Are you playing fair, financially speaking, with your partner?
Many widows and divorcees discover negative financial surprises when they have to take control of household finances
One of the kindest things partners in a committed relationship can do for each other is share the burden of responsibility for the household finances, says leading financial planner Janet Hugo.
Financial stress increases levels of depression and anxiety, says Hugo, a certified financial planner (CFP) and director of Sterling Private Clients.
And financial stress is not something only poorer households experience. The most recent Old Mutual Savings & Investment Monitor shows that one in three households with a monthly income level of between R20,000 to R39,999 reported high levels of financial stress, and almost as many (27%) in the +R40,000 monthly income households identified as highly financially stressed.
Of those who experience trouble managing their debt, 70% described their stress levels as "overwhelming".
However, the negative effects of financial stress are buffered by "a strong and supportive relationship, through which a couple feels capable of problem solving together", psychology professors at Carleton University, Canada, found.
In heterosexual relationships, financial roles still tend to follow traditional gender lines, the 2019 Investor Watch survey from the UBS Global Wealth Management survey shows. Women take care of day-to-day spending and men take care of long-term planning, such as investing, insurance and retirement planning. Also, women, including millennials, typically leave important financial decisions to their spouses.
In Hugo's practice, traditional gender roles generally persist. "When I do financial planning with clients, I struggle to get women into the room, especially the older generation," she says. She attributes this to the desire to avoid responsibility and maintain the illusion that the household finances are in a good state.
Of widows and divorcees discovered negative financial surprises when they had to take control of household finances
Besides easing the burden for the person who has been assuming responsibility, Hugo's view is that setting up a plan together strengthens bonds and empowers the less knowledgeable partner, giving them greater confidence about what lies ahead, whether it's funding their children's education or retirement.
"We do meet women who defer their financial responsibilities to their partners," says Gugu Sidaki, CFP and director and wealth manager at Wealth Creed. "But there's a shift. Younger women are highly independent and they usually initiate the financial planning process. Very few think of their partner as their financial plan."
Sidaki says it is useful for both partners to be involved in their finances given the rising rate of divorce. Stats SA research released last year showed that over 44% of divorces in 2016 occurred before the 10th anniversary. "The possibility of divorce is a reality, so it has to be brought into the conversation around finances."
This applies to dread disease and death too. As the Investor Watch report points out, in such critical moments, lack of participation in long-term planning leaves women ill-prepared. The report found that 74% of widows and divorcees discovered negative financial surprises when they had to take control.
Kirsty Scully, CFP and senior financial planner at Core Wealth, who was pregnant when widowed at the age of 28, also notes the increasing prevalence of divorce. She says women need to protect themselves by looking after their careers.
"If you do not keep in touch with your career, you will find it difficult to go back later and earn a market-related, viable income."
Does playing fair mean that household expenses should be evenly split? "If you're a committed couple, you should be committed financially as well," says Scully. "It is not your money or my money, but our money."
Years without saving
She recommends you add up joint expenses and put the amount that covers those in one account you both can access. Ideally, the expenses should be divided 50-50, she says. However, if one earns less than the other, the division should be in proportion to their earnings.
Arguably, one of the greatest impacts on a couple's finances is their children. "If the couple decide that one will stay at home to look after the kids - and increasingly men are fulfilling this role - the finances have to be discussed, as that person needs a sense of financial security," says Sidaki.
This decision should take into account that the financial impact extends beyond the salary. "There is also the fact that you are not spending those years saving for your retirement," says Scully.
She points to a second phase of life when people take time off work: "When you are in your fifties, you either need to look after your parents or in-laws yourself, or pay for a nurse. So again you say, 'Why don't I do it myself?' And again you lose out on contributing to a pension fund."
Scully says she is seeing the effects of this more frequently in her practice.
Managing your financial journey as a committed couple holds many challenges. Sidaki advocates enlisting the services of a certified financial planner. "We have experience of what couples tend to struggle with. It's not to say that the road is going to be smooth once you've spoken to a financial planner, but it will help you navigate those issues."
Find a CFP, says Scully, who is on the board of the Financial Planning Institute.