Financial pillow talk – not sexy but necessary

Financial planning is easy when you are young, single and have little money.

My responsibilities were simple when I began working - pay rent, set aside money for my parents, have enough for food and drink. I was free to decide how much to save, what to invest in, and any wins or losses were my own.

Things get more complicated when your life becomes increasingly intertwined with someone else's - and you may find that while sparks flew when you met that special someone, a different set of sparks is ignited when it comes to the heavy pillow talk - financial and investment planning.

Talking numbers, unfortunately, does take some romance out of a relationship but if you are taking it to a serious level, it is an inevitable step.

My husband and I discovered this when we started making decisions that involved big sums of money. First, it was deciding to rent an apartment with some friends - we split the rent and utilities equally between us and it was relatively simple.

Then, when the global financial crisis triggered a property market correction in 2009, I saw the opportunity to invest in our first home. Except that we weren't married and had not talked about it at that point.

But time and tide await no man and that's even truer of Singapore's property market. We bought an apartment as "unrelated singles" as we could just afford it with the depressed property prices.

We decided to buy it as joint tenants, which meant that on the death of one owner, the apartment would go to the surviving one. Then we had to decide how much each would pay for the down payment, renovations and subsequent mortgage instalments.

Thinking about death and mortgages was the first big decision we had to make as a couple. It was the first of many - how much should each pay towards the mortgage? Do we start a joint account?

We split the costs equally for the most part, but it is quite common for couples to agree to contribute an equal percentage of their incomes on shared expenses, since whoever earns more can pay for more.

Then it was about how we should invest our money. He favoured trading in foreign currencies but never had the time to keep up, while I preferred investing in equities.

I bought some penny stocks some years ago which tanked and are still floundering at 1 cent per share. Every time we have an argument about money, he trots this out as the "shining example" of my investment acumen and I point to his pointless forex trading which has lost us money.

Needless to say, we have driven each other insane in many of these conversations. Experience has taught me that it's best to agree on what to pool your money together for. Beyond that, husband and wife should be left to invest their personal wealth however they deem fit.

A more controversial subject: how we spend our money. In our earlier years, I used to say to our friends jokingly that with my husband's monthly bar bill, we could have serviced a second mortgage on another property. They thought I was joking except that I wasn't. I'm not a big spender on shoes or bags but I would sometimes splurge on, say, an expensive camera, prompting some raised eyebrows.

Naturally, these were sources of conflict and it shows how tricky it can get when couples start combining their personal wealth and have strong opinions about how this should be spent.

Experts such as OCBC Bank's head of mass segment, Ms Ng Li Lian, say it is useful for couples to discuss their financial situation and aspirations as soon as they have intentions to get married. Looking back, we should probably have had a lot more conversations about money than we cared to have.

According to the experts, some key considerations include sources of income and expected costs. A checklist of big-ticket mid-term milestones - such as buying a home, throwing a wedding and going for a honeymoon - can be useful. Estimate the costs and discuss how to fund it.

Ask difficult questions such as "Can we afford it?", "How much can we borrow?" and "Who pays for what?" Going through these questions helps couples visualise the financial commitment required and understand how their lifestyle may be affected, says Ms Ng.

That is one of the first steps. Once you are married, there is a laundry list of boring but necessary things to sort out - should joint bank accounts be set up, how much should we be saving, what are our monthly expenses, and what insurance policies should we buy.

The answers will differ from couple to couple. We found that sharing expenses equally and having separate accounts worked better for us. But I know of couples who combine all their wealth in one account and somehow manage to agree on how they spend it.

Financial planners say couples should be saving 10 per cent to 20 per cent of their incomes, and set aside six to 12 months of income in savings for emergencies. Term insurance or mortgage insurance is also recommended to ensure that, if any misfortune happens to either party, the other is left with a decent sum of money to service loans.

Beyond that, longer-term goals such as upgrading to a bigger home, having children or planning for retirement should be discussed. Some common mistakes that couples make include a lack of discipline in saving money or tracking expenses, and not setting clear financial goals, say the experts.

Many also over-stretch their finances in their desire for bigger homes or cars. One important question to ask is whether you can still afford a purchase if there is an increase in interest rates or if one of you loses a job.

Such conversations are not easy to have, and definitely not the sweet talking you expect to hear from your spouse. But a bit of early financial planning could help you avoid potential, larger conflicts further down the line - and make for a happier marriage.

stinvest@sph.com.sg

Get a copy of The Straits Times or go to straitstimes.com for more stories.