They say all is fair in love and war. Marriage often ends up falling in both categories. Sometimes the war is just a big part of love. But the war over finances can very easily turn ugly if the partners don’t match when it comes to their attitudes towards financial planning. Here’s a couple that was having a similar problem.
Suman, an independent woman and journalist got married to Akshay Kumar last year (no, we don’t mean the actor), much to the delight of her family. Since she got married in her late 30’s, she already had a clear cut financial plan going for her. But her husband had had a very carefree bachelor life and often went overboard while spending money.
He lovingly bought gifts for her, planned a vacation together, changed cars and generally loved to splurge. While Suman enjoyed all the attention Akshay gave her, she felt uneasy with his spendthrift ways after a certain period of time.
She decided to actively ensure that there is no discord in their money matters and that their common goals were met in the best way.
The significance of financial compatibility:
Just like Suman’s case, many couples realize that they’re financially incompatible months or years into their marriage.By that time they lose out on the best time for financial planning and the magical power of compounding money. Starting out late with financial planning can often leave you with an insufficient corpus, debt traps, high insurance premiums and an undisciplined financial life.
Ways to manage financial compatibility:
Get into a financial commitment: The Kumars decided to upgrade to a bigger apartment. They contributed equally towards the down payment and the home loan. Their newly opened joint savings account had standing instructions to transfer a pre-fixed amount every month to this account from their salary accounts. This nudged Suman’s husband towards financial responsibility.
Joint expenses: Suman’s next step was to draft out a clear budget plan with all the expenses they have to meet every month. This included their fixed expenses on grocery, electricity bills, rentals, and all other miscellaneous expenses. The couple agreed to split these expenses as well. After calculating the average expenses for the last year, they decided to add these expenses to the standing instruction given to their joint account.
Other loans: Both Kumars own cars. They decided to bear the burden of their car loans individually. This reduces the burden of only one person taking up all the financial commitments.
Common goals: Their common goals include all the expenses including owning a house, having a contingency fund plan, their children’s education and marriage, and a retirement plan. All these goals were clubbed together the Kumars decided to pool in a fixed amount monthly from both their incomes.
Here are the top do’s and don’ts to take away from the Kumars.
Top 3 financial do’s
Joint decisions:The implementation of financial plans must be done jointly. This doesn’t mean that it is necessary to route all expenses through a single account or make all the investments in joint names. Nevertheless, both partners must be aware of the investment decisions and patterns.
Recognizing spending natures:Recognizing each other’s strengths in planning finances is important as it makes it easier to divvy up the financial tasks accordingly. This way savers and spenders balance each other out.
Starting early: An early start at financial planning can give much better results than starting out later in life. The earlier you recognize each other’s income and spending patterns, the earlier you can find the best way to resolve problem areas through open discussion and combined decisions. This makes sure that financial goals are not compromised in any way.
Top 3 financial don’ts
Not talking about finances: Open discussions on financial matters should be part of everyday life. This not only helps in planning for goals and sorting out misunderstandings, but also keeping one partner aware of the financial condition when the other is not around. Or if there is an eventuality.
Ignoring conflicting spending habits: It is important for partners to discuss and debate all aspects related to their income, expenses, savings, assets and liabilities. Ifone lacks the financial discipline,the other might fail to take the lead to ensure that the money is wisely spent. Here Suman’s decision to participate in monetary decisions and not to remain a passive partner should be followed by everyone.
Not agreeing on dividing money: Many people today follow a concept of “my money” and “your money” and spend independently. This is mainly due to the increasing financial independence of both the partners. But this individualism often spells trouble for couples when the money is not shared and when different financial plans are made independently. Financial individualism can be maintained while discussions and equal contributions are important to ensure that the common goals of the family are met.
And as a golden rule, never hide purchases or debts from your spouse. Your wife might chase you with a ‘belan’ (we kid). If your horoscopes match and your love is written in the stars, you might as well align your financial arrangements and future.