Introduction

So, you have found THE one—congratulations! You are ready to ride off into the sunset, hand in hand, and live happily ever after … except you have not spoken about your finances. You see, marriage is as much about ‘what is yours is mine’ as it is about ‘who is paying the Wi-Fi bill this month?’

Before you get swept away in wedding planning, you must talk about financial planning—because while love may be blind, your bank account is not. Whether you are entering your union as a frugal financial guru or the type who swears that the green Zara top was an emergency expense, this guide is here to help you navigate the wonderful (and occasionally nerve-wracking) world of finances as a married couple.

Although financial planning is not a one-size-fits-all solution, aligning your goals and expectations before marriage is vital, as money can spark long-lasting disputes. In 2024, a Fidelity Investments survey found that 45% of couples occasionally argue about money and that one in four couples admit money is their most formidable relationship challenge. Therefore, open communication about money and expectations from your partner will go a long way in avoiding future conflict that leads to financial friction.

In this article, we address the various legal and financial aspects couples should consider, which will impact their financial planning as a married couple, to avoid potential pitfalls.

Open communication about finances, budgeting and joint financial planning

Open communication within any relationship is vital to building trust and a healthy relationship. Therefore, openly communicating about finances with your significant other before getting married is just as important and prevents the guesswork.

Goal setting

Discussing financial goals, values, and spending habits will help determine whether you are on the same page regarding money matters. Each of us has a level of desire to create abundance. This desire and relationship with money will depend on each individual’s ideas of money and their upbringing.

Establishing short- and long-term financial goals can provide focus and direction regarding what to work towards as a couple. Before establishing your financial goals, it is essential to identify each person’s relationship with money. The following can be regarded as having a poor relationship with money – regularly spending too much, using credit to finance your lifestyle, purchasing on impulse, neglecting a budget, accumulating high-interest debt, and living beyond your means to “keep up with the Joneses”. Addressing these issues in your relationship should form part of your short-term financial goals. Short-term financial goals can typically be achieved within a year or two. Some examples include building an emergency fund together, saving for your wedding, a vacation, or paying off debt, to name a few.

Longer-term financial goals will allow you to determine your partner’s desire for financial abundance and whether you see eye-to-eye on money. Knowing how much money is enough and what financial freedom looks like for your future spouse can assist in establishing a shared financial vision through aligned goals. When setting your financial goals as a couple, try following the SMART principle (an acronym for Specific, Measurable, Achievable, Realistic, and Timely). Using these criteria may help increase the likelihood of achieving your long-term goals and leave less room for future marital discontent.

Debt disclosures

Debt can be one of the most significant contributors to financial stress within a marriage. According to the latest SARB statistics, South African households’ indebtedness in terms of their disposable income stood at 62.6% at end-December 2023. Of this debt, c. 80% is longer-term loans, whilst the remainder is short-term credit. Thus, the likelihood that your future spouse may have debt is high. Understanding this and being prepared to tackle it is a crucial step towards financial planning.

If you want to get married without having massive debt obligations weighing on the relationship, there are several steps you can take to pay your debt faster. Using an accelerated payment method and paying more than the minimum amount may create a snowball effect in reducing your debt. This involves settling your smallest loan first whilst continuing the minimum payments on other loans. Once settled, roll that payment amount to your next smallest account as you work up to the largest balance. This allows you to budget appropriately and build momentum to repay your debt. A different approach could be paying your more significant and higher interest-rate debt.

Income and expenses

Discuss your current and potential income streams, including formal employment, business ventures, or investment income. You can share or split expenses equally based on your income level. Ensure that this arrangement feels equitable for both parties. Finances can become a power play within a household. Power distribution is often determined by a spouse’s income, occupation, or even level of education. It is vital to set clear expectations for one another to avoid conflict when managing household finances.

Shared vs separate accounts

Decide whether you will have joint accounts or keep separate accounts. In SA, joint accounts are common for shared expenses like rent, groceries, and utilities, while personal accounts can be used for individual spending. Deciding whether to create a joint bank account or keep entirely separate bank accounts can be facilitated by setting spending limits on specific categories and creating a shared budget template to track expenses. A helpful app to facilitate this is Splitwise, which allows couples or groups of people to track and allocate joint expenses over time.

