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.
BUT THAN ,
EVEN WHEN BOTH ARE KNOWLEDGEABLE ENOUGH WHY FINANCES ARE FOUND TO BE IN TROUBLE
AND IN LATE MARRIAGE YEARS COUPLES FIND THEMSELVES IN TROUBLE ,WHICH SOMETIMES
ALSO LEADS TO SEPERATION?
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."

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:
- Whether to mix individual funds in joint
account or keep accounts separate after marriage
- To live with the parents or live separately
- Which city to settle in (staying with
parents vis a vis staying in a big city, OR staying where one of couples
is working)
- When and how big a house to purchase
- When to think about starting a family
- What to do with windfall gains received –
for e.g. yearly bonus, inheritance
- How and when wife will take a career break
to raise kids
- How should be the child’s schooling (type
of school, day boarding etc.)
- What career options can homemaker explore
in later years
- How much to invest in commodities (e.g.
gold etc.)
- Which financial goals to keep in priority
- Taking care of senior parents, their
accommodation, medical treatment costs etc.
- 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:
- 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.
- 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.
- 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.
- 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.
THE CORE THING HERE
MISSING WAS HEALTHY COMMUNICATION.
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.
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.
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.
4 comments:
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. :)
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!
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.
MY PLEASURE
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