The summer wedding season is upon us and wedding bells are ringing. Getting married is a very special and exciting event, one you may have planned for and dreamt about for a long time.
It’s important, however, says John Manyike, head of financial education at Old Mutual, not to get so carried away that you end up forgetting to stay within your financial means and to make responsible preparations for your financial future together.
Before taking this big step, every couple need to ensure that they tick not only all the boxes on their wedding plan, but also all the boxes on a financial plan.
“It’s important to keep a level head and ask yourselves what makes more sense: an extravagant wedding that leaves you battling financially for the first few years of your marriage or a smaller, less elaborate wedding that allows you to start your marriage on a financially healthy footing?”
In other words, make a conscious decision not to be blinded by your wish for a dazzling, celebrity-style wedding. Make sure you’re able to say ‘I can’ before you say ‘I do’.
The golden rule for couples is open communication, adds Mr Manyike. Both of you need to be on the same page when it comes to finances. Joint planning, budgeting and saving are the first steps to a happy and healthy financial life long after the wedding. Money is not a romantic topic, but it’s a crucial one, and couples need to tackle it before they tie the knot.
Types of marriages and their financial implications
The first thing to consider is the type of marriage you will enter into.
There are three types of marriages recognised in South African law:
Civil marriages (between heterosexual partners)
Civil unions (which can be between same sex as well as heterosexual partners)
Customary marriages (marriages in terms of African custom)
There are also two matrimonial property regimes, which are arrangements that regulate how your assets and liabilities are treated during, and at the end of the marriage:
Marriage in community of property (COP), which means all the assets and liabilities (what you own and owe) that you each had before the marriage become jointly owned when you get married. Marriage under customary law is regarded as being in community of property.
Marriage out of community of property, which means you draw up an antenuptial contract before you get married. There are two kinds of antenuptial contracts:
Antenuptial contract (ANC) without accrual
This type of contract must be drawn up by a lawyer and there are costs involved. The contract states that your assets and liabilities are kept separate. In the event of a divorce or death, each party leaves with whatever they brought into the marriage plus what they accumulated in their personal capacity during the marriage.
This contract is appropriate for couples who have been married before and who may have children from previous relationships or where one of the parties is in business or acquired excessive debts prior to the marriage. It is also used to protect assets where one or both of you may become personally liable for the debts of a business venture.
Antenuptial with accrual system
With this option, assets and liabilities are also kept separate, however, if you acquired less growth in your estate than your spouse during the marriage, you will be entitled to receive half of the difference in growth of your two estates.
The type of marriage system you choose determines how credit providers will assess your future credit applications such as buying a house, a car or your access to credit in general.
Pre-wedding money conversations
It is crucial to know your partner’s credit profile, particularly if you are planning to be married in community of property.
Knowing each other’s credit history will also give you some insight into each other’s financial behaviour. Be honest with each other from the onset. It’s better to openly discuss historical debts and current financial responsibilities such as maintenance for children outside the marriage and financial assistance for parents. Failing to disclose responsibilities and debts can erode trust and damage your relationship, so rather play open cards with each other.
Is a joint account a good idea?
Having a joint bank account is a convenient way to manage day-to-day spending and saving, but it can be problematic if one of you is not financially disciplined. Couples must agree who is the one who’s good at handling finances and who would be better suited to taking care of the household budget. It is very important to avoid falling into arrears or having judgments against you.
The benefits of financial planning
It is generally a good idea to get a financial adviser to help you draw up a financial plan that suits your specific lifetime goals and needs. Remember, your wedding is only the start of married life. A couple that plans for the future together succeeds together. Enjoy the financial freedom that good money habits can give you. Commit to saving and creating wealth as a couple, and reap the rewards together.
The value of a monthly budget
Mr Manyike also advises married couples to draw up a monthly budget together.
This ensures that the household is managed by both parties and any shortfalls are picked up and tackled in good time.
“Sit down monthly to check on your financial behaviour and spending habits. Identify unnecessary and costly indulgences that can be eliminated.”