)
For many newly-wedded couples or those planning to tie the knot, discussing money is not among the top priorities. Neha Sharma regrets this. She married her colleague while working at a prominent Knowledge Processing Outsourcing (KPO) firm in Mumbai. But the marriage took an ugly turn, when she realised that her husband had four personal loans and Rs 4 lakh outstanding on his credit cards. She agreed to pay off some of his debts from her savings. But the differences grew with time as he couldn't control his expenses. And then, the marriage ended in a divorce.
Knowing about each others' finances is an important step before marriage. But most choose to avoid the subject. Even after marriage, many don't discuss it because there is a feeling that such discussions can lead to spats and reveal financial vulnerabilities. Worse still, couples even find themselves in a situation where they are unsure about who will bear the monthly, weekly or holiday expenses or who will save for the family needs. But for two people who plan to spend their life together, it pays to open a dialogue. Some steps that can help:
Are one or both spendthrifts? Start with understanding your partner's attitude towards money. Two people coming from different families can perceive money in different ways. Understand whether your spouse is a spendthrift or a saver. Is he or she penny wise and pound foolish? While none of these are bad, understanding the attitude towards money will help you to plan your goals, savings and budget.
Deepali Gajra, an analyst with a private firm says that she spends impulsively while her husband, a chartered accountant, is a saver. To curtail her expenses, the couple decided that she should contribute higher towards their savings. "Things won't change in a month or two but over time, we have seen the spender slowly cutting down expenses," said Steven Fernandes, a certified financial planner.
How much do you have? Tell each other where you stand financially. How much have you saved and where? Do you have outstanding debts, how much they are and how you plan to repay them. What kind of expenditures you have and how you spend your monthly income? If you are into business, how does your income vary?
"These questions definitely helped us to plan things better. Accordingly we planned the venue, gifts and other expenses," says Priyanka Saini, who will be getting married in February.
Is the balance sheet balanced? Tax experts say that both should manage their finances separately for initial months as it will help while filing tax returns. Joint accounts and investments require a lot of paperwork. The wife needs to change her name in various documents such as PAN card, KYC, and bank account. Similarly, trying to figure out who has contributed or withdrawn how much from the joint bank account can become a complicated affair.
If the wife earns more than the husband, it is better the finances and investments are mutually kept separate all the time. If the couple decides to part ways, joint investments can become a bone of contention. For example, there have been cases where the wife paid a higher equated monthly installment on a loan when the couple bought the house together. But on paper the husband had a higher share of ownership. After a bitter fight, the husband staked a claim to the house and won. Similarly, when wife is making her mutual fund investment, she should become the first holder. The second owner has no rights on the investment unless the first passes away.
Once the wife changes her name on all documents, the couple should make the spouse beneficiary and nominee. Don't defer it. This will ensure that the partner is adequately protected in case there's disability, death or illness.
Do you have targets? Once the couple starts to settle down, they should start working on goals. Creating an emergency fund should be the first step. If both have stable jobs, three months' expenses should be kept in bank or fixed deposits. If the husband is self-employed and income is not steady, six months' expenses needs to be saved.
Decide on your short term goals - things you would like to do in the next five years - and how you will save for it. Then, draw a plan for long-term goals such as children's education and marriage, and retirement planning. "The couple can use gifts received in marriage to make their first investment," said Fernandes. And that's what Deepali and her husband did. They did a fixed deposit of the money they received in marriage, which they will use to buy a house.
You can't afford this: A couple cannot be discussing every penny they spend. However, between the two they need to have a minimum spending threshold limit. This means, if either of the partners is making a purchase above a particular amount, they need to discuss with the other the necessity of it. Say you decide this figure to be Rs 5,000 and one of the partners wants to buy a mobile phone. The two can talk and decide a budget on the expenditure.
Should charity begin at home? Couples should set a policy on lending and helping friends and family. There could be someone seeking help for illness and there could be someone who is always in financial trouble. Financial planners say that this is a bone of contention among many clients. One solution they recommend is that depending on the income surplus, the couple should decide the amount they will part with and how they would deal with such a situation.
Is it her's or her parents'? There could be assets in the name of the girl that belongs to the father and he might want to keep it. For example, a property or high value fixed deposits. These need to be transferred back to the parent. There could be insurance policies for which the girl's parents had paid. If she decides to quit her job or take a break, the couple needs to work out who pays for such investments. "In the marriage preparation, these might take a back seat but it's always better that asset transfers are done before," said Brijesh Dalmia, a certified financial planner.
Do you need to stop dinner outings? Draw a list of monthly expenses such as payment towards loans, groceries, utility bills, shopping entertainment and so on. This will give a clear picture on the money that's left in your hands at the end of month. Financial planners recommend that a couple should save minimum 20 per cent of their total income. If your budget is over 80 per cent, then you need to pare down expenses.
If the unforeseen happens: Both partners might have health cover from the employers. But it always makes sense to have a family plan that covers hospitalisation in case there's job loss and the cover from employer is discontinued. Financial planners suggest that couples should look at accidental death and disability cover.
