Managing money as a couple: Should it be done jointly or separately?

Each couple must adopt an approach to managing finances that best suits their circumstances based on their goals, incomes, spending behaviour, and risk profiles.

A marriage may bring together two individuals, but that doesn’t necessarily mean it brings together their money too. There can be different permutations and combinations in how each couple manages their finances.

Take, for example, Hardik Jagdishbhai Thakkar, a financial services industry professional who takes care of all the household expenses and invests the rest. His wife’s salary goes entirely into investments. They have jointly-held investments, with the person making the contribution listed as the primary holder.

Different folks, different strokes

Mamta Dubey, a private banker, follows a somewhat similar approach. “My husband takes care of all the major expenses, such as loan EMIs and monthly rent. I take care of the smaller expenses and invest the remainder of my salary. With his higher income, he’s able to save more despite footing a larger part of our expenses,” says Dubey.

Tanya Barbora, a marketer at a consulting firm, on the other hand, believes in splitting the regular household expenses equally with her husband. But each of them does their investments separately, with the other spouse added as a nominee.

Ashish Srivastava, a sales and operations professional in the education industry, has a mix of modes of investment holding: singly-held mutual fund investments with his wife as the nominee for ease of transactions, and jointly-held fixed deposits (FDs) and property.

A Mumbai-based 51-year-old man who left his job to try his hand at entrepreneurship said there is no particular pattern to his investments; some are held in single mode while others are jointly held with his wife. This person did not wish to be identified, although he shared his experiences with Moneycontrol about how he and his wife manage their finances.

Moneycontrol spoke with a few married couples to understand the intent behind their money management.

According to Thakkar, he and his wife are on the same page when it comes to managing money. Their main motive is to save as much as they can together. “We are investing aggressively in equity (over 90 percent of our portfolio) for our daughter’s education and our retirement, our two main goals,” says Thakkar.

This combined-finances-for-shared-goals approach runs in line with what Vishal Dhawan, founder and Chief Executive Officer (CEO) of Plan Ahead Wealth Advisors, a securities and Exchange Board of India (SEBI)-registered investor advisor, recommends. He says, “We strongly recommend merging finances for married couples, as multiple goals are likely to be common. Planning separately for each individual may, therefore, be counterproductive.”

Also read: Meet The Millennials Who Foot Their Own Wedding Bills

While Dubey and her husband, too, have shared goals for their son’s education and their retirement, they make investments in their capacity (not as joint account holders) with the other spouse going down as a nominee. The Dubeys explain the logic for this. She says, “This helps us keep things simple from a tax perspective. We are both finance professionals, so we like to take our calls. But we discuss everything and are aware of where the other person is investing.”

But Pratibha Girish, a certified financial planner and founder of Finwise Personal Finance Solutions, says that it is okay for a couple to have joint investments because the tax liability is clearly on the first holder, and this is easier for transmission on one of the partner’s deaths. Akhil Chandna, Partner, Grant Thornton Bharat, a leading tax firm, adds, “It is very common and generally acceptable for an individual to have joint investments in his or her spouse’s name by using only his or her income. However, the income from such an investment is liable to be taxed in the hands of the primary account holder only.”

Splitting expenses, making investments 

Commenting on the varied pattern of split expenses and investments between couples, Amit Kukreja, a SEBI-registered investment advisor and founder of Amit Kukreja Advisory, has this to say: “Couples need to ensure that their contribution to expenses and investments is in proportion to their incomes. From an income tax perspective, the two individuals represent two separate PANs and must ensure that no one PAN should bear all the expenses and then be deprived of all investments.”

Girish says that when it comes to investments, couples need to ensure that both partners have the right mix of investments.

Recounting one of her client cases, she talks about avoiding the mistake of having all the debt investments in the name of one spouse (who is in the lower tax bracket) and all the equity investments in the other spouse’s name just to get around the higher taxation of debt products (which are taxed at an individual’s slab rate). “If the marriage falls apart, then all the growth assets (equity) will be concentrated on one spouse, while the other person will be left with only debt investments.”

Then, as Kukreja points out, among couples who are not aligned over money it has been observed that one of the points of disagreement between them relate to how much support one can give to one’s own parents. Here, Barbora’s approach of each spouse helping their respective parents with no interference from the other partner seems to offer a simple solution.

Changing times, changing strategies?

Today, Srivastava is the only earning member. He transfers money to his wife’s account for the monthly expenses. But in the earlier years of their marriage, when his wife had a paying job, they split the expenses.

For other couples, too, changing times may trigger a change in how they handle their finances. Barbora, for instance, talks about how she and her husband have talked about him taking complete charge of their monthly expenses if they decide to have a child. "I aspire for us to reach a point where I can take a break from work for a few years, ensuring I am able to dedicate my full time and attention to my child.”

But the Mumbai-based person (quoted earlier) says he and his wife will continue with their current way of splitting expenses. “My wife earns a salary and a consulting income. So, she takes care of all the major expenses while I handle the small ones. But even once my start-up starts making money, we will continue with this because of the way we are. She loves shopping and likes to keep track of only large expenses, whereas I am more into investing, and remember to keep an account of even the smaller spends.”

At the end of the day, each couple must adopt an approach that best suits their circumstances based on their goals, incomes, spending behaviour, and risk profiles. As Girish says, what is needed is an open discussion on all aspects, as each partner needs to know why the other is doing what he/she is doing.