6 Financial Actions to Take Before Getting Married

6 steps for early financial planning with your future spouse before marriage to avoid marital disaster.

Getting married soon? Well, you should start preparing yourself to tackle the new financial situation. Marriage not only means sharing of goals, desires and ambitions but also partaking assets and financial liabilities. From personal finance needs to investment, everything becomes shared. Marriage brings modifications in financial situation.

While finding a partner for life by itself a significant challenge, basic money management is perhaps a bigger challenge to the institution of marriage itself.

People mostly viewed marriage as a rose colored glass of love but they tend to overlook the importance of financial planning. In reality, not having these talks early on can hurt our relationships and lead to major financial arguments

Money arguments  have been identified as one of the leading factor of divorce. Having a financial plan and taking time to engage in meaningful money talks on a regular basis is very essential for a couple. If you or someone you know is about to get married, take or advice them on some financial planning ways to make prior to getting married.

#1. Complete a financial wellness assessment

Before both of you sit down to talk about financial story, you need to know exactly you each stand financially. Your financial wellness assessment should include important information about your current financial status. At a basic level, complete a net worth statement and review your recent expenses. Then, create a spending plan so you can start proactively telling your money where you want it to go in advance. Other important financial aspects you can include is your savings ratio, debt to income ratio and emergency fund. Your assessment should also include a quick examination of your financial attitudes and confidence about your knowledge of money matters. You can consult a licensed financial planner on this matter.

#2. Create a debt reduction plan

You don’t necessarily have to completely eliminate your credit cards or student loan debt before tying the knot with confidence. But it is recommended to have at least an action plan to deal with your debts. Many couples delay getting married until after student loan debt or personal loan are less overwhelming. Bringing the baggage of of debt into a marriage can be a major stress factor for a couple. Couples should spend some time to understand each other’s current debt obligation. But, instead of just identifying the potential problem, focus on establishing a debt reduction plan to deal with your loans and debt as effectively as possible.

#3. Be honest on your financial situation

You aren’t alone if the thought of getting financially exposed in front of a future life partner seems less than ideal to you.

Discussing about your financial situation prior to getting married requires trust and honest communication. You can even go beyond the financial wellness assessment and take a look at your credit reports together. Just remember that this process is not designed to dwell on the past. It is a way to use the past to guide our future financial decisions in your life together. And if some financial baggage do exists, it is better to be honest early on so you can create effective solutions together as a couple.

#4. Schedule regular money talks that aren’t boring or judgmental.

It is significant to discuss about finances and get into money talks before getting married. This is helpful in understanding each other’s financial needs and liabilities. Some topic ideas that you can explore are:

• What important financial lessons did you learn growing up?

• What are your future vacation plans? How much will this cost? How often do you plan on taking trips?

• Will you be renting or owning a home within the first few years of marriage?

• Do you have any specific career goals or future dreams of self-employment?

• What does financial independence means to you?

• What do you look forward to doing the most when you have achieved financial freedom?

#5. Baby talk with your future spouse

So, let’s talk about babies. Not the cute or adorable part, but the part where you need to be ready financially to have them. Sit down with your partner and have their opinions about whether or not you should have baby right away or you will need to wait some time before having one. List down potential costs needed when you have a baby including food, housing, transportation, health care, clothing, child care and education, and miscellaneous costs.

Understanding that having children is a lifetime commitment both emotionally and financially is a great first step in the process of deciding when to start a family.

#6. Make a decision to manage your finances as a couple

Figuring out how to consolidate accounts can be a challenge. Sometimes it helps to establish a joint checking or savings account before getting married to set aside funds for the wedding or honeymoon. The money in the account will be easily accessible to both the partners hence making it easy for any of them to withdraw money, make payments and track their financial activities. You also need to discuss how you currently handle day-to-day financial decisions. Whether you are a long-term planner or are you a well-organized and prefer to pay the everyday bills. This will help you start creating an initial game plan on how to consolidate accounts and whether it makes sense or not to keep separate accounts initially.

