I absolutely love watching period dramas. I recently re-watched one of my favourites; Jane Austen’s Pride and Prejudice for the umpteenth time. Before this last time, I’ll admit that I usually only watched Pride and Prejudice for the romantic inkling and now this time I noticed the undernotes of pragmatism in the movie when it came to marrying for comfort, fortune and wealth.
In the plot, Mrs Bennet is eager for her daughters to marry well so that they would not be destitute upon their father’s death, because his wealth could only be passed on to a male heir. Early on in one movie scene, Lizzie and Jane (the older sisters) are seen gushing under their bed cover about Jane’s suitor (Mr Bingley) who they described as ‘Sensible, good humoured…conveniently rich’. I’ll call it triple luck to find all these in a person of interest, but what if you don’t?
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Here’s where your pride should set in, and when you should think of and execute a personal finance plan. In last week’s article, I spoke about the softer topics to discuss with your partner before making a financial plan, which would help you both as individuals determine if you are aligned in terms of lifestyle expectations. Once you’ve agreed on this, it’s time to put numbers to your lifestyle needs and goals on an annual basis. Here’s how to go about this…
Make a list of all your needs
Do you know where your money goes on a monthly and annual basis? Itemising your needs will help you understand your spending patterns and prioritise which needs are more important to your lifestyle goals than others. It will also help you have a clear view of how to allocate your money to the needs when you begin to budget for them in the next step.
Estimate how much it will cost you to fund the needs in the start year
Starting at the beginning of a new month, track how much you spend on each of your needs for the month. Separately, also make a list of your annual expenses including rent and service charge. By separating your monthly and annual costs, you’re able to dimension how best to optimise your income cash-flow to meet your needs.
Apply your macro-economic assumptions to a forecast for future years
Next, apply the current inflation rate as a growth rate to grow your annual costs over the next couple of years. By doing this, you can assess your current earning power and see what point you will need to ask for a promotion, salary increase or simply need a career change.
Apply your contribution ratios
Remember in the last article when I said you should have an honest conversation with your partner about how you’ll each contribute to your joint life-style goals? This is where that ratio will be applied. For example if one of you chooses to take on 100% of the cost, then the other will bear 0%. It need not be; it could be 75%:25% or however you choose.
Even if there’s no prejudice in splitting the contribution, a good knowledge of your joint costs will help you both plan towards a stable future. Now back to the movie, the sharp-tongued witty Lizzie (protagonist of the plot) is my favourite character. It wouldn’t be a fairy tale if she didn’t end up with Mr Darcy, who’s twice as wealthy as Mr Bingley. Listen, I never said a woman shouldn’t find both romance and finance in partnership, but she’s got to have her finance in check and also be independent. As a hopeless romantic, I love the affectionate show of love by Mr Darcy to Lizzie, at the end of the movie. It’s currently showing on Netflix if you’d like to watch it. You’re welcome!
Toyosi is a Strategy & Corporate Development Professional with over 8 years of experience in the Financial Services industry. She has spent the last 3 years working at FBNQuest Asset Management. She is passionate about sharing personal finance advice to help others build strong wealth habits.
