It's Valentine's Day on Sunday and if it's like any other year, hundreds of couples will get engaged.
What can you do to ensure a long and happy marriage? New research suggests resisting the urge to spend up big on the wedding reception is a great place to start. As discussed in an excellent recent podcast, economists at Emory University surveyed more than 3000 couples and found those who spent more on their wedding ceremonies were more likely to later split up. Of course, they could not prove that the expensive wedding caused divorce. Only that there was a correlation.
There are lots of reasons why those who spend more on their wedding are less likely to have a marriages that endures – maybe when you really love each other you don't feel the need to make extravagant gestures to impress, or maybe you have been together a long time and have already done all the fancy stuff earlier in your relationship.
However, the study's authors posit that the cause is the debt incurred for a lavish wedding that puts strain on the relationship and sets an unhealthy behaviour pattern for married life. This makes some sense, as Relationships Australia has found that money stress is the No. 1 cause of relationships breaking down, notwithstanding Australia having one of the highest levels of income per person in the world. This suggests it's not lack of money that causes problems, but lack of understanding and agreement between couples about how to use it.
Going into debt to fund the things in life we want can be a necessity – there are not many of us who can buy a car or house with cash saved up in the bank. However, Australians now carry a worrying level of debt and many of us have started to lose track of the fact that money we borrow is not ours and it's not just the interest that we need to pay the bank, it's also the loan principal itself.
Home loan interest rates are now lower than they ever have been in history and there is the danger that we get too comfortable with rates at current levels and borrow too much. This can cause big problems and huge stress when interest rates go up. While you might think that increasing interest rates are a long way off, tightness in wholesale funding markets has resulted in banks recently increasing their business lending interest rates, and this could flow through to home lending rates even if the Reserve Bank does not lift the official cash rate.
The best thing to be doing while rates are low, is to be paying down the debt you already have and thinking about ways you can demonstrate your love on Valentine's Day without breaking the bank. Not only is this financially savvy, but just might be the key to long-lived marital bliss.
Catherine Robson is a financial planner with Affinity Private.