PART 1: FINANCIAL HARMONY: THE KEY TO A COMFORTABLE RETIREMENT FOR COUPLES
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It may take two to tango, but it takes professional guidance, patience, and dedication for a couple to learn how to do it flawlessly. The same is true when it comes to mapping out your wealth journey. An exciting new experimental series “Conversations – A series by Citadel” demonstrates the power of talking about wealth with loved ones and Part 1 explores the topic of financial cohesion for couples.
In celebration of its 30th anniversary, specialist wealth management company Citadel has embarked on an experimental series to find out why many South Africans still feel that speaking with loved ones about finances is taboo.
Husband and wife, Brad and Allison, reveal how financial matters can be a sensitive topic for many couples, and why it is crucial to recognise the importance of being on the same page when it comes to long-term financial goals, such as retirement.
Advisory Partner at Citadel, Christelle Louw, analyses Brad and Allison’s conversation and offers five tips for couples who wish to set themselves up for financial security in their golden years.
FIVE TIPS TO ACHIEVING FINANCIAL HARMONY
- SHARED VISION AND GOALS
To retire comfortably, couples are encouraged to establish a shared vision for their later years and have regular check-ins to hold themselves accountable. Open and honest communication about lifestyle choices, travel plans, housing preferences, and desired activities will help build a clear picture of what they envision for their future. By aligning their goals, couples can work together towards a common financial objective, making the journey more enjoyable and less stressful.
- RETIREMENT TARGETS PER YEAR
It is important to agree on the required savings target per year per partner so that you can determine if you are staying on track or not. Whether each partner is financially independent or it’s a combined goal, the best way to achieve this is for each partner to do a realistic deep dive into their own expenses. Dreams and aspirations are important to have and to share – this is no different when it comes to long-term financial goals. The personal day-to-day discretionary spending, lifestyle pleasures and lifestyle preferences of each partner then forms part of the integrated goal that both partners commit to and deflates tension between partners about spending habbits.
- STRATEGICALLY MANAGING YOUR PERSONAL FUNDING REQUIREMENTS
Funding the cost of debt can significantly impact retirement planning and financial security and couples should work together to manage and minimise debt effectively. Analyse all outstanding debt and ensure that lifestyle debt such as residential property mortgages, motor financing and credit card balances, are repaid first.
Develop a strategic plan to ensure that your debt repayments are aligned with your saving goals. Well-structured debt to finance your balance sheet with tax benefits are seen as good debt. Financing of lifestyle debt like credit cards due to poor planning is seen as bad debt and should be avoided by introducing an emergency savings account to the household planning as alternative source of funding.
- INVESTMENT STRATEGY AND RISK APPETITE
Investing wisely is crucial for growing retirement savings. Couples should discuss their risk tolerance and investment preferences to develop a suitable investment strategy under the guidance of a professional wealth advisor. There is no substitute for professional investment advice from someone who lives and breathes it daily, can analyse trends, mitigate risks and look after your investments without having their emotions impact decisions. Find someone you both trust and always keep each other involved in any prospective decisions.
It is important to regularly review and adjust investment plans as circumstances change, ensuring both partners have a say in financial decision-making and individual access to emergency funds as part of the financial plan and strategy.
- CONTINGENCY PLANNING
Preparing for unforeseen circumstances is an essential aspect of retirement planning. Couples should jointly reconsider and discuss insurance coverage, including health insurance, life insurance, critical illness cover and long-term care insurance. By having sufficient savings to cover lifestyle expenses, specific personal risk cover like life and disability cover should be revisited and may be reduced.
By having comprehensive medical, gap and critical illness coverage, they can protect their retirement savings from unexpected medical expenses or other emergencies. Additionally, couples should create or update their wills, establish powers of attorney, and discuss end-of-life preferences to ensure a smooth transition of assets and protect each other’s interests. Even if you are already married, you don’t want to die intestate (without a will) as this will put your spouse under extreme pressure and stress in their time of mourning.
By aligning their goals, investing wisely, preparing for contingencies, and engaging in regular financial check-ins, couples can pave the way, not only for a comfortable retirement but also for a more harmonious marriage. Schedule periodic financial check-ins to review progress, reassess goals, and address any concerns or changes in circumstances. These conversations can foster trust, allow for adjustments, and keep both partners accountable to their shared financial and life objectives.
“Remember, financial harmony is not just about money; it is a foundation for building a future that allows couples to enjoy their years together to the fullest. Start the conversation today and embark on the journey towards a financially secure and fulfilling retirement together,” concludes Louw.