Handling money as a couple: The key to growing family wealth

Make a deliberate effort to prioritise your finances.

Make a deliberate effort to prioritise your finances.

What you need to know:

  • You will need to be as detailed as possible in order to get on the same financial pedal.
  • One of the most effective ways couples can grow wealth is through investments.
  • Do not live beyond your income.

Merging and handling your finances with your partner can be tough. But regardless of the amount of money you make individually, there are steps you can take to improve the way you handle your finances and boost the financial health of your marriage.

Talk and prioritise money

Make a deliberate effort to prioritise your finances. “If you don’t, your finances will never be a priority,” says David Bach, the author of Smart Couples Finish Rich. This means money should be a regular topic between you.  “Smart couples talk about money all the time. When you work together on your finances, you will be able to compound the results. When you don’t, the same will occur for the mistakes you will invariably make,” says Bach. You will need to be as detailed as possible in order to get on the same financial pedal. Discuss and mutually agree on issues such as family and household bills, management of bank accounts, and budgeting of family income.

Invest together

One of the most effective ways couples can grow wealth is through investments. Once you have agreed on the right investment to place your money in, go for a similar long-term strategy in order to reap handsomely. In the 2014 Nairobi Securities Exchange, Equity Bank Group CEO James Mwangi’s 6.5 percent stake co-owned with his wife was estimated to be worth Sh.12.5 billion. This gave the couple an annual compounded rate of 50.4 percent over an eight-year period from the year 2006.

Salaries and budgets

According to James Njenga, a financial coach based in Nairobi, do not live beyond your income. “Establish joint saving and investment goals and cut unnecessary expenditure to create more capital for investments,” he says. One of the easiest ways you can start saving for investments is by following the popular 52-Week saving challenge plan, through which you pool money for saving weekly, bi-weekly, or monthly. “To avoid the effect of inflation, it is better to save through money market funds which are safe, interest-accumulating forms of investments,” says Njenga. In addition, get started immediately after establishing your money goals. “Take specific and immediate actions to make your goals real. This is what will ultimately pump in the energy the two of you will need to see your goals through to reality,” he says. You should have three bank accounts. A private account for each of you, and a joint account which you use to manage your household and relationship expenses.

The home loan

Owning a home is likely to make it in your top list of medium to long-term goals. If you go for a mortgage, ensure you have a plan to pay it off as quickly as possible. “The trick is to increase your principal repayments gradually such that you are able to slash down the period stipulated for repayment,” says Njenga. His sentiments are echoed by Bach who says while a longer repayment period will give you financial flexibility, under no circumstances should you repay a home loan for the full repayment period. “The smarter decision is always to pay off earlier. You’ll also pay less than you would if you served the home loan for a full term,” he says.

Promissory note

Stefanie O’Connell, a financial advisor and author of Broke and Beautiful says due to the dynamics of a romantic relationship, you should have a promissory note – which in the worst-case scenario can be legally enforced. “In the event of borrowing, both of you should make a plan on the amount of money being borrowed, how it’ll be used, and when it will be repaid, where the money is going, and then put it in writing,” she says.

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