Saturday, February 08, 2014


Being in a Week of Love, first I need to wish all a very happy and lovable Valentine week for the year along and whole life. I could't resist myself to publish an issue related to couples in such special event of love.

With the change in Socio-Economic conditions of our country and increasing Literacy among females-even in rural areas- a big shift is happening among young couples and there financial life which affects sometimes directly sometimes indirectly married life positively and/or adversely depending upon how the life together is taken forward.
With most of the couples, lately both are actively working and having sizable earning capacity, and with finances becoming more and more important to handle even daily chores, some or the other financial question always arises between a couple at least once in a day which they need to discuss and/or decide. Traditionally in India, females are always part of finances for a couple / family,  but was limited to only household expenses. With growing literacy , growing aspirations, ever growing expenses, changing socio-economic conditions and more and more females actively working , each member of the family has to take active participation into finances and investments as at least Taxation has to be taken care of even for the Females now. With growing literacy, comes knowledge and more awareness which leads to more cash surplus which a couple should positively utilise for achieving their goals and dreams.

I have seen cases where the couple is earning excellently and can easily fulfill their dreams and goals, but still are in trouble AND the challenges can actually start even before one says "I do."

After preparing Financial plans, I have realized few lapses which I would like to share with you, just to see that I do not have to handle or rebalance any portfolios for separation as the reason and in a larger sense sharing few ideas which would help couple take and enjoy life more prudently with satisfaction and finally achieving financial freedom. Here, size of dream or income or goal is of least importance, rather what is important is achieving whatever the family dream is, together.

To explain things from financial aspect, I first need to talk about individual traits and couple compatibility as related to finances.

Different types of couples and their approach to financial planning

From the perspective of financial planning behaviour, I generally find the couples into three broad categories:

Type 1: One spouse leading from the front, second spouse on backstage

The first partner is knowledgeable, inclined and actively involved to design family’s financial future. The second partner gives first partner an implicit authority to take financial decisions for the family and to live out its implications (possibly because this partner is not very money savvy, trust in knowledge of first partner, being from a non-financial background like IT etc., loaded with other responsibilities like managing household, etc.).

Type 2: Both spouses on the front-stage

Both spouses are professionals having own incomes, have a very clear view about money and financial goals, and definite opinions on how it should be managed for the family’s future.

Type 3: None of the spouses at front-stage

Both spouses are laid back as regards financial planning aspects. None of the partner displays any active interest/ involvement to design family’s future and plan financial goals.

Now, let us analyse the above approaches.
Type 3 couples anyways are not bothered and happy in their own life, so there generally may not be an issue, so we will exclude them for our discussion here.(We will talk some other times their financial problem, which always is, because of laid back and unaware approach)

In case of type 1 couples, the approach is acceptable, because then the first partner is free and without any botheration allowed to take calls regarding financial aspects – like hiring a planer, listing down financial goals, making investments etc. Also, the first partner takes lead in learning more on personal finance aspects and takes charge when required.

But here also, the first partner has an implicit responsibility to keep the second partner updated on important financial decisions and its implications AND also seek consent for critical financial choices.If not done so, at time it is found that it leads to future differences, unsatisfaction, not meeting financial expectations and finally living with or separating for not giving due respect and thus not achieveing financial goals or aggravating financial problems.

Coming to type 2 couples – in these cases, if both couples are very much knowledgeable about money matters – while having all the knowledge is good, over time in marriage, this knowledge itself can result into “self-centeredness” and resultantly, ego issues can very easily crop up.  

Since both partners earn and have own view on how to manage money, in case partners don’t have the necessary emotional maturity and empathy towards each other, there can be a possibility of conflict in terms of each member knowing best on how to plan the family’s financial future.

In such cases, even if a financial planner presents a very clear cut financial roadmap, there are very slim chances that it will actually get implemented, unless there is enough compatibility amongst the spouses to work together.

Why compatibility between spouses is so important for a sound financial life

In earlier times, we had a very good safety net in form of joint family system – a wise community of elders whom couples could approach in case of confusion/ conflicts between spouses.

Today’s times are increasingly stressed times, there is no job security, plethora of choices, ever increasing lifestyle expenses, big responsibilities taken early at life, easy availability of credit etc.

