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Managing finances as a couple is very important and has several advantages. Here are some money management tips for couples.
By Poornima Kavlekar
A friend once told me, “The mind boggles when we discuss investment. So I let the husband do the needful.” No doubt, the various financial product options on offer can sound intimidating. Yet, it is very important for men and women in India to get involved in managing finances as a couple, rather than avoiding money matters completely.
Whether you are a working woman or a home-maker, you have a very important role to play in your family’s money (expenses or investments), especially in the planning stages. And the population of women who think this way is on the rise. Bangalore-based Sunita Srinivasan, 36, a freelance marketing communications writer, believes that it is very important to have full knowledge of the family’s money and involves herself in planning for their future. “It not only strengthens our journey that started 10 years back, but also helps in planning for a secure future, which also involves education and marriage of our two girls,” she says.
And, no, it is not just about having a joint bank account. Good financial management is about planning and having full knowledge of your inflow, outflow and sharing critical financial information with your spouse. Articulating your financial goals and discussing them openly is the first important step towards managing finances as a couple.
Emergencies and Crises: Joint financial planning helps a couple be prepared for any potential emergencies. Since women in general have longer life expectancy than men, and marry men a little older than them, it is likely that a large percentage of wives will outlive their husbands. If there is, unfortunately, the death of a spouse, the surviving spouse will have a tough time if she has no knowledge of the family’s financial and asset status.
In case of a medical emergency too, one needs to have access to emergency funds or the health insurance details. Ignorance at such times can make the situation even more painful. Joint investments need to be set on the ‘either or survivor’ option as this helps the surviving spouse to operate the account without any hassles.
Further, a small percentage of marriages do break up, leaving women vulnerable if they are unfamiliar with the current financial situation or with managing finances.
The power of 2: Remember the saying “Two heads are better than one.” Managing finances as a couple helps in understanding whether you can sustain the outflow towards investments, based on the current capital inflows. It also helps to ensure that there is a fair distribution of wealth among the members and investments aren’t overweight on one member. You can also ascertain your risk taking capability and divert your funds towards investment products that match it.
If a couple apply for a home loan together, they are eligible for a higher amount. Working together when investing or buying insurance also saves time, especially for working couples. One spouse can do the initial research, while decisions can be taken jointly.
Regular discussion on goals: Joint discussions need to happen to ensure that you are on the right path. Whether you are saving for your child’s education or marriage, planning for retirement, buying a house, or taking care of dependant parents, discuss your plans at least once a year. This will help in realigning your income and expenses keeping in mind the rising cost of living. It also helps you invest in new investment opportunities that keep cropping up.
Managing finances as a couple has helped Sunita and her husband, Srinivasan, 41, to understand how much they want in their kitty for retirement and work towards it. “We are looking at buying a second home and a second car,” says Srinivasan. “Of course, sometimes we may have different wants. But we try to reach a consensus if there is a major spend of over Rs. 10,000,” adds his wife.
Money flow: Have full knowledge of where the money is coming from and where it is going. This will help you keep your goals in sight and regulate your money flow towards it. Divide your money responsibilities. One could take care of daily planning, while the other can take care of long-term goals. However, make sure you know what’s happening in each other’s world.
Existing investments: Have full knowledge about your existing investments, asset and liabilities. Ensure that there are no legal complications. A clear Will or nomination of beneficiaries will help.
Review and update investments such as insurance policies, bank accounts, bank lockers, demat accounts, provident fund accounts and property documents. This will help you identify if everything is in order and is a reminder for any follow-up on premiums that need to be paid. Chennai-based finance professionals, Sangeetha, 35 and Sumesh, 35 have an excel sheet that has details of each others’ payments. This keeps them from missing out on any insurance premium payment or any other outflow.
Regular reviews also help reduce redundancies like identifying bank accounts that are not operated, prune dud investments and enter new products.
New investments: Financial products-savvy couples plan and execute their own investments. In the case of the Srinivasans, whenever they plan fresh investments, Sunita comes up with a list of best five fixed deposits, mutual funds and stocks. Then the couple discusses the products and decides which one to invest in. Of course, you could also take the help of a financial planner, but do put in some research on your own.
Any investment, insurance policy or fund has no meaning if it cannot be used at the right time. Ensure that your spouse knows where all the financial documents are kept.
Location of important documents: Any investment, insurance policy or fund has no meaning if it cannot be used at the right time. Ensure that your spouse knows where all the financial documents are kept. Sangeetha and Sumesh not only keep their documents in relevant files in a location that both of them have access to, but also have a soft copy of the same. This helps in quicker access to the documents. Create an online or a physical document detailing all the insurance policies, and investments. This document should contain important details like where it is kept, amount of insurance or policy, name, number and contact details of the financial advisor (if any) handling it. With this in hand, one can actually put away the actual document in a safe too.
Finally, and most obviously, disclose all important and material facts of your income, investment, expenses, loan or any other financial dealings, to your partner. These are a few things that you can do to ensure that your financial future together is hassle-free. There is no major strategy involved here. Regular and disciplined follow-ups, reviews and discussions is all that it takes to make managing finances as a couple profitable in the long run.
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