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Follow six ordinary South Africans as they take up the Absa/City Press Money Makeover Challenge and undergo a money makeover boot camp. Each contestant has been allocated their own Absa financial adviser, who will help them organise their finances and reach their personal financial goals. The contestants will be required to complete certain financial tasks and to stick to the budgets set out for them in order to win incentive prizes, or be selected as the final winner of a R100 000 investment fund. Personal finance expert Maya Fisher-French will share their stories with you and, hopefully, inspire you to start your own journey
Our contestants have found that having an open discussion with their partner about money is extremely liberating!
When the competition started, one of the first things financial adviser Maria Mogomotsi did, was get departure controller and first-time dad Vonne to draw up a budget with his girlfriend to understand their joint expenses. Until then, Vonne was paying for everything and quietly drowning in debt. His girlfriend never realised he was struggling to make ends meet. “Because I never asked for help, she assumed I was OK,” says Vonne. Now his girlfriend is paying for the groceries and they are working together to understand their budget and not overspend.
READ: Reaching the tipping point
When entering the competition, town planner Mmabatho admitted she still acted like a single woman when it came to her money. Financial adviser Gerrit de Jong took steps to consolidate the couple’s finances. “I had separate meetings with both Mmabatho and her husband, drawing up cash flow statements, to determine their responsibilities in the marriage. During these individual meetings, I determined what each of them have regarding wills and insurance. Thereafter, we had a few combined meetings to finalise each of their cash flow statements to ensure there are no misunderstanding or duplications.”
As an experienced adviser, Gerrit has found that couples struggle to talk about money. “They often don’t trust one another and they do no financial planning. Each one just tries to survive financially, yet they have no financial discipline, which leads to accounts and loans and nothing left for saving or emergency. In a lot of cases, the one is a saver and the other the spender, which creates conflict and the saver hides his/her financials/savings from the partner.”
But it was not just getting a better handle on their finances that made a difference to our candidates, it was the financial intimacy these discussions introduced.
As Mmabatho says: “It has definitely changed the way we discuss our money. For example, our car is now eight years old and needs repairs. I was planning on selling it and buying another car.”
Previously, she would have bought the car without discussing it with her husband. The couple discussed their options and her husband suggested they pay for the new parts and keep the car for another two years, until they saved up a deposit.
READ: When car finance drags you down
“We also need to do some maintenance to our house. I was using my emergency money, but my husband said we need to start a separate account for car and house maintenance and that I must not tap into my emergency fund, which I need for real emergencies,” says Mmabatho. She is recovering from major surgery and has covered the medical aid shortfall from her emergency fund. “I appreciate that there is someone I can talk to and he can make good points – I’m not just on my own.”
The couple are far more open about discussing the state of their finances and being honest about what they can afford each month. Mmabatho’s husband has a metered taxi business and, in December, his income dropped as high traffic volumes slowed down driving times. She experienced a cash flow constraint when the tenant from her house went away on holiday without paying the rent. “Before, we would not have discussed this and kept spending. Now, together, we are making a plan. We know we need to make some sacrifices until we get paid. We are now open and talk about everything. I have an interest in what he is doing and an understanding. Otherwise, it is just a blame game,” says Mmabatho.
Working with an adviser made it easier for our couples to introduce more sensitive topics, especially estate planning.
READ: Finding the marriage, family and money balance
Says human resources manager Zamokuhle: “It was difficult for me to advise my wife about her money, even if she was making mistakes. But when she met Charlotte [Pretorius], our adviser, it opened her eyes.”
His wife started to budget, increased her disposable income and was able to make her savings work for her. “We discuss before buying things, she is more comfortable than before, because it was a professional involved, rather than just me,” he says. This included a discussion about drawing up a will.
“It is hard to bring up the subject of a will. She may think ‘you want to kill me’. This was something I could not introduce, but was introduced by Charlotte without raising suspicion.”
Charlotte says that in her experience, people tend not to be aware of what their spouse’s budget is because of the emotional strain they think it might put on them.
“Others prefer not to tell, because they don’t want to be put in an ‘explaining your budget’ position. All people are the same and needs and cultures differ, but it will be worth spending time with your partner to sit down and find a mid way solution,” says Charlotte.
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Mmabatho agrees that an adviser helped a great deal. Gerrit met her husband several times and advised him on the need for a will, retirement provision and life cover.
“He told me after meeting Gerrit that not having those things would be selfish to me and the kids, as they are still young. It also helped that Gerrit met my husband alone at first. It would have been difficult for me to introduce the topic.”
Follow the Money Makeover journey at city-press.news24.com/SpecialReport/MoneyMakeover and on Twitter and Instagram (@city_press) and Facebook (@citypress.co.za) using the search: #MoneyMakeover
Children from diffrent marriages
One of the challenges Mmabatho faces is that she has a child from a previous relationship. Mmabatho’s 14-year-old son lives with her and her husband and their two children, and is seen as part of their family. However, this needs special attention when you are creating estate planning.
Initially, Mmabatho had intended to leave her home in Witbank to her son because she was worried his biological father would not take care of him if something happened. However, her adviser Gerrit recommended a different approach. He believes that her estate should be shared equally between all her children so none feels favoured or left out. Her son’s father is still alive and he could step in if something happened to Mmabatho. She has made provision in her will for her sister to take care of the teenager. She has allocated a higher percentage of her life cover to her son to help her sister raise him. But the house and other assets will be shared equally between the children.
She is saving more per month for her eldest’s education, but that is because he will go to tertiary education in four years and they have less time to save for this expense.
“Some parents feel guilty if they are not saving the same amount for each child, but you have to take time into account,” says Gerrit.
READ: How to start tackling the debt monster
