6 Tips To Combine Your Finances As A Couple

Unnecessary friction about money during a marriage is unavoidable but you can work together to combat it.

Marriage is a union between two people that lasts a lifetime. You promised each other to stay together, through thick and thin, in sickness and in health. Once the honeymoon period from the wedding wears out, you will be hit with the reality of financial management that comes with your new life (in the form of rent and bills!)

Joint finances mean something different for every couple. Some couples keep their money mostly separate and only share one or two bank accounts. Other couples combine everything—bank accounts, credit cards, investments accounts, and more. When it comes to combining finances there isn’t a right or wrong answer. Instead, it’s important to find the best solution for you and your spouse.

Here are 6 tips for combining your finances after marriage.

Tip #1. Manage Your Debts Together

Who doesn’t want their debts to magically settle themselves overnight? While we all wish our debts are gone, realistically we are likely to have some debt with us, including carrying some of it into marriage.

Discuss and be open with your spouse about each other’s debts. Share with each other about your loans, credit history, and spending habits. This is to avoid future miscommunication or any financial mishaps that might come in the future.

It is certainly okay if both of you want to treat each other’s debts separately, but when you think of them as household debts, it becomes easier to put aside some money to clear them. Clearing existing debt is very important for your cash flow especially if you are planning to make any big purchase in the near future like buying a home and car or even having kids.

Tip #2. Draw Your Household Budget

If both of you are working, you can both contribute to household income. However, your contribution might not be equal if you have different amounts of salary and commitments (debts!).

To determine how much each of you needs to provide for the household is to make a list of the person’s debt. After that, write down the household expenses that include utility bills, groceries, rent or house loan, and others in the budget.

After you did this, determine the percentage for each expense. For example, both of you want to contribute 10% of your income to pay utility bills. If you earn RM4,000 a month and your spouse earns RM4,500 a month, your contribution can be RM400 and RM450 for each other.

Tip #3. Create an Emergency Fun

Saving for a rainy day is Personal Finances 101 for everybody. And this applies to couples too. In general, a financial planner advises that your emergency savings should cover from 6 to 12 months of your household income.

With this fund, you are more than ready to face any unexpected situation like losing a job, poor health condition, or any miscellaneous stuff. An emergency funds provides your family money and protection during any financially bad situation.

Getting started is hard, but try to save at least RM100 per month as a couple, and if both of you are working, you can increase that amount according to your budget. Small changes like a coin or RM1 notes is essential and can be saved separately in your ‘tabung’ to help add to your existing monthly saving.

Tip #4. Set Your Goals

To live together financially healthy, couples will need to identify their short- and long-term goals.

When it comes to the short-term, is anything up to 2 years or less. Ask each other “Do you want to upgrade your current house ( e.g buy a house or rent another apartment? ) travel every year or have children?. With this, we would like to recommend to set up different money jar for each goal and determine the amount you will put in each jar weekly or monthly.

For long-term goals (anything more than 2 years) you may want to plan for your kid’s future education funding, retirement, or buying a second home. Set up a plan that stretches for several years to include how you planning to achieve these goals. This planning can help you to work harder to earn more money.

Tip #5. Pursue Combined Investment Planning

Before you decide on investing, you need to determine what is the right way for you. Never jump blindly into every opportunity to invest until you are aware of the technicalities and your risk profile. Instead, consult a professional like a licensed financial planner who can help you guide you through the process.

You also need to be careful not to over-invest or over-fund your retirement fund. Young couples tend to over-fund their retirement because they are worried about the future. But, this can also hinder their short-term goals. That’s why it is so important to lay the whole planning for all your goals and make sure your investment strategy is in place and doesn’t conflict with your other goals.

Tip #6. Seek professional support

If you feel the financial planning with your spouse reaches a dead end, consider getting help from a professional. Help like couple’s counseling can provide as the intermediary for both of you to discover deeper issues and figuring out a way to face the issue. Consider joint sessions for better responses and higher chances of communication between both of you.

For the financial part, seek your licensed financial planner to make sure your financial goals are correctly aligned with your partner plan. A financial planner will help to make sure your household cash flow is balance and your asset is allocated properly. But, of course, all decisions will come to your hand and financial planner only showing you the way how it will be properly done.

Conclusion

Talking about finances with your partner can be an awkward conversation. Finances are something that is considered very private. But, when you open up to them on your financial situation, it will help to set the course for better financial goals and as both of you slowly working towards the goal, you will realize that marriage is not a one-man show and you will need each other to make it work.

The best way to have a good money conversation with your spouse is to create a judgment-free space. Regardless of your partner financial situation, you have to approach it with neutrality and compassion as you create a plan for your household finance.

What is your go-to steps for finances after getting married?

5 Reasons Why You Need an Emergency Fund

Emergency savings is one important facet in planning your finances. Learn reasons why you need to save for your inevitable rainy days.

An emergency fund is a familiar term that is often stressed on by financial advisors when it comes to the best strategies to mitigate financial difficulties.

