Jill Kerby

SUMMER MEANS WEDDING BELLS AND MARRIAGE CONTRACTS…

There is much to say in favour of the state of marriage - as opposed to the state of most people’s marriages, which, as any married person knows will occasionally need a little extra work and maintenance over the course of a long union.

What better time to do so from a financial perspective than in the summer, when so many couples are about to take their wedding vows or are celebrating their anniversaries?

Regular readers of this column know that I am not a big proponent of big, expensive white weddings where the funding of the event (which too often is spread over three days) requires bank loans, credit card debt or an appeal for cash from wedding guests instead of a conventional gift.

In the Talking Money Guide (see www.irishlife.ie for free download) which accompanied our RTE Drivetime radio slot, mortgage and financial adviser Karl Deeter and I wrote about how a €25,000 wedding loan over five years at 9.7% interest “translates into a monthly repayment of €528…and a final interest payment of €6,200.”  But we also pointed out that a monthly investment of this amount for five years, assuming a lower 6% return, would produce a gross lump sum of €36,867.

Meanwhile, the couple who opted for a more modest wedding and gave each other an on-going wedding gift of a €265 each into their respective pension funds, earning 6% net of charges and fees, could expect a combined fund worth €1,055,490 after 40 years. Only their pension income would be taxable.

Substituting a lavish wedding for a dull, but worthy pension investment is a lot to ask. But foregoing expensive wedding debt for affordable mortgage debt – and a contribution to a pension fund – may appear plausible if presented in their right light.

Which is why it is so important that every young couple who is planning to marry should be sitting down and discussing their finances in an open and honest way and certainly no later than their engagement party.

It may not be the most romantic discussion, but finding out what financial assets and claims each party will bring to a marriage is a very necessary one.  Too many couples have never had frank and open discussions about their respective and collective finances during the entire married life.  Too many working spouses don’t know exactly what they each earn, how much tax they pay, the size of their savings accounts, the debt they carry. 

Wives (mainly, still) who take career breaks to rear children and are not certain about their joint finances, can be left nearly entirely financially dependent on their spouse for the first time, leading to a great deal of unnecessary stress on their marriage.

At the very least, engaged couples should want to avoid nasty, post-honeymoon surprises like the one that happened to a young husband I once met who mistakenly opened his new wife’s credit card bill after their two weeks on a golden beach.  He discovered she had a stubborn, €10,000 outstanding Visa card balance that was now his problem – quite correctly – as well as hers.  (They were lucky it didn’t cause a serious, early rift; instead it gave them the nudge they needed to sit down and review not just the total cost of their wedding, but their wider finances.)

That young couple was lucky.  But luck isn’t what makes a successful marriage; love and mutual respect, trust and good communications does. So for every blushing bride and groom-to-be and their mums and dads who will be celebrating their own wedding anniversaries this summer, here’s a short checklist of financial issues that every couple should discuss and adopt: 

-       Net worth – our individual and collective income, savings and investments, including pension funds and other assets (like property). How much debt do we have and its service costs?

-       How much tax do we pay? What will our liability be as a married couple? As parents? Should we consult a tax adviser? (Yes!)

-       Should we have a joint current/deposit account or keep separate ones? (How about both!)

-       We need to make wills and take out life insurance on each other’s lives. Our wills will need reviewing as circumstances change, like after having children.

-       The need for an annual budget that identifies household and personal costs and from the outset allocates our income proportionately to our joint costs – the mortgage/rent, utilities, food, insurance, child-care costs, retirement, holidays, etc.

-       We need to discuss spending priorities, our discretionary spending and to agree to always reach a consensus regarding financial purchases, investments, debt, career changes, starting a family and retirement.

Marriage contracts seldom appear in written form…more’s the pity. But good communications can avoid costly disagreements few brides and grooms ever anticipate on their wedding day.

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