Love hurts… your wallet – Know what you are in for financially

11 February 2015

Valentine’s Day is just around the corner! ‘Love is in the air’ and so are adverts for gourmet chocolates, expensive jewellery and bouquets of flowers.

Many people think that this is the time to break the bank to show their loved ones that they care about them, but how much money you spend is often not as important as how much effort you put in to make someone feel special or spending time with the person you love.

Financial pressure is a common reason as to why relationships fail and why people fall out of love. It is important that you address your finances to;

  1.  Manage expectations for small romantic events such as Valentine’s Day,
  2.  And more importantly, understand exactly what you are in for financially, before you enter into a marriage.

Romantic Resources:

Just like other romantic events, Valentine’s Day is the perfect opportunity to be reckless with your money and spend more than your budget allows you to. Wendy Monkley, Marketing Manager of DebtBusters says, “Although many people get into debt due to uncontrollable circumstances, the majority of people are under debt counselling because they are unable to manage their money properly. Before debt counselling, clients spend more than 109% of their net income servicing their debt.”

Make sure you don’t make the same mistake and keep within your budget this Valentine’s Day – Here’s what you can do;

  • Don’t go OTT (Over-The-Top): Unless you are going to ‘pop the big question’ or celebrate a wedding anniversary, it’s unnecessary to go over-the-top on spending. Avoid purchasing unnecessary overpriced hampers and curios that are most likely never to be looked at again.
  • Be cautious when entering into a purchase agreement: If you are not paying for an item with cash, make sure you read the agreement ‘terms and conditions’ very carefully. Interest rates on jewellery, credit cards and department store agreements are generally very high, which therefore makes it very expensive to pay back. PLEASE NOTE: If the purchase is interest free, be aware of the repayment period and what will happen if you do not manage to pay back the item within that period or if you miss a payment.
  • Manage Expectations: You know your partner better than anyone else. Confirm you are both on the same page in terms of Valentine’s Day monetary expectations and avoid the stress of ‘high expectations’. If need be, have a chat about money and what you can or cannot afford. Place emphasis on sentimental or home-made gifts, this can save you a lot of money, and most of the time, they are better received than a material item.
  • Budget: Valentine’s Day, just like other romantic holidays, comes around every year. Budget for gifts all year round. You know when you will be expected to splash out for certain things. Make sure you have saved up for ‘big ticket’ gifts so that you do not over spend and stick within your budget.

“Valentine’s Day is one of those special events that occurs in the middle of what we call the ‘festive season financial hangover’. Consumers already struggling to make ends meet, are tempted to spend more money that they don’t have. DebtBusters has experienced over 50% year-on-year growth in new debt counselling applications and has more than 20,000 clients under debt counselling. Financial times are tough and people are seeking help before it is too late. As part of debt counselling, after DebtBusters has renegotiated their debt with credit providers, consumers generally spend only 30-40% of their net income on debt repayments,” says Monkley.

Marital Money Matters:

They say ‘money can’t buy love’ but it certainly does improve your bargaining position. The decision to marry in Community of Property (COP) means that one-half of your spouse’s earnings belong to you. However, on the down side, your spouse’s debts become your debts too.

Wendy Monkley goes on to say, “Approximately 30% of DebtBuster’s clients are married in Community of property and are working together to eradicate their debt through the structured rehabilitation Process, debt counselling.”

What you should consider before entering into a marriage in COP;

  • Debt: Reiterating what was stated above, when married in COP, ALL of your partner’s DEBT, will become your debt too. This includes all the debt was wracked up even before you were together.
  • Credit Score: Regardless of the status of your credit score, you will be penalised for your partners poor credit score. If you wish to take out a loan, you are more than likely going to pay a less favourable, higher interest rate on your debt.
  • Judgements: If your spouse has a judgement, creditors can clear out monies from your personal account even if you do not have a joint account OR they can garnishee your income to pay off the judgement.
  • Small businesses: What happens if you have a small joint business? Small businesses sometimes go through tough times – remember the onus is on the business owner to pay back the debt. Therefore you are both liable.

Author: Kelli Knutsen

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