Will you pay that car insurance premium?” Aditi never thought that a simple question like that would bring her to the doorstep of a split. The D word was for others and had no place in her eight-year-old marriage. For a couple who had enough money in their accounts to pay this premium, the issue became the beginning of a huge row, with each partner accusing the other of spending too much and on unnecessary things. The argument led to other issues and in an hour’s time the entire eight years of their life together almost lay in ruins.
There was a time when the man was the money earner and the manager and the woman had little to do with issues around the area considered “too tough” for her to understand or handle. But the urban mass affluent couple, most of them with twin incomes, is discovering a new reason to disagree: attitudes over money.
A fine balance: It’s important to shift focus from ‘his’ or ‘hers’ to ‘ours’. iStockphoto
Though not at a stage where the issue derails marriages, it is one of the factors in marital discord. Says Srividya Rajaram, clinical psychologist, Escorts Heart Institute and Research Centre, money can “lead to a power struggle, especially when both partners are earning well and neither wants to pitch in more than the other”.
Though our attitudes towards money are formed during childhood and depend on what sort of values we grow up with, the challenge is for these values and attitudes to shift from “his” and “hers” to “ours”.
Also See Apartment (PDF)
According to Rajaram, some of the common misunderstandings between couples over money are who spends how much and on what, whether the investments are prudent, and what is a luxury and what is a necessity.
If you are one of the lucky minority to have a spouse who is a value clone, don’t read any further. But most people take time to fall into a pattern around their money lives. But what if the pattern is all wrong? With two incomes coming in, the stakes are now higher and the opportunity cost of losing out on the efficiency of a well-managed marital money attitude large. Says Sumeet Vaid, financial planner and founder and managing director, Ffreedom Financial Planners: “When both partners are working, the potential income can be higher and can also enable you to take more risks in terms of aggressive goals and timelines.”
Joint but separate
A couple living together sharing expenses, liabilities and investments, all planners agree, need to have all their bank accounts in joint name. But it is prudent to operate them as single, with the option of the spouse dipping into the other account in times of an emergency.
Says Suresh Sadagopan, financial planner, Ladder7 Financial Advisories: “It is a good idea that each person (with spouse as co-applicant) has separate accounts, from where the investments are done. This will be useful from the compliance viewpoint and is totally desirable from the income-tax viewpoint.” So, decide to make one “his” and one “hers” and operate them like single accounts with just one person using the account on a regular basis.
However, Harsh Roongta, CEO, ApnaPaisa.com, has a word of caution, “Divorces are not unheard of nowadays as they were earlier. So, one needs to be careful with joint accounts and has to be absolutely sure of the spouse. There have been cases, where one spouse has polished off the balance in a joint account. But, I agree, that in India the trend is not that common yet.”
Divvy up expenses
There are couples, where one is a lavish spender viewing the model of car she drives as the statement she makes about who she is, while for the other it is something that gets him from point A to point B. Which car they will buy then becomes a bone of contention.
And this dichotomy could translate into everyday expenses as well, causing constant acrimony. One way to fix this is to decide on a savings target and then split the expenses two ways. This takes care of the major issue of one partner thinking the other is spending too much, since whatever is left in the account is actually available for spending, after the savings target has been met. The key to this is sticking by the rule and not making exceptions, because if you do, the exceptions will soon become the rule.
Both build assets
There are two extreme ways of expense and saving management seen in urban Indian houses. The first sees the woman looking at the money she earns as hers alone and leaves the husband carrying the entire burden of the home and asset building. Says Roongta: “In India, a lot of times women tend to treat their salary as pocket money and the entire burden is on the man.” The opposite is equally true, where the woman ends up spending her entire salary on household expenses, leaving the man’s salary for asset creation.
All is well if they live together forever, but in case of a split, the assets belong to the person who paid for it, leaving the non-asset-creating spouse with nothing. “While a lot of couples save one spouse’s salary, and spend the other’s, that should not be the case. A lot depends on the understanding between the two. So, it would really depend from case to case,” says Sadagopan. He suggests that for this approach to work, the asset creation can be done in a joint name, with the non-asset-creating spouse’s name at the first holder in half the assets.
Co-own a house
The first house is always a big decision for a couple—there is something about home buying that cements a family together. And while simple money math may push you towards registering the house in the woman’s name due to lower stamp duties, it is a financial planning best practice to make the purchase joint.
“Though the stamp duty for registering a house in the name of a woman is cheaper, it makes sense to go for co-ownership of a house. In case of working couples, it would offer tax benefits under section 80C to both spouses. Also, in case of death, the succession process becomes smoother,” says Roongta. Remember, both get the Rs1.5 lakh deduction on interest paid on a home loan if the loan and the house is in a joint name.
Insurance for both
It was a man thing to get a life insurance cover 20 years back. No longer. Both spouses need to be covered not just to protect the future of the dependants, but also to cover the debts that may be in the name of the spouse. “If both partners are working then insurance needs should be shared in the ratio they are contributing to goals and savings,” says B. Srinivasan, Bangalore-based financial planner.
Basics include medical insurance, a critical illness and accident cover, plus a life and household cover. While life insurance premium would have to be paid by the spouse in whose name the cover is, medical and household insurance premiums can be split up.
There are thousands of crores of unclaimed insurance amounts and fixed deposits lying with companies in India. The person buying forgot to tell his wife what he bought and where the papers were.
With responsibility now getting split two ways, both need the other in the loop on what financial products they are buying, what insurance covers they have, which locker they operate and where the papers, keys and other documents are. Leaving one spouse responsible for all the paper work leaves the one who is fancy free at great risk. If she dies, he won’t know where to look.
But remember that all the above rules will break down unless the marriage is based on discussion, disclosure and a sharing of money-linked responsibilities. “Discussion and open communication only strengthens a relationship. After all, money is not what a relationship should be based on,” says Rajaram.
And women need to listen up. Says Sadagopan, “I often see that women are not really interested in the finances of the family. This should not be the case. Both spouses should have detailed knowledge of their finances and should participate equally. You never know when one would actually need to take charge.”