Asked by Anonymous
Asked on 22 Oct 2019
My bf has a takehome pay of 2.5k after CPF, 1k goes to insurance, $400 goes to his single mum (who tries to squeeze every single cent out of him). He constantly pays his credit card bills through instalment and he doesn’t feel that his insurance $ (endowment/investment/medical) is too much.
What should I do to safeguard my future? Is financial incompatibility a big red flag?
Top Contributor (Oct)
Hi anon, I would suggest you sit down and have a heart to heart with your boyfriend.
One of the most common reasons for a relationship or marriage failing tends to be over money issues. It's important to have a common understanding of how both of you will manage money when things get serious. (e.g. buying a flat, staying together, having children) I would not go as far as to say it is a big red flag, but it is one of the many factors that may potentially contribute to stress on a relationship.
To improve the situation, he needs to understand his own expenditure habits. Start by tracking where his expenditure goes to. This is where the Seedly app might help, although, for people like myself (I have been tracking for 10 years now), excel is my preferred method due to my strange fascination on plotting pivot tables, colourful pie charts and analyzing how much I spend on KOI bubble tea vs LiHo. But you get my point.
With some figures in mind, encourage him to set up a saving account where he transfers some money into every month after salary comes in. Even $50 is better than nothing. Then use the money to pay off all outstanding debt. The goal is to reduce all debt to $0 first (especially the credit card), which will put him in a better position financially to contemplate the next steps such as marriage/starting a family.
It's never a good idea to pay credit card bills by instalment as the interest is high and is one of the surest paths to financial ruin. You can explain to him that you would like to help him improve his financial standing, as I can't imagine anyone saying no to having more money in the bank.
$1K/mth on insurance is a little excessive. Based on my own 4-3-2-1 expense rule and his take-home of $250/mth, he shouldn't be spending more than $250/mth cash on insurance, and probably a maximum of $500/mth going to investments and savings. But $500/mth on investments and savings can be started later on. Clear all debt first and have an emergency savings of 6 to 12 months
To put it in perspective, if $1K/mth is not too much, then ask him to calculate how long he'll last if he is out of a job. That should give him an idea of his financial standing and hopefully lead to an epiphany of sorts, and some form of action, hopefully.
I can't comment on what his mom is doing, unfortunately. I'm not aunt agony nor do I profess to be. I can only give your logical and practical advice on the financial side of things. However, if he shows commitment to take action, I would say that is a positive development.
I wish you all the best in helping your boyfriend improve his finances. Please feel free to ask further questions if you require. All the best!
My take-home Is only 2.8k and I give $600 to my mum and all the insurance I pay is around $500 per month... That said... Although my bank account balance dropped from 23k to current 11k over this 1 year I had been with my gf... I still managed to put $200 in robo-advisor every month and $200 in RSS plus $400 in a joint account... That said, the crucial part is your bf insurance and the credit card... Since he does have endowment and investment policies, you should be all right if you stick him till the policy ends... His money is safe inside though. Just that you won't have the luxury of spending it...
Hi.. sorry to hear that but have you tried asking him why he's paying so much for his insurance? I am thinking he may have gotten it through friends who are in the industry (and often with an agenda to hit sales) plus he may have some misguided concepts on "protecting his future."
I cannot comment on his decision to contribute $$ to his mom and honestly, if he could cut back on his excessive insurance spending it could go into your future saving funds (or his own).
Financial incompatibilities is definitely a big red flag; because no one can solely survive on love and passion alone. You need bread and butter; even at a bare minimum. That said, I think the most important thing is to keep an open mind and try to understand from his point of view why he did that and try to guide him to the right direction and get him to cut down on unnecessary coverages so he can reinvest the money elsewhere.
Hope this helps!
Financial incompatibility usually leads to arguments about money and that is bad.
Sounds like it’s more than a money related problem, the root cause of this matter could be what are your BF’s priorities? The money will flow accordingly as well.
Sounds like he’s very easily convinced to be able to take up $1k a month premiums.
Anyways, good luck, I hate to type such messages but whether to stay or not is up to you.
Incompatibility is an issue. The question I'd ask is how much you love him and how much he loves you. Ultimately if both of you love each other enough then you'll find a way to talk it out. It's best to meet up with someone who can open conversations between you guys about this. The challenge is navigating that conversation to be factual without being judgemental. Once you guys have agreed upon your expectations and goals, further steps can be taken (plan finances etc). Work out your why; the how will come.
The biggest issue I see with what you have described is the credit card payment. How you should tackle the issue is to take the annual interest, convert it to monthly, and show him how much interest he is paying per month. At this junction, based on the circumstances I am helping friends understand their credit card debt trap...
if the credit card/lines total balances less than or equal 3 mths take-home income - this situation is very manageable, enlighten them on the interest costs, and help them switch behaviour to paying it down. If spending is an issue, I recommend first reducing the credit limit to 35% of take-home pay until they learn to pay it in full.
if credit card/lines total balance more than 3 mths, and less than or equal 6 mths of take-home pay, the situation is kinda bad. At 6 mths of pay, you could be looking at paying the balance over 3-4 years (while not putting on new debt). Major plans like marriage, getting a house or car should be deferred until after the debt is paid off.
if credit card/lines total balance more than or equal 12 mths of take-home pay, the situation is very very bad. You won't be paying this down comfortably in less than 6-7 years. Best to cut the cards, get a debt consolidation loan, and aggressively pay it down.
if credit card/lines total balance more than or equal 18 mths of take-home pay... I think they should apply for bankruptcy. The hole is too deep to get out of easily. There will be a lot of pain, and repayment could take as long as 1.3 x 6 x (debt/mths of take-home pay) mths. Not a pretty picture.
The 2nd might be more insurance than he can afford, but this would reduce as his pay goes up. So for time being, I won't see it as an issue, though I would recommend keeping insurance costs below 12.5% of take-home pay. But there are people who feel more comfortable with endowments.