money conversations that you wouldn’t enter into with separate bank accounts.

She however maintains that it’s okay to maintain an individual account for all your personal needs and wants. It doesn’t feel very good asking your partner for money even for the slightest of things.

What are your current financial habits?

Media personality Caroline Mutoko once spoke about managing finances on her YouTube channel and she subscribes to a 50,30,20 model when it comes to money. 50% to go towards paying utility bills, 30% to go towards things you like and 20% to go in a savings account. Do you subscribe to that or any other model for that matter? Another thing, do you actually believe in investing your money or would rather it lay around in a savings account? Most importantly do you work with a budget?

According to Shannah, one of the first decisions you should make after you get married is who is going to manage the budget, and how you plan on tracking it. This point person should be actively involved in the day-to-day budgeting and management of money, tracking daily expenses and staying on top of loan payments.

They should also be regular meetings where the point person updates the “not in charge person” on spend and the current status to your financial journey as a couple. This meeting also offers a good opportunity to discuss updates on loan payment, weekly budgets for food, utility bills and entertainment. It’s also a perfect time to check in with each other regarding your money goals to make sure you’re still on track.

Have you spoken about the ‘backup’ plan?

Meet Jack, now jobless and totally depressed but a former financial director in a multinational that used to manufacture and sells PC’s. He secured the job after campus first as an accountant before rising up the ranks to become the financial director. He used to make a sizeable income which enabled him to take care of the family comfortably. His kids for example were all in private school and he had taken up a mortgage for a maisonette in Kileleshwa.

The company failed to keep up with technological advancement and soon enough they were wiped out as they couldn’t keep up with competition. They decided to close down the PC manufacturing wing which had employed thousands of people including Jack. They gave him a severance package which was quickly depleted and so the wife; a lecturer at a local university took over the mantle of providing for the family. She eventually got overwhelmed and after a couple of years asked for a divorce.

Now in an event that this kind of a scenario happens to you, what next? Have you planned for it as a couple? What if one of you was to die and leave with you with an unfinished mortgage, school fees for young children, debt, what next?

Many financial advisors recommend products like life insurance and life savings policies to secure the family’s lifestyle and safeguard against any unexpected life changing events that may bring financial strain. Many well to do and even prosperous families have been thrown into financial ruin on the death, critical illness or disability of the main breadwinner. Safeguarding your family’s lifestyle continuity becomes even more relevant once you get married, and one would argue even much more important once you have kids. With a life insurance policy, you make sure that your partner can stay financially stable if your portion of the income isn’t around to help pay the bills. Most financial advisors recommend taking a policy with a sum assured of that 7 to 10 times the family combined annual income to guarantee a comfortable lifestyle in case of an unfortunate life altering event.

Financial freedom, is it part of your goals as a couple?

How do you define it and what is the time frame in which you expect to achieve financial freedom? Do both of you have the same objectives when it comes to Financial Independence and Retirement (FIRE)? It can be useful to discuss whether kids are in your game plan and if so, what attitudes towards money you will employ when it comes to raising children.

Will both partners work? Which system of education do you believe in? Will you set aside funds to take up an education savings plan for your children? All these are important questions to ask before making that all important decision of walking down the aisle.

The elephant in the room that is debt

The most important thing that you can do to prevent this from wrecking your marriage is to be honest about your debt situation, particularly before the wedding. Hiding debt from your future spouse is not only a very bad idea but can be the ultimate home wrecker. You can’t make shared decisions and settle upon mutual goals without talking about this issue.

After this discussion, then the both of you can make the ultimate decision or whether any debt brought into the marriage becomes individual or shared debt.

Shannah further suggests that your marriage is a partnership, and sometimes that means making sacrifices with your finances. For example, say your spouse has a significant HELB loan that they are making a financial priority to pay off. While it’s not your debt, you may decide to pick up a larger portion of the rent to help them achieve their goal of paying off the loan. At the end of the day, you both need to be happy and feel that you are fulfilling your financial goals together as a couple, and not just individually.

Debt.org recommends consumers begin reducing their debt by paying more than the minimum payment on loans with the highest interest rate. Once the high-interest debt is paid, you can tackle the next one more quickly by combining the regular payment along with the money previously paid on the first card.

For example: if you are paying Ksh 30,000 a month for a HELB loan and Ksh 20,000 per month for a car loan, once the HELB loan is paid off, make Ksh 50,000 payments on the car loan. You’ll be surprised how quickly your debt will continue to dissolve.

Money discussions can be difficult but they have to be held for a fruitful and fulfilling marriage.

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