It is in these times that both partners are forced to make some very key decisions that can potentially impact their entire financial future.  Some of such decisions are as follows:

  1. Whether to mix individual funds in joint account or keep accounts separate after marriage
  2. To live with the parents or live separately
  3. Which city to settle in (staying with parents vis a vis staying in a big city, OR staying where one of couples is working)
  4. When and how big a house to purchase
  5. When to think about starting a family
  6. What to do with windfall gains received – for e.g. yearly bonus, inheritance
  7. How and when wife will take a career break to raise kids
  8. How should be the child’s schooling (type of school, day boarding etc.)
  9. What career options can homemaker explore in later years
  10. How much to invest in commodities (e.g. gold etc.)
  11. Which financial goals to keep in priority
  12. Taking care of senior parents, their accommodation, medical treatment costs etc.
  13. What will one do after retirement? Etc.

It is in these times that the emotional maturity and mutual respect and regard between spouses truly shines through, and determines ultimately how abundant a family’s financial life will be.

Also, these crucial decisions have to be acted upon fast and cannot be avoided altogether. For e.g. a couple postpones home buying for 5 years. By end of 5 years, when they go out in market to buy, prices have risen so much that house becomes unaffordable and also whatever they paid in rent for all those years was money down the drain…had the couple taken decision before, they would have been much better placed now…how many of us see this happening everyday to people around us?

What couples need to keep in mind

From a financial perspective, both couples should realise that “being on the same page” is their “most important asset” when it comes to their financial life.

No partner should thrust his/her financial decision on the other partner, for the simple reason that if the other partner is pained by a decision, the pain will come back and affect the first partner as well.

Each partner has to see into each other’s hearts as to what the other partner envisions their joint future to be, which helps both partners to understand and appreciate other partner’s views.

Both partners have to also decide whether they are themselves capable to chart their financial path, and if they decide to hire professional help, that decision should also be a joint decision, and not a forced one.

In my view, couples should specifically reflect on following points in their financial journey:
  1. Stop considering “money matters” as a taboo. It’s high time couples talk about financial goals and envision the financial future – remember that only dreams become reality. I generally suggest partners to sit together and chart out a financial plan discussing all financial aspects of family together, listing out goals/dreams i.e. creating a common vision and charting out a path to achieve financial freedom and meet goals. This indirectly helps couples to act like-mindedly even to handle disturbances in life, which may occur in life at some point or other.
  2. A word to husbands: You know a lot, agree. But please involve your wife in financial decisions, even if she is a homemaker. It is equally about her life too. Let her learn, and contribute also.  
  3. A word to wives: Please be more active in financial matters. It is your right. It is you who actually “runs the house”, so any financial planning exercise is incomplete without you.
  4. A word to the financial planner – don’t ignore the spouse compatibility aspect in the planning process. Inform the couples that their joint involvement is necessary for success of the plan. At least in the initial meeting and presentation of draft plan, try to call both spouses for a discussion.

Here I would like to share one example which highlights of the biggest problems I see within couples, which surely affects their financial life in a grave manner:
I met this couple few months ago, both working in a good company, having excellent income levels to save enough to meet atleast 70% of their common Goals / Dreams, but I got this call saying “we are not able to save enough and we don’t know why even our high incomes are draining”.
I just did one thing, while discussing made the couple sit together and got all details from both of them together. Even I was shocked to see that they where discussing their finances for the first time together.                                                        

After they discussed the Incomes and Expenses, goals, assets, liabilities, and other details with me (surprisingly, even within themselves for the first time, even after having kids and being married for more than 20 yrs.) and recording the details i.e. putting things on paper in detail they by themselves had the solutions ready in their minds (even before I wrote and presented their financial plan to them).The problem initially was NO SURPLUS EVEN AFTER GOOD INCOME LEVELS AND BOTH WORKING automatically turned into A WOW EFFECT ,just because a healthy communication and discussion happened where all was recorded and a common goal with a vision and a common path was laid.


Now let me come down to basics, which could help each one in some or other way to excel through or even help avoiding separation. A little financial planning can do a lot for your love life down the line. Here are a few pointers to help you stay smart when following your heart:

Know Money Habits
You must talk money even before your relationship becomes serious—a person's financial habits are an incredible insight into his values and ethics. That doesn't mean a lousy credit score is a reason to break up, but if you find that your new love interest doesn't handle money responsibly, you have to question what else he isn't going to be upright about. If you're the one with the issues, be honest about your shortcomings. A good relationship is one in which each partner helps the other make better choices—and you and your beau might be able to help each other become smarter about money.

