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LOVE AND TAXES

February is a month for lovers and taxpayers. Although our new Finance Minister Nhlanhla Nene will announce his first National Budget just eleven days after Valentine's Day don't expect any hearts or flowers. In his Medium Term Budget address in October the Minister made it clear that higher taxes are to be expected. This increases the importance of financial planning and the need to use investment products that lower your tax burden. The 1st of March will also bring important tax changes in terms of your insurance policies. Look out for our next newsletter where we explore the impact of these changes.
LOVE AND MONEY

Michelle Dubois – Liberty’s Legal Marketing Specialist

Long term relationships extend far beyond flowers and romance. A relationship will only survive when both partners are able to discuss their finances and have an honest and open relationship about money.

It's the lack of communication that torpedoes relationships, not a lack of money. Here are a few important questions to discuss with you partner to avoid any future misunderstanding.
 
WHAT ARE YOUR FINANCIAL PRIORITIES?
 
Don’t make the mistake of assuming that you have the same financial priorities as your partner. People have different views about what is important to them financially:
  • What are your views on spending money on a wedding? Does one of you feel that the money is better spent on a deposit for a home while for the other partner a big wedding has been a lifelong dream?
  • If you are planning on having children have you discussed your partner’s view on working parents and raising children? If one of you plans on being a stay-at-home parent have you discussed how the finances will work?
  • Do you know what each other’s life goals are? Do you want to retire early and travel the world, or plan on starting your own business one day?
Priorities can change over time so it is important to take the time to discuss your goals and expectations at least once a year or when considering a significant financial milestone together, such as buying a property. Make sure that you both understand the implications on your financial plan both together and as a couple.
APPETITE FOR DEBT
 
What do you and your partner regard as an acceptable level of debt? One partner may be happy to make the minimum repayment on debt, while the other may believe in living debt free. This can cause significant friction in a relationship especially if one partner continuously spends on their credit card!

You also need to understand what debts your partner may already have especially if you marry in community of property where both partners are liable for any debt incurred. Also find out if either of you signed surety which may have been forgotten about, but which could one day wreak havoc with your personal finances.
 
BUDGETING AS A COUPLE
 
It is important that you create a joint household budget as well as your own personal budget. For the household budget you need to discuss which expenses each person is responsible for and how you divide your joint expenses.

For example do you share costs pro rata to income or do you each contribute a set amount towards joint expenses? This discussion is very important especially if one partner earns significantly more than the other.

Make sure that your budget includes your joint and individual savings. Both of you should be using your tax deductible allowance for contributions to a retirement annuity, as the taxman allows this deduction per person.
 
JOINT BANK ACCOUNT
 
Legally there is no such thing as a joint bank account. In practice this is usually an account in the name of one partner and the other partner has signing power and is authorised to use the account as their own. If, however, the principle account holder should die, the account would be frozen.

It is imperative that each partner has their own bank account to ensure their own financial independence and build up a credit record.
 
LIFE AFTER DEATH
 
No one likes to discuss what would happen in the event of death, but unfortunately it is a reality and it is better to be prepared for these matters than to simply ignore the possibility.

Ideally couples should discuss their succession planning together so that they have peace of mind knowing what the financial position would be if something happened to their partner. Each partner should create a “book of life”. This is a file of everything their loved ones would need in the case of an emergency. This information will make tying up loose ends so much easier for those left behind.

The book of life should contain the following information:
  • ID number
  • Copy of medical aid details
  • Passport details
  • Tax details
  • Financial adviser contact details
  • Policy documents
  • Bank details and anything else that could be relevant.