In just a few days, men will again make a beeline for flowers or chocolates, and couples crowd the restaurants to share a romantic dinner. Valentine’s is one of the most-celebrated, and definitely profitable, special occasions of the year, attracting billions of dollars in annual consumer spending in the US alone.
As much as it is a special day to celebrate love, Valentine’s Day is also the perfect time for couples to bring up the subject of money. Experts say people are just too focused on the celebration that they overlook the need to spare a moment to discuss the state of their finances.
“Money provides a potential conflict point in a relationship, but it also can be something that draws a couple closer,” says Ted Beck, president and CEO of National Endowment for Financial Education (Nefe).
“Couples should talk openly, and often, about money and should understand their partner’s financial values.”
Money may be a dicey subject, but it doesn’t have to ruin the romance. According to Natalie Storey, financial consultant at Acuma Independent Financial Advice, the key is finding the perfect timing, or initiating the money talk as soon as everyone winds down from the celebration.
It might not be smart to broach the topic a few seconds after your better half hands over an adorable bouquet of flowers or is on bended knee about to pop the question.
“Valentine’s Day is a time when most couples will spend some quality time together maybe over a romantic meal or just a stroll outside. Although you might not want to speak about money and financial matters, it is a good opportunity to discuss this, when you have time together and probably free of children for the evening. It should be a time to speak openly about money and the future,” Storey advises.
However, if you think your finances are really in a serious state that discussing it in detail could spark a row with your better half, at least convince your partner to set a date when you both can take the matter up.
“At least [agree on a date] so that both parties can prepare in time for a meeting like this,” advises Steve Gregory, managing partner at Holborn Assets.
The following are important talking points that married partners should discuss either on Valentine’s Day or later:
Since the two of you promised to journey through life together, it is important that you set joint goals. Goals give you a sense of purpose and a sense of direction for where you’re headed. If you haven’t talked about it yet, now is the time to bring up the subject.
“Talk about what you and your partner each want financially out of life, and choose goals, big or small, that you want to reach as a couple,” advises Nefe. “Discuss what changes you each can make in your money habits to help you reach those goals.”
Are you in the red or black?
People are able to plan well and improve their situation if they know the state of finances they’re in. There’s only one way to find out whether your financial situation is a cause for concern or not – determine your total net worth.
You can calculate your net worth by subtracting the total of your liabilities from the sum of your assets. This process will help you establish if you are better off or worse off than the day you were born, or than you were last year, according to Gregory. It is also an essential step to decide whether you need to change your spending patterns and save more.
Start by drawing up a list of all your assets and liabilities. When you write down your assets, think about how much cash and investments you have. You can include your bond certificates, second apartment back home, rest house in the mountains, the five-acre farm and sports utility vehicle that you seldom use, among others.
“Assets are cash, the encashment value of investment plans, bonds, land and property, motor vehicles and tend to be tangible, and immediately available to convert to cash. Intangible assets, such as franchise agreements and trademarks would not be included,” explains Gregory.
“For this purpose, you would probably not include chattels that you need to hold on to, and therefore would not be realized for cash. I’m talking about furniture and kitchen equipment and mobile phones, for example. These are not assets in the sense of assets of realizable value since they are in day to day use.”
For liabilities, take into account your debts, credit cards, commitments and borrowings of any kind. “You might also want to include debts that will come to you soon, such as school fees for the coming year and mortgage payments due,” says Gregory.
If you’re always too busy to sit down and draw up a budget, take this special day as an opportunity to get your partner to discuss the household budget. The key things to include in the budget are “existing commitments” such as debt payments or savings; accommodation costs, education and day to day expenses, says Gregory.
“Write down everything you spend each month, every little details from grocery shopping to utility bills,” suggests Storey.
“Have a look at your budget and then see if there are areas you can trim down on. For instance, instead of going out, could you have people over and all chip in for the food and expenses? The main point to having a budget is review your spending and sticking to the budget you made.”
Is your family adequately insured?
Insurance is another important topic that couples should discuss, especially if there are children or dependents in the picture. Insurance plans will give you peace of mind knowing that if something bad happens, you and your family are protected.
Gregory suggests reviewing if you have enough protection in place against death, serious illness, loss of income and home contents, among others. If you already have an insurance, find out if the cost is too high or if there are “areas of risk not covered that should be.”
“If you have children, have you reviewed your life and critical illness cover or have you got any in place? If you were to be diagnosed with a critical illness tomorrow, would you want to make sure you had adequate provision in place for your family to maintain their lifestyle? It is very important to protect your family in the event of death and disability,” says Storey.
It’s not enough to promise each other that you will grow old together. Plan how you can grow old together comfortably. To ensure you are able to support yourselves financially after you both stop working, talk about getting a retirement plan.
“If you haven’t done so, starting a retirement plan is very important. Living in the UAE, it is very seldom your employer provides a pension plan for you. The earlier you start saving for retirement, the easier it will be to [stay] financially sound when retirement age gets close. It really is the years that count when you are saving for the future,” says Storey.
There are various retirement plans in the UAE that couples can sign up to outside of work. The type of plan you choose will depend on several factors, including the amount of returns you want to achieve and the timeframes you are looking at.