Friday 15th July 2005
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Reviewed by Kathryn Dalglish on behalf of Good Returns
Linda Gough, an investment columnist, has written this book to help young couples (married, de facto and same-sex) to sort their finances and personal arrangements to give themselves security for the future.
Although it is quite a slim book and easy to read, it covers a wide range of topics, from budgeting to taxes, wills and divorce. Linda Gough's book begins with the premise that couples want to build a fruitful life together, and helps them to do this. As she says, couples have many advantages when they work together to achieve their goals. This book is designed to help you get rich together.
Linda Gough advises young couples to treat money matters just as you would any other issues in your relationship - with care and attention. The first step towards achieving your goals together is to communicate well with each other to find where you agree or differ in your ideas and ambitions.
People tend to bring differing attitudes to money and security to any new relationship, often based on the way their parents did things - either by copying them or doing the exact opposite. When people get together they soon realise that often people view money differently - they have different 'financial personality profiles'.
Linda Gough divides these financial personality profiles into four main types - thrillseeker, savvy, steady and timid. Thrillseekers have an adventurous attitude to money and enjoy taking risks, whereas a timid person aims to have a paid-off home and money in the bank. When a thrillseeker sets up house with a timid type, there are bound to be differences of opinion about spending and investing. These differences need to be recognised, so that a strategy put in place to take advantage of the positive qualities of each type, and minimise any disadvantages. The chapter on strategies for this is a very interesting section, and you will all recognise some of the characteristics of people you know.
The first step towards acquiring wealth is hitting any existing personal debt on the head; and paying off your credit card in full each month should be your first goal. If you are a compulsive spender, you should consider cutting up your credit cards.
Christmas spending can have a serious effect on the budget, and cellphones can also cause money to disappear without trace, so some thought needs to be given to controlling or reducing these expenses if they become a problem. Any addiction is bad for budgets; anything from smoking or talking on the phone for hours, to drugs, alcohol, gambling or even a motorcycle obsession. Seeking help from a financial counsellor is advised if any of these problems start to get out of hand.
Linda Gough adds some cautionary words about sharing cheque accounts and credit cards with a partner. The chapter on debt pays some attention to what can happen when things go wrong. Now the Property (Relationships) Act is in force there are many complications which could be encountered by people living together in a de facto relationship, extending to all areas of finances.
Many people have been badly burned after a relationship falls apart. Some of the examples given are of quite disastrous consequences when an absconding partner cleans out the joint account or runs up huge expenses, leaving the remaining partner with impossible debts. Joint credit cards can find one person responsible for the other partner's debts long after the partnership has ended. Another trap is being a guarantor for your partner, so be very wary when signing documents without independent legal advice. Bankruptcy is also discussed. The book certainly gives one pause for thought, and invites caution before entering any relationship where money is held jointly.
The book suggests that couples should try to live on one income and save the other. This makes it less of a shock when one partner stops work for any reason. Income protection insurance is recommended for the main breadwinner. Another idea proposed is having three bank accounts: His, Hers and Ours, so that any inequality of income is smoothed out, and the partner with less income, or none at all, does not have to ask for a fair share of the household income for personal spending.
Starting a family changes the financial dynamics of a relationship, and one chapter discusses, in detail, the costs involved in having a baby and raising children.
This book is written not just for the young married couple, just starting out together, but it also explores the various possible partnerships which exist, and there is a chapter on partners who have come from other relationships, bringing with them their own 'baggage'. This chapter covers questions of maintenance payments,pre-nuptual agreements, and sometimes which house to live in - his, hers or ours. Legal or financial advice is advised where there are children from a previous relationship, so that the children's futures are looked after.
The chapter on buying a house or property investment is also extensive, and examines decisions such as choosing your ownership entity. Options such as purchasing as joint tenants or tenants in common and also contracting out of all or some of the rules of the Property (Relationships) Act before or at any time during your relationship. Legal advice is recommended when making these decisions.
After implementing your budget plan, you will hopefully have freed up some cash to invest. One chapter gives ten tips for smart investing, and there is also a chapter on investing in shares.
'Ten ways to trim your tax' discusses topics such as income splitting, salary packaging, claiming all your deductions and putting your funds into tax-efficient investments. Planning for retirement, having protection for your income and your assets, and the need to write a new will for your new partnership, are also covered.
The final chapter, When Love Goes Wrong, discusses divorce or partnership break-up and aims to make the resultant split 'fair and equitable'. In spite of possibly being in a state of shock, immediate steps must be taken to protect your share of joint assets, such as a joint bank account or joint credit card. Also move quickly to advise the bank that any mortgage redraw facility must in future have two signatures to draw down funds. Family trusts which have been set up to deprive a partner of their share of matrimonial property are liable to be overturned because of the Property (Relationships) Act.
I found this book very informative and thought-provoking, as it raises a number of issues which most people don't consider until things turn to custard. The implications of the Property (Relationships) Act are covered in some depth and New Zealand couples who are deciding to live together would benefit from reading this book. Linda Gough is a great believer in doing your own research, shopping around and getting advice from financial advisors to help you on your road to financial success. The websites she mentions are very useful for planning and budgeting.
Her book has an easily read style, and is well set out and has many useful checklists within the chapters. She also covers many topics which are not normally covered in books on personal finances, and uses individual examples to illustrate various financial disasters which might occur. However, although the contents listing at the front of the book is quite detailed, the lack of an alphabetical index limits the book's use for future reference.
To buy ‘The NZ Couples’ Guide to Money’ priced at $24.95 GST incl from Good Returns click here.
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