MANAGING FINANCE AS A MARRIED COUPLE

Managing finance as a married couple

Managing finances are never easy, especially when it comes to being in a relationship or in a marriage. A person or a family would need to be able to discuss openly and plan their spending in order to ensure that they are sticking to the budget set in the initial stages of the discussions.

 Furthermore, in Asian culture, any discussion of wealth or money between partners might result in a negative outcome as such topics are considered as taboos for most. Financial planning is difficult to achieve but satisfyingly good when you and your partner manage to obtain results from the effort. For starters, you might want to purchase a HDB in Ang Mo Kio to settle down. They would need to put their collective effort to plan in order to achieve their goals. 

Marriage messes with the heads of even the most organised of Singaporeans. While you might have tracked every cent you spent religiously as a single, merging your finances with another person when you tie the knot has the ability to throw even the most detailed person in us off, at least for a while. Joint accounts, supplementary credit cards and shared expenses aren’t easy to keep track of, especially when there’s someone else who’s incurring expenses you might not be aware of. Add to that the sudden onslaught of huge expenses like the purchase of your first HDB and the arrival of a baby, and you can see why some couples abandon trying to keep track of their spending. However, you should not give up. Before making any big acquisition such as a HDB or whatever, you should use the loan repayment calculator to calculate your commitments beforehand.

How to use loan repayment calculators to plan your finances as a couple

Normally, for most couples, the purchase of a home is the first huge financial commitment they’ll be making. So it’s quite shocking that many couples ballot for an HDB flat without really letting the extent of the financial burden they could be taking on sink in. Moreover, buying a home shouldn’t have to involve vagaries and guesswork.

Below are step-by-step guide to using a loan repayment calculator to know what you can afford when you buy a home.

1. You should start out with an approximate budget for your new HDB Never mind if you’re not sure whether you can afford it yet. You’ll know soon enough whether the budget is reasonable or not;

2.  First, you want to educate yourself on the home loan options or HDB financing you are eligible for and know the difference between a fixed and floating interest rate mortgage. Decide which one would be better for you. Everyone has difference requirements so please do your own research instead of listening to other’s recommendations blindly;

3. Compare interest rates of the various banks online. There are plenty of websites online which can help you do your research on this matter. After that, you could get a clearer picture about your commitments monthly and the tenure;

4. Subtract the down payment required for the HDB and use a loan repayment calculator online to see how much you’d have to pay each month given a certain loan amount and tenure. You may have to increase the tenure or lower your budget if you can’t arrive at a monthly repayment sum you’re comfortable with.

5. Check that the TDSR rules don’t bar you from borrowing the amount of cash you’re looking at. According to the TDSR rules, you cannot spend more than 60% of your income on loan repayments—this includes not just your home loan but also all other debt, including car loans, credit card debt and student loans. Again, there are online websites to assist you with the calculations if you are not capable to calculate it yourself. If you find that you can’t borrow that much thanks to the TDSR rules, you’ll have to either lower your budget or increase the loan tenure for achieve that dream HDB of yours.

 Budgeting as a couple

Using the above methods, it is now clear that you know the cost of acquiring your dream HDB, you can take a look at your finances to see if you can really afford it. To start, assume that your combined monthly income is $8,000 and you don’t have any other loans. That means the TDSR rules technically allow you to borrow up to the point where you are paying $4,800 a month.

However, that doesn’t mean you should borrow that much. You need to look at your actual financial situation and see how much you spend every month, as well as how much you need to save and invest in order to reach your retirement/other financial goals. So, let’s say out of your $8,000 combined income, you spend $1,000 every month on food and dining out, $1,000 on necessities like phone bills, household contributions and so on, $1,000 on outings and entertainment, $300 on transport, $200 on your child’s education and $1,000 to support your respective parents. To ease this process, you can use one of the many budgeting apps or software available in the market to find out what is your average spending in the span of two to three months.

 That means that every month, after deducting all your spending, you are only left with $3,500. From that $3,500, you should be putting aside some money for saving and investing. Assuming that you want to out away a generous amount of $1,500 per month, that leaves you with only $2,000 for the loan. From there, you can use the loan calculator to back track the amount of loan you should take to purchase that HDB. If every couple did this, there would be fewer people biting off more than they can chew when purchasing a HDB in Ang Mo Kio as their future home.