The most important thing about finances in a marriage is to ensure that you are on the same page financially. Organise your finances as a couple and agree on what to do. When discussing, consider that you have different personalities. One may be risk averse while the other one relishes taking risks. Acknowledge each person’s differences. If you are discussing investments, accommodate each other’s money personalities. Do not force the other person into things they are not comfortable with.
2. Merge separate budgets
Make separate budgets. Each person should write their own budget on their own, then the both of you get together and marry the budgets. The reason for this is that one person may be more aware of some expenses while the other focuses on others. For example, the husband may not know much about household expenses while the wife does. Doing this, you will find some expenses that you have to remove and others that you need to increase. Make sure all expenses are included, including entertainment. Make a realistic budget to prevent disagreements surrounding money later on.
3. Joint accounts with separate kitties work best
There is nothing wrong with having either joint or separate accounts. However, my experience is that what works best is to have a common joint account where both incomes go to and then each person has their own kitty for personal expenses. The bulk of the money should be for the family as a whole and you should agree on what to do with it. Then each person can have a small allocation which they are allowed to cater to personal expenses, needs, basically to do whatever they wish with it. It is easier to invest when you have your account set up like that, with a main account containing the bulk of both your incomes.
4. Schedule money meetings
When doing financial planning, meet with some regularity. This could be once a month to look at your finances and see where your money is going. Use these meetings to honestly assess your financial position. Do you have investments? Enough savings? Are you living above your means etc.
5. Calculate your joint net worth
You need to know how much you are both worth and you do this by subtracting your total debts (bank loans, sacco loans m-shwari, etc) from your total assets. Your net worth is your financial position. As you go on in life, you should be growing in net worth, so you should ideally calculate this every year.
6. Have an emergency fund
You should have an amount of money that you can access quickly. An emergency kitty is crucial because something unexpected can happen in the family. You do not want to have sell something or borrow, sometimes even from places that you should not be borrowing from, like shylocks. The barest minimum you should have in your emergency fund should be an amount worth three months of your family expenses.
7. Invest together
Having a group of assets is the key to financial security. This ensures that you have money to live on even if one or both of you lose your jobs. Accumulate investments as you go along, because it can cause a lot of marital trouble if your finances are bad. It’s important to understand that among personal use assets, such as your car, furniture, house, only your house has a positive impact on your financial security. The rest are depreciating assets, meaning their value is always going down and do not help strengthen your financial situation, so focus on putting your money in investments.
8. Watch your debt
Some debts are good while others are bad. Understand what you are borrowing for. Borrowing for furniture, entertainment etc is accumulating very bad debt. Only borrow for appreciating assets like a house, plots of land and skills to help you earn more such as taking a course. However, be it good or bad debt, do not borrow too much. You should not be paying more than 36 per cent of your salary towards debt.
9. Utilise each other’s strengths
Some people are talented in financial analysis and are good at making financial decisions, others are good at managing people. You may find that one of you is good at starting a business but not good at managing it, because those two things require two different skills. So do not let one of you be the one doing everything all the time – the one who starts the business, for instance, should give the other one the responsibility of running it. One person may not like debt but might be good at cash control. Find out each other’s strengths and weaknesses and complement each other on both.
10. Save for the children from the word go
Your budget should cater for both the long-term and short term needs of the family. Always make sure that the big things are taken care of, such as home ownership, the children’s education and retirement. People tend to overlook retirement, but when you do this, you will end up in a big house and cannot afford money for food and medicine and other small expense. Likewise, money for the children’s primary and secondary school is not very worrisome and can be handled using current income, but you need to both save for the children’s higher education from the day they are born to ensure you give them a good education.
Manyara Kirago is the managing director of Financial Counseling