According to a survey conducted by the Department of Statistics Malaysia (DOSM) during the Movement Control Order (MCO) period last year, more than two-thirds (71.4%) of self-employed respondents had savings of less than a month’s worth and 82.7% of private-sector employees had savings of up to 2 months’ worth only.

If you don’t have an emergency fund in place and are hit by any of the unexpected financial situations, you will have to risk relying on credit cards, applying for a loan, or even using your retirement account. This would not be wise as it could lead you into much more debt or have insufficient money for your retirement years. Such actions lead to a lasting impact on your finances as they are harder to recover from than having built an emergency fund in the first place.

Before you start building an emergency fund, we outline to you 5 reasons why having one is important.

Reason #1. Relying On Active Income or Single Income

Having only active income or only one income source is familiar among us, especially those with monthly salaried basis. But, what if you face a situation that directly impacts your ability to make that income?

If you suddenly lost your job, the money will stop flowing in but you still must continue to cover your everyday expenses by using savings until you secure a new job. If 2020 has taught us something, it is that anything can happen and if you don’t have any savings, how will you pay for your commitments? The situation becomes even worse if you are the sole breadwinner of your family and it’s impossible to obtain money from another source of income as your condition keeps you from doing so.

For a single person, you should have at least 6 months of emergency savings to keep you afloat during these tough times. For an individual with dependents, it is recommended to have 6 to 12 months of emergency savings.

Reason #2. Facing Unexpected Health Conditions

If you or your family members are suddenly struck by a serious medical condition, it can cause a big hole in your pockets if you don’t have an emergency fund stashed away. Routine checkups, medical surgery, and medicines add up quickly. You might even need to use all your sick leave until eventually you are taking days off without pay.

If you have medical insurance, you may need to recheck with your insurance providers on your coverage as they may have limits on covering your medical expenses that can be expensive.

With well-funded emergency savings, you can better deal with these costs and make it bearable to get through those challenging times. Your treatment period should be a time for you to get enough rest and recuperate than to worry about upcoming financial situations as this will hinder a good recovery.

Reason #3. Paying Off High Interest Debts

You will not want to be in debt in the first place. And, it is somewhat controversial to use your emergency savings to pay off debt. However, it is good to have the option available to pay off high interest debts with part of your emergency savings.

With every financial bump in the road, your savings are there to help mitigate the situation as well as avoid you needing to add more to your debts. Those funds can help you to cover unexpected expenses caused by situations made by natural disasters or medical expenses.

By using your savings to handle these stressful events, it is easier for you to stay focused on resolving to get out of debts. Do make an effort to replace the money taken out from your emergency savings.

Tip: To ensure consistency for your emergency savings, include a monthly contribution in your budget until it is fully funded to the right amount.

Reason #4. Achieving Financial Goals

When you are working towards a goal like changing your career or owning a home, your emergency savings is one of the best ways to ensure that you achieve your goals. The savings provide a safety net that allows you psychologically to focus on your key financial goals without worrying about your finances. This is especially true if you have always been employed and are now looking to become an entrepreneur.

For example, if you buy a house, you need to put some down payment and make advance capital payments (while still being able to withdrawal if you have a flexible housing loan). A bigger down payment or capital advance meant your are paying less in interest on your property netting you some savings.

Although your progress to rebuild the saving may slow a bit, it will leave more money for your savings and this is a great way to prevent you from moving backward with your emergency fund. You can think of your emergency fund as a backup plan for any unexpected expenses.

Reason #5. Preparing for Retirement

Everyone wants to have a blissful retirement without having to worry about day-to-day survival, right? While your retirement savings in the Employees Retirement Fund (EPF) or your pension (e.g. public servants) will help provide you income, your emergency fund plays an important role by protecting that income.

If you are heavily invested into the market and there’s a prolonged correction or recession, you may be forced to sell investments at a lost to cover your living expenses. A larger emergency savings buffer is highly recommended for such situations if you are retiring or near retiring.

If unexpected expenses pop up, it can affect your monthly income. When you are retired, your income is fixed and might be slightly lesser than your working years, and there is no way to make up the difference between the money you currently have and the money you need without any streams of income.

For individuals that have a family, an emergency fund can help you to fund gaps when your children or other family members might need help. Your newly graduated kids might face problems getting a job, especially during a bad economic situation and as retired parents, you can help them first while they are looking for a job.

Conclusion

Emergency savings is a good way self-discipline lesson while teaching yourself the value of money. The main takeaway is the fund will give you some breathing space in the event of an unexpected financial blow while helping to prevent you from going into debt.

If you feel it difficult to build your emergency fund, try starting with a small amount, for example, RM10 per month. Increase the amount gradually whenever you feel comfortable and ready. Set in mind that this fund is for your future usage and peace of mind.

What drives you to save money for rainy days?

6 Tips to Instill a Healthy Financial Mindset in Your Kids

By Fateen Rosli

Creating a positive financial mindset should start from an early age. Learn some of the ways to cultivate healthy financial mindsets in kids.

Financial planners often hear clients exclaiming, “I wish I knew about this earlier! If only this was taught in school.”, whenever financial planning and other sub-topics regarding it are discussed. Today, we want to encourage you to bring these topics to your children in the “school” you call home.

