Friday, June 12, 2009

Marriage: A risky business

Lately I came to know a few friends from different social circles getting married. I am not sure if you call it pre marriage jitters, but 2 different couples who have already bought HDB houses are already having 2nd, 3rd thoughts about that person they want to marry.

One couple was together for 6 years, and the reason for getting married is because they have already known each other for 6 years and time is running short! The guy in the relationship really hates to receive SMS and calls from his fiancée, often trying to avoid her whenever possible. Breakups have been tried and failed due to pressure from the fiancée’s whole family, he was time and again held hostage emotionally by them.

As for the other couple, they rushed into a marriage less than 1 year of their relationship as they were keen to receive the 40k CPF housing grant by buying a resale HDB. Both are unwilling to go through the marriage now, but the house had been bought, banquet booked, bridal shoots taken and renovation paid. All by installments. There is little they could do but carry on with the mistake. And by the way, they no longer talk anymore, even over dinner.

Needless to say, we can foresee that they might not live happily ever after upon marriage.

Risk: Considering sunk costs

“It will be a waste if we don’t get married after being together for so long” is not a good reason to get married. Even if we were to analyze the issue from finance perspective, knowing each other for years is actually a “sunk cost” which should not be considered when making cost benefit decision. (Sunk costs are costs that cannot be recovered once they have been incurred. However sunk costs greatly affect actors' decisions, because humans are inherently loss aversive and thus normally act irrationally when making economic decisions. )

Actually marriage is a cost benefit decision between 2 persons. We should be choosing the person we love that would provide the biggest benefit and lowest cost to us in FUTURE. In order words, we want to maximize returns and minimize risk. Hence, “sunk costs” like knowing each other for years, already spent a lot of money on him/her, already bought the house etc should never be considered for marriage decision making, if you are a rational person.

We should rather, be concern about opportunity costs. If I forgo this girl (or project) and I invest time and money in another girl (or project), what is the projected benefits (cashflows) from the new selection? Is the net present value or internal rate of return higher? It depends on your expectations (discount rate) though!

Unfortunately, for marriage, the payback period for the investment is often minimum 40 years. Hence, it is a risky investment!

Risk: Non diversifiable risk

The other reason to consider marriage as a high risk activity is because of its non diversifiable nature. I can only choose one spouse and live with it. I cannot marry many (for non muslims) and spread my (their) eggs over few baskets. Hence, it is of paramount importance to choose the correct one! Even if one may argue that you can choose the best wife from many girlfriends (though not ethical), choosing the correct girlfriend may not turn out to be the correct wife, mother (for you children) and daughter-in-law.

Just like business climate, tax policies and consumers’ taste change rapidly; your spouse will also change. The same spouse today may not be the same one 10 years later. You will need to discount and adjust your expectations accordingly, which may be painful and difficult experience.

Risk: Unfavourable historical returns

Look around yourselves. Are there happier married couples or happier singles? What is the percentage of divorce and broken families? Again, from current statistics and “historical perspectives”, most people are better off single, which again points to the risky nature of marriage!

So if you are considering to get married, do think carefully! Do not get married for the wrong reasons!

After all, life can only be understood backwards; but it must be lived forwards.


Createwealth8888 said...

Marriage is like any investment by nature it is risky as no one is sure how future will be; but people still invest, right? Some win, some lose.

Cheng said...

Interesting article. :)

Createwealth8888 said...

Before marriage, open one's eyes wide and see one's spouse clearly and after marriage, keep one of your eyes close.

A man has to expect his girlfriend to turn into a nagging wife and a nagging mother too.

A man can ignore and run away from his nagging mother but can't hide from his nagging wife.

Everlearning said...

Hi Sgbc,
It is a sad thing that couple enters marriage for the very wrong reason.

If there is no love for each other, it is better to call off the marriage than to enter into one and live an unhappy and unfulfilled lives together. There is no "exit" unlike investments because both parties suffer great pains and losses.

Love comes with sacrifices and mutual understanding to do good or more for the other person. It is not for selfish or economic gains.

With mutual commitment to keep the marriage ongoing and a happy one, neither party should "demand" the other to fit into his/her ideal perception as a life partner.

Personally, I don't think that marriage is seen as a business, worse still, a risky business. All these are man-made mistakes that some "parties" gained when divorce surfaced.

Therefore, I conclude if one is certain and honest about one's feeling for the other party and determined no matter what it takes, one is willing to make it a life-long marriage together than get married and build a beautiful home together with lasting joys and happiness.

Chin Wei Wen said...


Your article is getting interesting...


Tactical Trading Team said...

Haha! I really like this article. By the way I just got married few months ago.

LeeSeng said...

Just like any investment, you never invest in things you don't know. If you don't even try to understand the other end, why incur so much cost?

To those now-happy-singles, what's the cost of your last 5 years of your life? How much can you saved to hedge that period if you not even saving rental from your first home? Hope that your live shorter than HDB lease you currently holding. :P