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  • Writer's pictureAkshay Nayak

When Couples Manage Money

Managing money is one of the most important jobs for any couple. In India most households have traditionally been single income households. The husband was typically the one who would earn money for the household. And the wife was simply expected to manage the household with whatever money she was given by the husband. But times have changed today. Most households today are double income households, where both spouses work and earn. It is also a lot more common to see partners living together before marriage.

As a result, both partners or spouses may have an equal say in money matters of the household. This means the dynamics of money management for couples has completely changed. But it can sometimes be a challenge for both parties to come to a common understanding on matters concerning money management. This could present it's own issues that may affect the relationship between both parties. Therefore today I am going to talk about what it takes for couples to manage money amicably and effectively in today's times.

One of the major reasons for discord between spouses or partners today is differences with regard to money. It has very little do with the actual amount of money each one earns. Most financial issues in a relationship stem from a difference in way each party views money and money management. Therefore it is essential for both parties to first develop a common philosophy as regards money management. Some of us may find partners or spouses whose philosophies on money management naturally align with ours. But that would be down to sheer luck and coincidence.

Most of us may find partners whose views on money management are divergent or radically different from ours. We would therefore have to sit down and communicate with our partners or spouses to find common ground on an approach to money management. Some of the nuances which can be discussed in the very beginning have been laid out in the graphic that follows.

Younger couples need to discuss when and how they would like to consider the financial implications of marriage and/or kids. Such discussions could cause friction and lead to stress in the relationship. But it is still better to have these conversations early on. It is also important for couples to confer before before acting on major spends which involve significant one time outlays. These include expenses such as purchasing a new home, vehicle or going on a vacation. Having discussions before executing such spends gives due respect to both parties and their respective ideas.

Practices related to saving and investing may differ from household to household. In a single income household, the onus of saving and investing would primarily fall on the income earning member. Therefore, the income earning member must save and invest only after consulting the non earning member. This reduces the possibility of a significant deviation from the money management philosophy agreed upon by the couple. The non earning member must be completely aware of every single financial decision being made. They also need to place complete faith in the earning member with regard to investments. Interference must be avoided as far as possible.

In the case of a dual income household the dynamics change. Each partner must appreciate the independence of the other. Each must realise that the other is an independent individual earning their own money. Both partners must therefore allow each other to make their investments independently of the other. Things need to be looked into only when one partner significantly deviates from the money management philosophy agreed upon by the couple. Documentation and transmission of the couple's investments is the next aspect to be taken care of.

Both partners need to ensure that their names on the ownership documents of their investments match their names as they appear on their PAN Card. This puts the ownership of their investments beyond question. A list of other documents that need to be collected and maintained are given in the graphic that follows.

There may be cases where couples work with a professional financial advisor or financial planner. In such cases, the contact details of the planner must be available to both partners. This would be especially useful when one partner lacks interest in money management. It is also helpful in case of the untimely demise of one of the partners. The surviving partner can get in touch with the financial planner. The planner can then help the surviving partner figure out the deceased partner's investments if required. The planner can then help the surviving partner chart out a course for the forthcoming years.

Let us finally understand how transmission of a couple's investments can be effected. In case of a single income household, the partner in charge of making investments can name the other partner as a second holder for every investment. In a dual income household, each partner can name the other as the second holder. Naming someone a second holder is different from naming them a nominee. The ownership of the investments would automatically get transferred to the second holder on the death of the first holder. The legal and procedural aspects associated with nominations and transfer of assets to nominees would be avoided.

Today, it is less common to see a scenario where the non earning partner is completely in the dark on money management matters in a single income household. In dual income households, both partners are a lot more capable of making their own money decisions. The need of the hour for couples when managing money today is transparency, trust and independence. Acting on the guidelines mentioned above would ensure the presence of all three of these aspects. It would allow both partners to manage money together while maintaining adequate independence. It would mean that both partners move toward the same goals without interfering with each other. And that is the level of success couples should work towards when they manage money.

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