Cultural expectations

SA is labelled the “rainbow nation” and is very diverse. Traditional and cultural expectations regarding financial contributions to extended family (such as lobola and other family responsibilities) can influence financial planning. Being honest about your financial status and ability to make ends meet is crucial. Your help should be realistic and not compromise your happiness and ability to provide for your direct family.

Investing together

If you can apply sound financial planning in your own life, it will be much easier to use it in your marriage. Therefore, before getting married, you should also assess your financial situation. First, it is crucial to build a cash reserve for emergencies. As a rule, set aside enough money to cover three to six months of expenses. This amount will be influenced by the number of dependents, your housing, groceries, and risk and health coverage, to mention a few considerations. Without an emergency account, when you incur unforeseen expenses outside your budget or suddenly lose your job or business, it may lead to you taking on debt to fund your lifestyle, which is not ideal, especially in the current high-interest rate environment. When mentioning cash reserve, we are not suggesting keeping cash under your mattress; instead, consider opening a basic non-fixed savings or investment account in a money market fund. This will give you the necessary liquidity requirements while earning a stable and attractive yield.

Regardless of your age or retirement timeline, capitalising on tax-friendly investment products will benefit your future self and reduce pressure on you and your future spouse on whether you can retire comfortably together. Examples of such investments include employer provident funds, retirement annuities (RAs) and tax-free savings accounts (TFSAs). After ensuring your emergency account has sufficient reserves, maximise your contributions to an RA and TFSA. If you cannot invest the full tax-deductible annual limit of 27.5% of your taxable income into your RA or the total annual limit of R36,000 into your TFSA, start with a small manageable amount and gradually increase your contributions.

Is purchasing your first property together a shared vision? If so, marriage can make buying a home easier because two incomes are better than one. For example, you may qualify for a larger loan by combining your income with your spouses’. However, the terms and size of your loan will also depend on each spouse’s credit score. Here, the topic of debt comes back into play and emphasises the importance of having a good credit history for you and your spouse. Having conversations about whose name the property will be registered, who will be responsible for the bond costs every month, and how your marital property regime will impact ownership in the case of divorce will be crucial.

Understanding SA’s marital regimes

In SA, there are three types of matrimonial regimes. These include:

• Marriage in community of property: In SA, a marriage is classified as in community of property if there is no antenuptial contract. Here, all assets and liabilities of each spouse are joined into one communal estate, with each spouse owning an equal share of 50%. Any assets and liabilities accumulated by either spouse will be added to the communal estate and shared equally. Spouses married in a community of property do not have their own estate but a joint estate shared equally. Only half of the estate will be subject to estate duty if one spouse dies. In the unfortunate case of a divorce, the estate will be shared 50-50 between spouses, including all assets and liabilities acquired before and during the marriage. However, gifts or inherited assets are excluded from the communal estate.
• Marriage out of community of property (excluding the accrual system): This means getting married with an antenuptial agreement. It may be a sensitive topic as it could raise signs of potential mistrust. However, an antenuptial agreement can protect both spouses’ interests in the event of a divorce by protecting assets accumulated before marriage. This contract ensures that both spouses keep their separate estates and are not responsible for one another’s liabilities or have part ownership of one another’s assets accumulated before marriage. An antenuptial agreement without accrual means that spouses retain what is theirs before marriage and what they have accumulated during the marriage – the estate will not be shared upon divorce.
• Marriage out of community of property (with accrual): This regime sees each spouse keep the assets and liabilities acquired before marriage. The difference is that the total wealth accumulated by spouses during the marriage is shared equally on divorce or any percentage agreed to in the antenuptial agreement. Any inherited assets or donations between spouses during the marriage will be excluded from the claim. Setting clear rules in advance simplifies and reduces the cost of legal proceedings, as there is less need for negotiation.

Planning for divorce may sound like planning for failure; however, the number of divorces p.a. is rising. SA’s latest divorce statistics show a 10.9% YoY increase in 2022.

Medical aid and risk considerations

Upon assessing your joint financial position, you may have determined various inefficiencies or shortfalls in your joint coverage. It is, therefore, important to discuss this with your wealth manager/financial advisor for an in-depth analysis. Below, we highlight those aspects that should be reviewed.

A minor consideration for a new couple commonly overlooked is emergency contact details, vital in tracking down your loved one if something unexpected happens. So, ensure you update all your emergency contact details at your doctor, dentist, gym, work, and car tracking company.