Conclusions

Being honest about your financial situation with future spouse can make a huge difference in couple’s communication and strengthen your relationship. Honesty can go a long way to ensure a harmonious marriage because you two are in this together. Not having these talks early on can hurt your relationships and lead to major financial arguments.

What other financial topics should you discuss with your future spouse? Share with us in the comments section below.

5 Steps To Manage Your Finances In The New Normal

By Rafiq Hidayat Mohd Ramli

Managing your finances in the new normal is inevitable. You need to adjust yourself to have control over your financial situation.

Most of our lives have changed either gradually or drastically since the start of year 2020 due to the pandemic crisis. The deeper we went into the Movement Control Order (MCO), the more people out there started to worry on how they would continue to survive if the MCO continues indefinitely. Phrases such as emergency funding started to become a normal vocabulary for most as constant reminders or sharing was done by those within the financial space.

As of 4th May 2020, Malaysia is currently under what has been termed as Conditional MCO. In this conditional phase, most businesses have now been allowed to reopen with certain SOPs and guidelines being shared by the government on how they can safely operate throughout the current conditional phase.

Individuals are also provided SOPs and guidelines on how we should go about living our daily lives, as the threat of the pandemic will still be there at least for the next one to two years according to most experts. Most people out there have coined this new way of living, working, and running our business as the new normal in which all of us will have to adjust to, until the pandemic is under control or a vaccine/cure has been found.

This brings me to the point I was going to make. If the way we live has to adjust to this so-called “new normal”, will there be any changes to how we manage our personal finances? In this article, I will share how we should go about managing our finances in the new normal for the benefit of the readers out there.

#1. Review Your Personal Budget

First things first, we need to have a hard look at our personal budgets. Identify all your current expenses – this can be done from either your credit card statements, bills, and bank statements among others. Don’t limit your effort on your monthly expenses, but expand it further to the non-regular expenses e.g. quarterly, annually or even ad-hoc spending.

#2. Identifying Needs vs. Wants

The next step is to identify your actual needs and what are the wants that can be reduced or removed from your budget. My easiest way of identifying the difference between these two categories is that anything that falls under needs is something that will affect your ability to live. Anything that doesn’t fall under that category would be considered a want.

There will also be less spending at least for the next one to two years for those that love to travel (especially overseas travel) as most countries might not be opening their borders to tourists due to fear of the virus coming in to wreak havoc on their respective countries. Even if you can go to other countries, you might be quarantined before you can truly enter the country and also quarantined when you return to Malaysia.

Most employees are also expected to continue to work from home in this new normal, which will lead to less time on the road, which would mean less money spent on petrol (which is the cheapest it has been in the longest time), toll, and even parking. There would also be less wear and tear of your vehicles, which would hopefully lead to reduce spending on replacing parts that have worn out due to usage.

#3. Review or Manage Your Loan or Debt Commitments

A subset of this budget preparation would be your loan or debt commitments. With the 6-month automatic loan moratorium, you should look into taking advantage of this time to start reducing your debts with higher interest, starting with credit cards and personal loans. This in turn will help you reduce interest charges and if you’re disciplined enough, you might come out from this period with reduced or no credit card debts. Good riddance, and congratulations to you for taking the first step towards becoming financially independent.

#4. Preparing Your Emergency Funding

After re-analyzing your budget, you would be able to identify what would be the amount that you would need in order to survive for at least 6 months if you should lose your main source of income, be it your salary or business-related income. Better still, extend the goal to having at least 12 months in your emergency funding. It doesn’t hurt to take extra precautions. Remember the term emergency funding that you have learnt earlier during the MCO, now would be the time for you to kick-start your plans to actually have your own personal emergency funding. Yay for adulting!

