If you’ve always felt that managing your own finances was challenging, then you may be in for a rude surprise after getting married. Making financial decisions with your significant other is exponentially trickier.
Whether it’s splitting household bills or giving allowances to the parents, financial decisions, when not managed and discussed properly, have the potential to create friction for couples.
To help us get a better understanding of the different kinds of challenges new couples may face, we asked three young Singaporeans to share financial planning challenges that they and their spouses have had to manage.
#1 Vincent & Jasmine, Both In Their Early 30s
Vincent & Jasmine have been married to one another for more than six years. From the moment he graduated in 2009, Vincent has been an entrepreneur putting in long hours at work to grow his business, while his wife holds a full-time job.
We spoke to Vincent to find out some of the challenges he and his wife faced when planning their finances together.
DollarsAndSense (DNS): What has been one of the biggest challenges in planning your finances together?
Vincent (V): At our current life stage with retired parents and two boys, being able to balance our household budget and still save enough for the family’s future with my “high-risk job” has been a challenge.
Over the last couple of years, I’ve reinvested a lot of my savings back into my business, which has translated into less savings for the family and disposable income we can spend today. At the same time, I believe that putting money in my business today means potentially having more tomorrow.
However, what this has meant is that we may not be setting aside enough to invest and grow our retirement nest-egg. At the end of the day, finding an acceptable balance between today and tomorrow’s needs is important.
DNS: As a couple, what did you do to overcome this challenge?
V: We always make it a point to spend below our means by living a modest lifestyle.
For instance, when we eat out, we rarely spend more than $30. We also seldom spend on experiences. Jasmine has been saving most of her income, and makes savvier purchases for household essentials through online platforms.
We’ve also tried to make a financially-savvy decision with our home. A few years ago, we bought a dual-key unit, allowing us to rent out a room for additional income without sacrificing privacy.
DNS: As an entrepreneur, how have you shaped the way you approach your finances?
V: As running a business bears enough risk for the entire family, both Jasmine and I err on the side of caution when investing. We invest for the long-term and do not make speculative investments. As such, we tend to invest in yield-producing investments such as REITs rather than to wait for long-term capital gains.
DNS: Can you share one tip you think newly-married couples or to-be-married couples need to consider?
V: As mentioned, entrepreneurship is risky as my savings are often ploughed back into the business. Saving for retirement has hence taken a secondary priority.
To balance this out, I sought out safer options to grow my money. One of the things I did was to simply make top ups to my CPF Special Account to earn attractive risk-free interest. This also allowed me to enjoy tax reliefs at the same time.
Even though I had the option of not contributing to my Ordinary and Special Accounts as an entrepreneur and having more cash on hand, I felt it was important to contribute as I wanted to have a secure retirement when we grow old. I believe I should not completely push aside retirement planning just because of my journey today as an entrepreneur.
One of the risks of being an entrepreneur is losing my income and not being able to pay for my housing loans. Because of this, we opted to use a minimal amount of our CPF monies to pay for our housing loan. This offers us the opportunity to build up money in our CPF Ordinary Account, giving us a buffer that we can rely upon to continue servicing our monthly mortgage in the event that I lose my income for a period of time.
I believe these decisions will put us in a healthier and stronger financial position when we become older.
#2 Andrew and Crystal, Both In Their Late 20s
Andrew and Crystal got married in 2016 and are both currently working in marketing and communications. We spoke to Crystal about some financial matters that they have been working on together even before getting married.
DNS: Given that both you and Andrew have been married for about a year, are there any financial hurdles that you have encountered thus far?
Crystal (C): One of the biggest decisions we had to make as a couple was to decide where we wanted to stay even before we got married. We eventually purchased a resale flat near Andrew’s parents. We did this for convenience – so that we could get support when we start a family.
In terms of financial planning, we chose a flat that would allow us to use our CPF Ordinary Account savings to pay for the downpayment in full, without any additional cash outlay. This was important because we had only been working for a few years and did not have much cash savings, especially after our wedding expenses.
We also planned for it in such a way that if one of us were to lose or take a short sabbatical from our job, our CPF would be able to cover the housing loan payments for at least six months.
This also gave us the flexibility to use our cash to do our renovations rather than rely on a loan. We were also able to start investing for our retirement earlier by allotting a portion of our cash savings for this.
DNS: What are some other financial planning matters that you had to think about after moving in together?