Medical aid

As with any new life stage, reviewing your medical aid will help determine any shortfalls. For young couples, the focus should be on your health needs. Understanding each other’s medical concerns and chronic medication requirements is essential when determining the right medical aid coverage. Certain medical aids may or may not provide for chronic medication and impose various exclusions or limits on cover for significant expenses. Your lifestyle and finances will assist you in making the right decision.

A family can save money through simple medical aid consolidation. This efficiency is created by consolidating two main members into one primary member and another adult additional member, which can lower your premium and maintain or increase overall cover.

Disability cover and income protection

Possibly the most crucial aspect of financial planning when getting married is assessing your family’s requirement for risk cover. While it feels like a grudge purchase, the implications of your partner being permanently disabled, losing their income or being diagnosed with a severe illness can be detrimental to your financial plan. Assessing your disability cover and income protection is designed to financially protect you and your family against financial loss due to said outcome. Ensuring the breadwinner or both individuals are covered can provide peace of mind and financial security for the unplanned.

Life insurance

Life insurance is not a luxury but a necessity for families with young dependents and financial obligations, as it provides a financial safety net when the unexpected happens. The loss of a parent, especially the primary breadwinner, can have severe financial consequences for a young family. Life insurance offers a lump-sum payout that can cover immediate costs or reduce longer-term liabilities. It can go a long way in easing the financial burden during an emotionally challenging time. Another key reason life insurance is especially beneficial for young families is affordability. Typically, younger and healthier individuals are eligible for lower premiums, making it a relatively small investment with a substantial payout in the event of a tragedy.

Estate planning

Estate planning is often considered a luxury for older or wealthy individuals, but young couples should recognise its importance as it not only relates to death but also incapacity. Beginning the estate planning process early offers several advantages, such as safeguarding assets, ensuring the care of loved ones, and future-proofing your life. The unintended consequences of failing to do so could lead to disputes among heirs, unnecessary taxes, or the mismanagement of assets. While estate planning can become highly complex, we will outline a few points of consideration for a young couple.

First and foremost, updating each other’s wills goes a long way in planning your estate. Ensuring an executor has been nominated, all assets have been identified, and beneficiaries have been nominated is a good starting point. Formal consultation with your financial advisor or lawyer is crucial in ensuring your will is up-to-date and valid. Regularly updating your will is essential as major life events (getting married, having kids), changes in law and your financial position (purchase of property, change in income and investments) will impact how you draw up your will.

It is important to consider the tax implications on death when estate planning, as tax planning is often overlooked during this process. Being tax cognisant during your estate-planning process can significantly decrease your tax liability (estate duty, capital gains tax [CGT], and income tax) and increase the overall inheritance to your beneficiaries. Below are a few strategies to reduce your estate duty and other taxes on death:

• Leverage trusts: Trusts are a valuable tool for lowering taxes, especially estate duty. Transferring assets into a trust can exclude them from your taxable estate, potentially lowering your overall tax liability.
• Make lifetime donations: Consider making donations while you are alive to decrease the size of your estate and the estate duty owed. SA law permits tax-free donations of up to R100,000 p.a., allowing you to transfer wealth to your beneficiaries gradually.
• Maximise use of exemptions: Take full advantage of available tax exemptions, such as the primary residence exclusion for CGT and the spousal deduction for estate duty. Structuring your estate plan to incorporate these exemptions can significantly reduce the taxes due.

Lastly, liquidity and access to funds for dependents are crucial. Depending on the complexity of your estate, the winding-up process can take a few years, so it is essential to identify what assets can be transferred quickly to provide liquidity on death.

• The use of endowments: Local and offshore endowment plans are especially tax-efficient for individuals with an average 30% or higher tax rate. These plans allow you to nominate a beneficiary to receive the investment proceeds upon death, simplifying estate planning. They enable heirs to access their inherited assets faster and avoid executor fees.
• TFSA: TFSAs are similar investment vehicles which allow you to nominate beneficiaries.
• Living annuities: A living annuity can offer income to nominated beneficiaries. They can receive the death benefit as a cash lump sum, transfer it to a living annuity in their name, or opt for a combination.

Conclusion

As a couple’s financial habits can be early indications of future marital satisfaction, marital distress, and potential divorce, figuring out who is responsible for the Wi-Fi bill does not sound so unimportant anymore. Discovering each other’s financial balance sheets may be just as crucial as finding each other’s personalities when living together.