Managing Your Finances as a Couple

Statistics cite that finances are one of the main reasons couples get divorced, putting even more importance on discussing financial matters with your partner

December may have been a season to splurge, but more couples are finding themselves in debt this January, thanks to a bevy of outstanding and unsettled payments.

In an enquiry with The Namibian, finance minister Calle Schlettwein appealed to Namibians not to borrow money beyond what they could handle. “The big picture here is, let us align our consumption to the level of our revenue in our households,” he said, adding: “Borrowing for productive purposes is very well advised”.

Parents and guardians are more likely to feel the pinch this month due to tuition fees, stocking up on stationery and paying for other items necessary for the school year. Money for registration, for example, is a regular pain. But how do people manage to strike a balance between their income and expenses?

Nick and Anne de Voss, an elderly couple, make sure that a budget is constructed before the ‘Januworry’ blues hit. “We are both pensioners but still have financial commitments. Fortunately, we still enjoy radiant health and generate moderate incomes. Every year in October we draw up a budget for the next calendar year,” De Voss said.

As much as it is crucial for couples to maintain communication concerning finances, those living in poverty are struck in the wallet thanks to increasing costs on basic products. Even the World Bank has said it: “Over the longer term, Namibia faces important challenges in diversifying the economy and broadening economic opportunities”. But what are the current expenses for the average household?

For De Voss and his family, there are certain provisions made. “We make provision for diverse items such as groceries, clothes, prepaid electricity, water bills, refuse removal, property tax, income tax, cellphone charges, Wi-Fi, contingencies, fuel for our vehicles, vehicle maintenance, salaries for the domestic worker and garden man, short-term insurance and life cover, study policies for our grandchildren, pocket money and money for charity.”

Unfortunately, not many people can afford these expenses, hence couples look to the bank for a solution in the form of debt consolidation. In other words, taking out one loan to pay off many others. Some people believe that this may be a solution because you’ll only have one amount to settle, but it’s much more complicated than that.

Explaining why debt consolidation does not work or address the root problem, Bank Windhoek’s executive officer of credit, Anton Smit, had this to say: “With debt consolidation, you are only extending the problem, because you think you solve the debt problem, but in reality the debt remains, as do the habits and behaviour that caused it. You cannot borrow your way out of debt. You cannot get out of a hole by digging out the bottom.”

After your credit card debts have consolidated, the debt eventually grows back in most cases because of situations where proper planning was not done. “Debt consolidation seems appealing because there is a lower monthly payment and a better rate can be negotiated. However, in almost every case, the lower payment exists not because the rate is actually lower, but because the term is extended. If you consolidate short-term debt, you get a lower payment, but if you stay longer indebted, the lender receives more interest, which is why some lenders are in the debt consolidation business.”

So what is the solution? In a recent study done by Charles Ackah and Adjoah Acquah for the University of Ghana, it states that “one of the fastest ways to guarantee financial development is to provide financial services to individuals in the informal sector”. It is also advisable to enable financial literacy among households so that they are aware of what and what not to spend on. Also, creating a budget is extremely helpful as it provides an effective goal throughout the year. With your budget being tailor-made, it’s easier to plan.

Couples who often argue about who owns what have plenty of solutions as well: Creating three accounts is useful. One for you, one for your partner and the other as a joint account. This could create less tension in the relationship, all while retaining your spending money. Discuss assets at an early stage in case of any unexpected occurrences. Often we hear about legal battles ensuing over unclaimed property. Make sure your documentation is in order!

Smit also offered another solution: “The way to get out of debt is by changing bad financial habits. You need to commit to getting a written plan, sticking to it and start paying off the debt. Live on less than you make and don’t spend what you can’t afford. Dealing with financial problems can be stressful, which is why most people need help getting through it.”

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