C: We realised, with household expenditure now added to our monthly expenses, it was important for us to be able to keep track of how much we were spending each month. I researched for the best savings account and credit cards to use so that we could make the most out of our credit card rebates and earn a good interest rate on our savings.
DNS: What is next on the financial planning checklist for the two of you?
C: We are reviewing our current health insurance coverage to understand if it is sufficient. This is an area that matters to us because I was hospitalised previously, with the hospitalisation bill largely covered by insurance. This incident reminded us about the importance of adequate insurance coverage. We are also thinking about how we can invest our money for the future. It’s always a toss-up between having more cash on hand today, and saving and investing to have more in the future.
DNS: Can you share one tip that you think newly married couples or to-be- married couples need to consider?
Spend within your means – don’t assume that your salary will grow at the same rate that it has in the past and that you will always earn dual incomes. This is especially important for big-ticket purchases that have recurring payments such as your house and car.
This also means that you need to know how much you’re spending. If you are too busy or lazy to track this, use an app or find a simple way to do so.
#3 Kai Vearn & Anita, Both In Their 20s
Kai Vearn and Anita got married at a young age compared to many of their peers. As they were just starting out in both their careers, getting married at a relatively young age came with its own set of unique challenges.
DNS: We believe all couples will face some form of financial challenges at one point or another. What’s been one notable financial challenge that you and Anita faced after getting married?
Kai Vearn (KV): A notable financial challenge that Anita and I faced after getting married was to pay for the recurring expenses of our resale flat purchase. At the time of our marriage, we were still rather young. Anita was 22 years old and I was 25 years old.
We had just started working for about six months. Furthermore, our situation caused us to opt for a resale flat. Since we took a bank loan, we needed to pay a higher 20% downpayment instead of the usual 10% required if you take a HDB loan. We also had to pay for home renovation and furnishing, as well as meet the monthly loan installments in cash as we have not accumulated enough CPF contributions in our Ordinary Accounts.
DNS: What did you and Anita do to overcome this challenge?
KV: I started full-time work in an FMCG company just two weeks after completing my final examination in University. At the same time, I also had a part-time job as a real estate salesperson with ERA Realty Network Pte Ltd. I conducted agency work after my official working hours with my employer, and during weekends to earn extra income.
Although I was doing agency work part-time, I was committed to do well and become a full-time real estate salesperson.
While working toward this, I continued to work under full-time employment at the FMCG company as it gave me better chances of securing a bank loan to finance my resale flat purchase. When the flat was ready, I quit the job to become a full-time real estate salesperson.
Despite the uncertainty and lacklustre property market, I chose to take the leap of faith. Fortunately, as my clientele base grew, I was able to earn a higher income.
DNS: How did this change the way you approached your finances?
KV: We focused on achieving long-term financial goals instead of focusing on short-term ones. Additionally, we also started to put more emphasis on strengthening our earning capabilities. Previously, we were mostly concerned about savings.
More importantly, we have set our financial goals but are flexible in our methods to reach those goals.
DNS: Can you share one tip that you think other young newly-married Singaporean or to-be-married couples should consider?
KV: Write down the specific time and corresponding milestones you and your spouse aim to achieve together on a piece of paper and stick that paper onto the front of your fridge.
This will remind and motivate you to achieve that milestone.
What Are Some Of Your Financial Planning Challenges?
Running into financial planning uncertainties or challenges are part and parcel of living life as an adult. Whether it’s getting your first job, buying a home or planning for your future, you will need to be responsible on the financial decisions that you make together with your spouse.
To help you in that, you can rely on some useful tools available on the CPF Big ‘R’ Chat website.
These include the interactive tool on CPF transfers, where you can find out how much more you can enjoy at age 55, if you were to make transfers today from your CPF Ordinary Account (OA) to your CPF Special Account (SA) to enjoy higher interest rate.
Source: CPF Big ‘R’ Chat
There is also a home mortgage interactive tool that shows how much more you can enjoy in your CPFOA account, when opting to use more cash for your mortgage repayment, instead of only relying on your CPFOA savings.
Source: CPF Big ‘R’ Chat
Regardless of the stage in life that you are currently at, one thing is for sure. Any financial decision you make today can impact your life in the future – both for you and your spouse.
This article was written in collaboration with the CPF Board. All views expressed in the article are the independent opinion of DollarsAndSense.sg