How to Tying The Financial Knot



This article published in Maxxbride magazine November 2012 (Text by Irina Jusuf)

Adapting to life after marriage, its not as easy as we have imagined. Many things have certainly changed from our previous life. Starting from day-to-day habits, level of needs to a way of thinking that will ultimately determine the basic goal of marriage itself.

Similarly, in financial affairs, a newlywed couples should be able to put aside their egos and getting used to combine their income for the household integrity.

Managing finance together after marriage is going to be a challenge because it involves habits and ego of each party. Is the husband gives authority of the entire income to the wife? What if the wife’s earning are also used to cover the family's needs? Is there a sharing of task and responsibility to pay the expenses?

That’s why the newlyweds are expected to sit together in planning their finances after the wedding ceremony, to determine the financial goals and to make a financial plan based on priority and the existing financial conditions.

According to Yosephine P. Tyas S.Kom, MM, RFA®, Chief Consulting Officer & Senior Advisor at Ardana Consulting, financial planning process in the family should started with transparency so that both parties are equal to know the actual condition of their spouse, if there are things that look not healthy then it can be fixed as soon as possible, that's why it's important to do financial check-up before marriage. Improvements on the financial condition could be done earlier. For example, pay off credit card debt, prepare for an emergency fund, etc. If each party has started budgeting before married, it will be easier in marriage to determine which expenses are primary and non-primary, priority or not a priority, the personal needs or the investment for family’s financial goals.

Yosephine says, after marriage, if there is no prenuptial agreement, the asset acquired after marriage is joint asset. Asset allocation can be done according to the needs of the family, if there is one asset that is not optimal, it can be allocated to other type of asset based on their financial goals that already prepared in their Financial Plan.

To facilitate financial planning process, they can make a joint account as a Operational Account Family (husband and wife may transfer their income partially or completely), account for Personal Needs for each party (hobbies, work, etc.), account for the Emergency Fund and account for Investment according to their priority financial goals (such as: Home Purchase Fund, Children Education Fund, Pension Fund).


So what if there are financial problems in the marriage? Financial problems can occur if one of the spouse in an unhealthy financial condition, such as having consumerism debts.  Yosephine suggested that these problems should be anticipated earlier, but if the problem known after they marriage then this should be discussed and not hidden because it will only make the problem more complicated. With open discussion (without blaming each other) then a solution can be found and done as soon as possible. To pay off debt, especially consumptive debt, as a family the husband and wife should support and help each other.  They should do introspection process, learn and change for better in financial planning.

To successfully build a harmonious family, couples should maintain financial strength they have. The financial condition of a family can be health if they keep these important things :

1. Emergency fund
Does the family have a special allocation fund that could be used during an emergency? Emergency fund  for married couples minimum is six times salary or expenses, and the amount will be greater by the increasing of people who depend on the family.

2. Liquid Assets
Liquid Assets are assets of high liquidity, such as saving. The amount in savings should reach the ideal percentage when compared with the overall assets. Liquid assets should not be too small, but also not optimal if it is too big.

3. Saving
A family should have an allocation of savings each month minimum 10% of the income.

4. Debt Installment
Make sure that the total debt installment is not greater than 35% of the total income.

“If you have fulfilled all the above points, it means that your financial condition mostly healthier than many people outside,” Yosephine said.

to be continue (Do's and Don'ts in Financial Planning for Marriage)

Image taken from here

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