Meet in the Middle
Whether you are newly engaged or suddenly find a long-term relationship challenged by a financial setback, support each other. Retreating to your corners does not help. Nor does finger-pointing; blame doesn't help your family balance sheet. To address any money problem, you need to work together to come up with a plan.

Understand all Equals
Who makes what is irrelevant. Do you hear me, stay-at-home moms or for that matter only earning dads? The size of your paycheck does not determine your role in the family finances. Respect each other as equal partners, with an equal say in money management.

Put It in Writing

Ensuring that you have the correct documents in place to safeguard you and your assets is a must. Means a couple who is about to commit to the relationship or a couple who is married should write it on paper or some sheet who owns what and who would own what later(or for that matter could decide and appoint a financial planner at earliest) and a will, or P.O.A. or trust preparation etc.with hilding all accounts in nomination or jointly . For those contemplating a second marriage, the only way to protect the assets you bring to the table—especially if you want them to go to children from a prior marriage—is to create a legal trust. That document will spell out what portion of your personal assets will or what will not pass to your children, rather than to your new spouse.

Understand Debts, before and after marriage
Debts you had prior to marriage are yours alone—unless you actively merge them. When you wed, don't automatically rush to combine everything. You can help each other out by chipping away at your loans without becoming officially responsible for each other's. Actually this is slowly but steadily and surely becoming a issue to handle.

Example: I had a client who had a home loan jointly with his daughter for tax saving purpose for both, so the loan would equally get deducted regularly. Once she got married this became an issue, somehow my client was not able to understand (and also handle, because of his own cash surplus issues, though temporary) and then once I wrote newly married couples Financial Plan, I got an opportunity to understand and explain their personal traits and get the matter resolved.

Divide and Conquer
Here's how I suggest every cohabiting, working and waring couple organize their cash flow: Create three accounts—one for you, one for your partner, and one joint fund. Once you've determined the total cost of your shared living expenses, both of you should contribute your portion of these costs to the joint account each month, based on your share of household income. (For example, if you make Rs.60,000 and your partner makes Rs.40,000, you're responsible for 60 percent of household expenses.) Whatever money doesn't go toward these costs stays in the individual accounts, to be used at each person's discretion.

Extra Credit
Every woman also needs one credit card in her name only. If you become divorced or widowed, an individual credit history will enable you to get a loan and open utility accounts without leaving a deposit, and may even help you land a job (some employers check applicants' credit during the hiring process).

Ties That Bind
After you marry, every asset either of you acquires is jointly held. That's why you both need to be in sync on your long-term financial goals, from paying off the mortgage to putting away for retirement. Ideally, you should talk about all this before you wed. If you don't, you can end up deeply frustrated and financially spent. Discussing money with the man/woman you hope to spend the rest of your life with doesn't mean you don't love him/her. It means you love him and yourself, and that you are seriously looking things forward.

Don't Hide Your Head in the Sand
A lot of women fall into the habit of letting their partner handle the money. If you are one of those women, that's not your spouse's fault; it's yours. Your husband may be doing a fabulous job with your money—that's not the point. You need to understand the family finances and weigh in on all decisions. The fact that women tend to live longer than men means they may need to rely on the money longer and will also find themselves managing it at some point. The longer you wait to engage, the bigger the surprises you may find down the line.

Truly this is one article very close to my heart, as finances should not become an issue for a couple just because of inequality in financial terms, few differences and lack of communication.

This took me very long to write as it is a very sensitive thing to write on finances in conjunction with personal traits.

 I am satisfied writing this, especially after this final article and I hope you people will be satisfied too? I am sure this will not only help each of you to excel in finances, but also knowing each other more. Untill I started Financial Plan writing I thought it is all about finances and calculations, but trust me emotions, individual traits, and how each of us react to situations differently also have somewhere financial implications, which is where my role also comes.


chintan said...

Nicely written !
Comprehensive and yet to the point. No need to read any other article on this subject after reading this one.
Thank you and keep the articles coming. :)

Viresh Patel said...

My Pleasure
This is just one of the Aspects of Finances and Married Life,more will follow


Very well articulated...Must read for beginners as well as experienced!

Viresh Patel said...

Mr.Nirmish. Thanks and Appreciated.
This is just one of the aspects on Finances and Smoother married life,more will follow in future Articles,for sure.