I have been working for several years now (am 31 years old) but have been jumping from one job to another. As a lawyer, I have recently shifted my career towards working in the financial market. I just started with a new and good paying job, saving a healthy portion of my income after spending on my basic needs and expenses for my parents' needs. My parents have been hinting about “grandchildren” but I am honestly very worried whether I can afford married life. I would appreciate some insights please --- Marc

Building sand castles in the sky that can withstand strong wind requires that you firmly plant your feet on solid ground. That solid ground says that married life is not a free ride, figuratively and certainly not financially.

From a financial standpoint, the two constraints that define almost everything are savings and cash flows.

Savings will be used for lumpy expenses. The wedding and the honeymoon are the first two of these lumpy expenses. The more you want – more guests, better menu, better travel accommodations – the more it will cost. There are no fancy rules or savings tips, just a lot of personal choices that affect your checkbook. For planning purposes Marc, it is always prudent to assume that payments for these costs come straight out of your savings.

Next come the recurring expenses and this is where your salary is the central factor. More often than not, housing will be the most dominant expense. Whether it is rent or an amortization, this expense must be planned carefully.

The starting point is income. To even be considered today for a P2-million housing loan payable over 15 years, your gross monthly salary must be at least P75,000. Based on market rates as I write this piece, the amortization for this loan will be in the area of P24,000 a month.

There are finer prints to consider. Banks will set a maximum proportion – generally 30.0 percent to 40.0 percent -- that the mortgage takes out of gross monthly income. Beyond this threshold, too much of our income is allotted to the mortgage raising concerns about our own well being to finance other needs. Also, prudential central bank rules set a limit that the bank can finance and we must contribute the balance as our equity -- another lumpy expanse.

A P75,000 a month gross salary will attract an effective income tax rate of about 28.0 percent. With 40.0 percent set aside for the mortgage, this leaves only 32.0 percent of the salary for utilities, food, clothing, medical expenses and saving.

Such a budget is not impossible, but frankly the margin for any surprise is very thin. A sudden and prolonged illness, other unforeseen needs in the family, a spike in the prices of rice and gasoline can surprise you in both the timing and the amount needed.

And then the babies come. From pregnancy to birth to post-natal care to schooling and eventually to their wedding days, these are all part of the married-life equation that takes you full-circle from your wedding day to paying for theirs.

I am not saying that the cost-benefit ratio makes the economics of marriage untenable. To the contrary, many happily choose this route despite the costs and the not-too-encouraging current trends on prices. This is what makes marriage special: we choose to go into it despite the financial challenges that go with it.

So, weigh your ability to take on the financial responsibilities of married life carefully. Since nothing beats being in a position to match planned actions with the capacity to pay for these actions, think about how you are going to build on your savings, or whether you need to define yourself in a new career direction. If you are or would be paying for Mom and Dad’s medical needs, you also need to bring that to the equation.

While cooking for two may cost the same as cooking for one, getting married also creates a lot of expenses. Sure, there may now be two income streams, but ultimately, there is nothing in married life that is (financially) free. So by all means, plan for marriage with eyes wide open, and don’t leave the wife-to-be out of the planning.

(Have a question for Dr. Noet? Email personal_finance@inquirer.net.

(Noet Ravalo is a macro-financial economist by practice and profession. He was chief economist of the Bankers Association of the Philippines until 2002 and has since been doing consulting work. Since 1994, he has been asked to provide technical inputs to both the Senate and the House of Representatives on various economic and financial legislation, some of which will have big impact on Filipinos' personal finances.)

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