One of the best skills that parents can teach children from young is smart money habits. It is important to impart good knowledge and attitude in handling money during the early years as it will shape their attitude towards money as adults. Undeniably, each child’s attitude towards money is influenced by parents, peers, as well as media. If their foundation is strong, they would be able to rationalize money decisions and this leads to them being more financially savvy adults.

However, it is getting tougher to teach kids about the value of money since we are in the cashless society now. More people are no longer use cash to pay for things. Transactions are made online and card payments are used. Thus, kids do not see physical money transactions when the parents and people surrounding them purchase goods and services. In addition, with credit is easily available, the need to be able to manage money is even more important now.

How can we start to teach our kids on good money management?

Tip #1. Start Your Kids Young

Parents can teach their kids from as early as three years old about basic transactions.

Kids at this young age learn through observations so for a start, parents can teach the concept of money by exchanging it for food or toys, which is likely to be their primary interest at such an age.

Tip #2. Value of Money

For kindergarteners towards school-going children, you can start to teach them about value of money. This means spending, saving, and learning to make small but wise money choices.

This is to prepare them since they will need purchase their own food when at school. At this age, parents need to be more involve by instilling confidence to their kids. For instance, to get your kids to approach the cashier and pay when making purchases, while the parents observe. Be ready to assist but only if they need help in order to build up their confidence. You can start by making this a roleplaying game at home first if your child has strong anxiety about it.

Start with a small fixed allowance and teaching them to understand how the price of an item relates to how much it will reduce their cash in hand. Help then understand options by providing substitutes if an item is over their budget. You can also demonstrate to them how accumulating their leftovers (savings!) can lead to having enough to buy something more expensive.

As a result, you are also teaching them that not everything can be purchased, and we should be spending within our means.

Tip #3. Include Kids in $ Conversations

When the kids are in their tween and teenage years, do include them in conversations when making money decisions. It is important so that they will feel that it is okay and safe to talk about money with someone that they trust i.e. family members.

You may ask their opinions and discuss on advantages and disadvantages,

repercussions, and rationalization in making decisions with regards to money, such as, when buying a car, purchasing a television, a phone etc. Do discuss with them on their aspirations for college and the cost entails.

This way, your children will have the sense of involvement and responsibility towards money as their opinion is heard. They will have a stake in observing the consequences of their opinions. As a result, they will have more understanding and familiarity on how money works and how better to manage debts.

Tip #4. Teach the 3-Jar System

Teach the school-going children how to manage their allowance so it isn’t just used for spending.

One of the ways to inculcate healthy mindset is to set-up jars i.e. 70% for spending, 20% for savings and 10% for charity or donation. At the end of the month or every quarter, count out the money with your children and record the numbers. Review the numbers with your child and encourage them. Do bring your child to the bank to deposit the money and once accumulated, bring them to their charity of choice.

Consequently, you are teaching the kids about sharing with the less fortunate, saving for their future, and carefully spending on what they need and want.

Tip #5. Sometimes Things Go Wrong…

Kids should know that sometimes, things will not always work out in our favor. Parents should share with the kids if they are facing money difficulties and when some compromises need to be made by the family members.

At times like this, when the economy is not as good, most people face pay-cuts, unpaid salary and worse, retrenchment. Thus, it is best to lay-out the expenses that can be dropped temporarily, for example, extra classes like piano, art, taekwando swimming etc. Do involve the kids in the discussion where some expenses need to be cut-off as this will affect them, physically and mentally. Explain to them on the things that need to prioritize for the time being.

Consequently, you are teaching the kids that when things does not go your way, you will need to have mitigation plan without sacrificing what truly matters.

Tip #6. Be a Good Example

Parents should always portray good money attitude in front of children.

Talk about money from positive angles – money as a tool that can help us achieve what we desire e.g. education in university of choice (with good grades, of course), to live comfortably within our means and provide the choice on what we want to acquire with peace of mind. Approach debt-management objectively and avoid blaming each other. Demonstrate what it means to spend within your means – what does this mean and how do you make it work.

Children learn about money from observing you. Thus, parents need to learn talking the right money language, having the right money attitude and skills. Children will absorb these money habitudes from their observation and listening while growing up.

Your beliefs become your thoughts, Your thoughts become your words, Your words become your actions, Your actions become your habits, Your habits become your values, Your values become your destiny. ~ Mahatma Gandhi

Conclusion

Kids that are taught with good money management skills with have better chance to make sound financial decisions and not get into money troubles when becoming adults. They will be better prepared to face any challenges in the future.

As parents, we should discuss openly with kids and share on our financial mistakes so that they will not repeat in the future. Nonetheless, in order to cultivate healthy financial mindsets in our younglings, we also need to be equipped with the right skills, knowledge and good money management, ourselves.

What are your tips on teaching your children about financial mindset?

About the Author: Fateen Rosli

I have always been passionate about figures and financials. I believe that by becoming a Licensed Financial Planner and Advisor, I can help people to improve and enhance their financial situations. I take great pride in helping clients achieve their goals through financial planning.

Contact Fateen at fateen@wealthvantage.com.my or register to get financial consultation here