When you take your wedding vows, it usually implies that you’re in a marriage for better or worse, richer or poorer. In reality, it’s never that simple. Look at the statistics: 29 per cent of boomers and 41 per cent of Gen Xers who are divorced, believe that their marriages ended because of money disagreements or troubles. This number is only increasing as millennials start to jump onto the bandwagon. It may sound trivial, but the old order of ‘what’s mine is yours, what’s yours is mine,’ doesn’t necessarily ensure a successful union.
We don’t want to disillusion all of you newlyweds out there, but forewarned is forearmed and most often, feeling heady in love may simply not be enough! What do you really need to take into account before embarking on a journey of love, laughter, and shared finances?
Discuss Your Debt Beforehand
Do you have a huge college loan that you’re still paying off or an EMI for a family that’s coming out of your pay packet every month? Your partner needs to be in the know. Data reveals that nearly 86 per cent of all marriages start with some kind of debt, which is almost double the number of couples from 25 years ago. “The first step is to sit down and discuss your current financial situation – both inflow and liabilities,” says Peter Mukherji, a Darjeeling-based banker. “Include your partner in the roadmap to pay off your debt. Do you have the means to attack it in an aggressive, short-term way if your partner can shoulder household expenses for a little while? Or do you want to address it every month without affecting your other financial commitments? Unfortunately, the best thing to do is to get it out of the way as soon as possible, because it prevents you from moving ahead and focussing on the future.”
Be On The Same Page As Far As Financial Goals Go
Envision this - You and your partner have been setting aside money every month to spend on something that doesn’t bill into your monthly expenses. You’ve been dreaming about a luxury cruise, but your partner wants to put it into redoing the house. How do you decide what to do with your surplus savings and avoid conflict? Says Mukherji, “Make sure that you devise and maintain a system that makes it clear ‘who’ and ‘how’ bills and budgets are addressed keeping your combined needs, values and financial goals in mind. Schedule a monthly meeting to review and track the progress of your short-term, medium-term, and long-term goals. Devise a budget for every expense that both of you can agree on, and stick to it as much as possible without deviating. This includes day-to-day as well as one-off big-ticket expenses. It’s basically all about being organised – setting goals and sticking to those goals unless there is an emergency.”
Start Saving Immediately
While this is in no way the norm anymore, newlyweds tend to be younger and lesser financially stable than couples who have been married for a while. Saving for the future is of key importance if you want to avoid financial troubles and ensuing conflicts later. Part of this process involves investing. “Get yourself a financial advisor who can take you through the principles of saving and investment – stocks and bonds, inflation, trading accounts, fixed and recurring deposits, home loans, tax saving schemes, insurance (health and life), emergency funds, planning for your kids’ education and so on,” says Chennai-based financial advisor Sangeetha Chakravarthy Iyengar. “Review all your insurance policies and nominate your spouse to take action in the event something happens to you. Draft or update your will and bank account beneficiaries to include them as well. If you’re employed, notify your company’s human resources team. Tell each other where important documents are kept, and how to go about accessing them in the case of an eventuality.”
Use The Venn Diagram Format
You can either combine your resources entirely into joint accounts, keep them entirely separate, or opt for a hybrid model. The last option calls for a ‘Venn Diagram’ approach, where you run your own separate finances, but also intersect in a joint account, where a pre-decided amount is put in each month for shared or common expenses. So your debts, credit card bills, personal expenses, and shopping could go into individual accounts. Expenses for children, groceries, home loans or rent, utilities, and so on could be shared. The problem with this model is, it doesn’t necessarily promote equality unless both partners earn the same amount. One partner is always either going to pay a higher percentage or a higher amount from their earnings than the other. If you can get around that sensibly and without friction, this may be the best way to go. Especially if you’re cautiously entering into a marriage where you haven’t ruled out the possibility of divorce.
Communicate
Findings from a survey conducted by American Express revealed that only 43 per cent of people discussed money prior to marriage, but the figure skyrockets to 81 per cent in young professionals. Money is a volatile topic. Speaking about it can be emotional, especially when you don’t have the number of years of comfortable co-existence as a couple who have been married for a decade or two. Says Iyengar, “You may even think it is crass to discuss money, with someone who you’re marrying purely for love and companionship. Not just that, but a lot of couples anticipate conflicts and fights and try to avoid them. However, this doesn’t downplay your relationship in any way. In fact, talking about it can help avoid financial infidelity in the future. It also makes you bond over shared financial goals. Even if you have separate bank accounts, making joint decisions about how to manage your money makes you feel like a team.”