SG Budget Babe
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?
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!
If you have plans for a long term future with your bf, you should sit down with him and have a talk with him about future finances. There are going to be lots of things that have to be shared in future, such as house stuff, monthly utility bills, groceries and kids. Make sure that whatever you agree on is comfortable for you. Try to advise him to change the bad financial habits that he has, especially if he lets his credit card bills roll. I feel that the important thing is that you must make sure that you will not end up being dragged down by his debts in future. All the best!
The best way to do this is to have an open discussion with him to understand the situation from his perspective and how both of your future will be like. In like manner, share with him on your insecurities and how both of you can overcome this issue to this end.
Firstly, I will suggest for you all to go back to the basics and do a proper cashflow analysis. This allows you to understand both of your earning ability and spending habit. From there, make adjustment to improve the overall financial situation. Here is a guide to help you: https://www.blog.pzl.sg/understanding-your-personal-cash-flow/
Next, if both of you are serious about each other's future together, create a budget that is for the future. Here is how I do mine: https://www.blog.pzl.sg/how-to-create-a-monthly-budget/
From now, you will have a better understanding of each other and the situation for your future. Then plan ahead, e.g. expenses for wedding, house, family planning. Accordingly, understand the limitations involved and brainstorm together on ways to make things right.
Above all, don't let emotions get into the way. Be as objective as you can to wanting to solve the problem together.
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I think honesty and communication is impt. Maybe he can approach trusted Financial advisor to see if he can reduce his premiums to a more manageable number, if he's young he doesn't need that much coverage. Also maybe break down the amount of interest he's paying on his credit card installments to encourage him to pay them off in 1 lump sum.
Additionally, get him to save let's say 10% of salary into an acct with no ATM card etc so he can't take the money out easily.
It all matters his current age, because I think that 1k for insurance is decent but of course allocation is wrong given his take home pay is 2.5k. You might want to check if he has any ILP and maybe that's the first step to reduce his insurance costs.
Then, you need to ask yourself if he's the hardworking kind and continue to strive to progress professionally. If yes then maybe u can observe over time and discuss with him appropriately. Don't be confrontational as sometimes guys might not be able to accept it and it might not bode well for a last relationship. All the best.
It is big red flag which affects marriages too. It will be important for you to teach him about financial prudence. It is okay to pay so much to his mom. But it is important to tell him to stop paying through instalment and clear the debt. He definitely has to reduce his investment insurance. Even though it may be a loss, the interest from credit card debts are a bigger killer for finances
Wow. I can sense your concern after reading your post. I don't think financial incompatibility is the issue here, it's more like your bf doesn't really have financial plans for the future, plus lots of current debt, and that should be worrying if you are considering to marry him and have a family with him. I would say that in the top 5 reasons for divorce, finance would be a major reason.
Credit card bills through installment - that's like a major financial drain right there. Is it a debt from long time ago, or is it a monthly debt that he accumulates every month? If he pays only the minimum sum by instalment, it may take him years before he can finally clear off his debts, plus 50% of the amount he's paying would most likely be from the interest accumulated.
1k for insurance alone does seem excessive. But if that 1k includes investments and endowments, then it might not be that much after all. I would check if that 1k is generating any passive income or gains over the years that he's been investing it into. If he has just been investing, without seeing any gains, then that's quite a concern for the future.
$400 for fillal piety. As you've mentioned, his mum is a single parent, so probably he's her only hope for a secure monthly allowance. I think the key to consider is that if you are going to marry him, she will be someone that you will have to take care of in the future too.
So, have a lengthy discussion with your boyfriend on the future and plans that he has to take to move forward in buying a flat and/or raising kids. If your boyfriend has no plans for the future, then you would have to ask yourself if you are comfortable with staying with him (no plans future) or would you be better off finding someone that is willing to make plans with you and for you in mind. :)
02 Nov 2019
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.