You should make it a habit to put aside a certain amount from your monthly income into your emergency savings on a regular basis. Don’t make the mistake of trying to save after you have paid all your bills, spent on your wants and needs. Consider saving into your emergency funding as a monthly commitment that you need to put aside. This will help you to be more disciplined and help you to achieve your goal of having your 6 months emergency funding earlier instead of later. This is important, as we are still not out of the woods yet. If the economy doesn’t recover and you do lose your main source of income, at least now you would have some funds in order to help you figure out what are the next steps that you need to take in order to secure a new source of income to replace the one that you have lost. The opportunity provided by the automatic loan moratorium can also be used to help you build up your emergency funding if you haven’t yet done so.

For those currently using instruments that are prone to market movements such as stocks, unit trusts, or even gold as a means for your emergency funding, please take note, that your emergency funding should mostly be saved in an instrument that is liquid (able to withdraw within a few days if needed) and also not exposed to market movements i.e, you capital will not be reduced if the market goes south.

#5. Creating a Robust Investment Portfolio

In terms of savings or investing, please start looking into creating an investment portfolio. Diversify. If you are someone who has a sizable amount allocated to an asset class, e.g. property, my advice is don’t double down on buying additional property right now even though property prices might be going down, and there might good potential purchases for you out there. Remember, we do not know exactly how long this “new normal” will continue to last.

What would happen to your new property purchases if no one can afford to rent or buy it from you as they’ve lost their source of income? How long would you be able to last i.e. your emergency funding/war chest if the above scenario continues indefinitely? Having a diversified investment portfolio would be able to help take advantage of different movement in all the different markets which will help you achieve your wealth accumulation goals.

Conclusion

Managing your finances in the new normal doesn’t seem to be much different compared to how it should have been managed before the pandemic. It is just that most people did not take the necessary precautions nor planning to ensure that their finances would be able to withstand such shocks.

One good thing about the pandemic, is that more and more people are now aware the importance of managing your finances and even understand the importance of proper financial planning to the overall health of your personal finances. I hope that we have all learnt our lesson here, and will start to look into managing our finances more effectively for our own benefits in the future.

What is the most important aspect to manage your finances in this new normal situation? Share with us in the comments section below.

Additional Charges Waived for Hire Purchase Loans Moratorium

Gain insight on how Malaysia’s Ministry of Finance announced latest changes to hire purchase loan and Islamic Financing moratorium affects you.

Banks have now agreed to waive the additional interest or profit charges imposed on installments for hire-purchase loans for the six-month moratorium, as announced by the government.

According to Malaysia’s Finance Minister, Tengku Datuk Seri Zafrul Tengku Abdul Aziz in a statement:

• The total amount for hire-purchase loans, both conventional and shariah will not change.

• No compounding will be imposed.

• Nor will the loan accrue interest during the six-month moratorium.

He added that the decision was made after discussions with the banking industry player.

“Borrowers must resume their loan repayments as usual based on the terms of agreement with their respective banks. This includes an additional six months to the total repayment schedule if they want to opt for the moratorium,” Tengku Zafrul added in his statement.

Banks will released further information regarding this matter and he hoped that this will help reduce Malaysians burden during these tough times.

The announcement is expected to put a stop to the heated debates that started over the weekend, on whether banks should impose additional charges for the six-month period from April to Sept 30.

Previously, Zafrul suggested that the financial institutions waive any accrued interest or profit imposed with respect to the moratorium period.

On Sunday (May 3), Agrobank, a development bank under the purview of the Minister of Finance Inc, announced it would do exactly that for all eligible individuals.

Make Good Financial Decisions Based on Your Needs

For individuals who don’t have any emergency savings, unstable source of income/salary, income affected by the Covid-19 pandemic, or have high interest debt e.g credit card debt, do opt for moratorium and use this opportunity to clear your debts and build up your emergency savings.

Overall

If you are still wondering what action needs to be taken for your financial planning, do consult a licensed professional for insights on actions you can take to improve your cashflow and finances.