Financial alignment is key to a better marriage.
When talking about finances with your partner, it is important to set financial goals and ensure you both are on the same page. It doesn’t matter if you earn different incomes, but couples need to align themselves on issues like housing, among other expenses.
By Paul Ho
Scientists may finally be able to shed some light on love. When you fall in love, the initial stages usually comprise romantic feelings and physical attraction. These are caused by hormones released in the brain that are responsible for strengthening emotional attachment.
Nature has a beautiful and complex way of ensuring the continuation of the species, but this may not be enough to keep couples together in an increasingly materialistic world.
Money values – Talk sooner than later
There’s a saying that money is the root of all evil, but the lack of money may be a bigger evil. So young couples should start talking about their finances.
Things to know about your partner
– Are your families of similar economic status?
– Are your incomes vastly different?
Differences in incomes may mean divergent lifestyles. The both of you need to reach a common understanding.
– Do you buy first and save later, or save first and buy later?
Bad financial habits come from bad personal habits.
– Does your partner smoke, gamble or indulge in alcohol? What about expensive hobbies like fast cars, expensive watches, jewellery or handbags? These affect your future financial well-being.
What are the major expenses for young couples?
– Wedding ring, wedding reception and honeymoon.
– Saving for the down payment of a house.
– Furniture and renovation.
– A newborn baby.
Buying a house in Singapore
If you spend too much money on getting married, I doubt you will have enough cash to buy a property.
Younger couples tend to be in junior positions at work and earn less. If they can move in with their parents, they should do so until they can come up with the down payment for a new house.
If you have already bought your place, phase out your furniture purchase or renovation. What use is a beautiful house that becomes the source of your financial worries, or worse, the root cause of your quarrels.
Scenario: Buying an HDB flat worth $350,000
Husband (Age: 30, $3,000/month salary with 13th month bonus)
Wife (Age: 30, $3,000/month salary with 13th month bonus)
The minimum amount of cash needed is around $22,000, while the CPF OA (Ordinary Account) savings need to be around $55,000. It will take about four to five years each to save up the $55,000 based on the $3,000 monthly salary.
In Singapore, banks will lend more money to those looking to buy more expensive condominiums, but they will not lend them as much for HDB flats. This has led to many people buying condominiums instead of HDB flats. Obviously there is a flaw here.
The main reason for this is the MSR (Mortgage Servicing Ratio) of 30 percent for HDB flats while condominiums are set at 60 percent, resulting in higher loans for condos.
Nonetheless couples should avoid buying a condominium unless they have very strong financial backing, from say their parents. Taking out a large loan from day one also means a heavy interest cost payment and a slow rate of paying down the principal.
In this case, couples earning $3,000 each would be able to secure an HDB flat, and they would not have to worry about mortgage repayment as there is no cash outlay. In fact, their CPF OA can still accumulate if they hold on to their jobs.
Spend too much on the wedding of your dreams and you may have to deal with the loans, overdrafts and credit card bills over the next few years.
It is important to spend within your means. Some parents may push for a large wedding, but are they paying for it? Ultimately, you must strike a balance on making them happy and the cost involved.
The cost of a table at a posh hotel will easily set you back $1,000. Don’t forget that you need to allocate half of the tables for each side of the family, so discuss this first before booking the venue.
A “simple” wedding dinner could easily set you back $20,000 to $50,000. That would take between 20 months to 50 months to repay the principal.
Financial planning for the future
Plan for the future by having some basic insurance cover such as hospitalisation cover in case of major illness, mortgage insurance (which will be covered under the HPS) or term insurance, and perhaps a savings plan for a future child. It is okay to have an interim plan and modify it as you go along. It is probably too early to plan for retirement, but there’s no harm talking about retirement goals and the lifestyles you would both like to have, so that you are on the same page.