By Carley Ellis
For Better or For Worth
As the days get longer and the nights get sweatier, it’s a great reminder that both summer and wedding season – is upon us! While I love a good wedding and an open bar, it always gets me thinking about how things can change when you’re not just looking after number one anymore. When you begin to intermingle your life and finances, there are some important conversations to have – ideally before the wedding speeches.
There are so many great things to look forward to in life, such as building a household, having children, and growing old with our partner. What we rarely ever consider or want to think about are the things that could possibly go ‘wrong’. We often overlook the worst that can happen, thinking that it will simply not happen to us.
The problem is, if we only prepare and look forward to the good in life, we might be surprised and overwhelmed when the ‘bad’ comes and pays the odd visit. We may be ready for the best in marriage, but are we ready to face the worst?
In sickness and in health:
In 2019, I was bedridden for a week, and totally reliant on my husband to care for me for five weeks after that. What was the cause?
Jim Beam, mostly. Kidding! I had a total hip joint replacement at the grand old age of 32. Thankfully, this was a short-term disability, and I was back to work at the end of my six-week rehabilitation period. My husband has developed a Pavlovian response to my little bedside bell, but other than that we came out of the experience financially unscathed.
Some aren’t as lucky and are hit with either a critical or chronic illness, such as cancer, heart disease, depression, or anxiety. Can your household afford a long-term dip in income, if one of you were unable to work? Moreover, if your partner was unwell, would you want to go to work, leaving them to drive themselves to appointments, or leave them at home to care for the kids?
You can create a financial strategy which provides you the ability to have the time off to heal, or seek treatment. Consider the following practical steps:
- Always retain an emergency fund equal to 3-6 months of your monthly expenses. If you have a mortgage, consider ‘storing this’ in an offset mortgage facility, or a revolving line of credit. Use this as a first ‘line of defense’ to protect your finances due to loss of income.
- Aim for a surplus in your monthly budget (ensure your expenses are normally less than your income) so you can adjust during tough times.
- Check your employment contract for any income protection provisions your employer may offer.
- ‘Rent’* a lump sum of money deposited straight into your bank account upon the diagnosis of an illness, total disablement, or even death.
- Ensure the reliability of your income using mortgage and income protection insurance.
It’s often easier to swallow times with no income when you’re sick, knowing you’ve done what you can to provide stability, and ability, to make purposeful decisions.
For richer, for poorer
Money doesn’t buy happiness, but I’d prefer to be crying in my own home, rather than in my parent’s spare bedroom. We start our adult lives imagining ourselves building wealth to allow us to have a retirement where we work on passion projects, spend time with grandchildren and travelling the globe.
But what happens if our wealth-building time is cut short? If the past three years has shown us anything, it’s that we can never truly be sure what’s around the corner. Sickness, redundancies, pandemics, death – all these situations can result in you spending money now that leaves you short in your golden years.
There are ways to ensure that money will continue to feed your family and your dreams, even if you lost the ability to through your work. While you’re aiming for a future world with more “Barcelona” than “baked beans”, just don’t forget that life can still happen. The only thing worse than watching your investments go down in a bear market, is being forced to sell at a low because you didn’t have a plan in place. Not only is insurance part of investing, it’s also good for your relationship. Arguments about finance are one of the leading causes of divorce – solve the money risks, keep your partner!
Think of these strategies as reverse pre-nuptial agreements, where you agree to ensure each other’s financial security no matter what happens. Call me old fashioned but there’s something very attractive about a partner that wants the best for you now, and in the future – not just ‘til debt do you part.