Marriage & money: Why coming together is crucial, moneywise

Financial problems are a common reason for divorce.

For recently-married childhood sweethearts, Dhanesh and Oindrila De, the desire to keep on fulfilling short-term aspirations, such as overseas trips, and long-term goals, like rearing a kid, prompted them to put their finances in order from day one.

Since getting married nine months back, the couple has put in place a sufficient emergency corpus for six months, bought individual health insurance plans as well as a term plan of Rs 2 crore and started investing in Public Provident Fund (PPF), National Pension System (NPS) and the equity markets via mutual funds.

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The couple’s financial plan looks well-structured at first glance. However, they admitted that there are gaps.

Dhanesh, a private sector executive, is based out of Mumbai, while his wife works for the French Consulate in Bengaluru. Both, aged 31 years, are planning to move to the same city. “We both look after our own finances and sometimes our spending goes out of proportion than planned. Also, there are dependent grandparents. We have realised that we have been lacking on the savings front,” said Dhanesh.

In modern times, when both husband and wife are financially independent, merging finances can help build trust and bring in financial harmony in a marriage.

What is the right time to start talking about finances?

Many times, during the courtship period, both the girl and the boy, in an effort to impress each other, may not disclose their true financial picture.

Discussing finances even before the marriage is key to building a strong foundation for a future relationship or marriage. Talking about debt is especially important during courtship. Whether it is a student loan, credit card debt, or other financial obligations, being open about each other’s financial situation allows for transparency and planning.

“This level of maturity is a must at this stage. If this bridge is crossed at a very early stage, and the couple knows each other’s financial strengths and weaknesses, they will work on building their finances around it,” says Kalpesh N Ashar, founder of Full Circle Financial Planners and Advisors.

Why merging of finances is important after marriage

Keeping finances jointly can help reduce stress around money, a common source of marital conflict. The exercise also makes it easier to manage joint goals.

"Rather than merging finances, I would use the term sharing of responsibility and planning for the future. One of the problem situtations is that suppose both the husband and wife are working, and if one spends more than the other and the other keep on investing. That can lead to problems later,” said Suresh Sadagopan, a SEBI (Securities and Exchange Board of India) -registered Investment Adviser and principal officer at Ladder7 Wealth Planners Pvt Ltd.

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While it is preferable to maintain joint finances, both, especially the wife, must be in control of some aspects at the very least.

“If the partners are not in sync when it comes to managing money together, it makes sense to keep finances separate and have a common account for family expenses,” said Mrin Agarwal, Financial Educator and Director at Finsafe India.

Banks, insurance, investment, spending

To be able to live harmoniously in marriage, it is also important for the couple’s financial goals to be in sync.

“Take a look at risks first. Investments will come later,” says Kiran Telang, a Mumbai-based certified financial planner (CFP). “Debt traps need to be sorted out on priority,” she adds.

Another key aspect is insurance coverage. When it comes to life insurance, experts suggest a sufficient term insurance plan for both the husband and wife, and a substantially large-sized health insurance plan.

How much should the couple invest? Experts suggest that the couple should contribute to the investment kitty, proportionate to their income. Keep your spending in check. A good way is to keep your spending caps depending on your income, to avoid future heartburn.

Having a joint designated account for spending is a good idea to go about in merging finances.

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“Young couples who have been married for one or two years usually haven’t reached a stage where they have to spend or park money for their children's expenses. The cash flows or the surplus can reduce drastically when that situation arrives. Therefore, before you get into that commitment, try to strike the balance -- enjoy life and travel, but spend wisely,” said Harshad Chetanwala, co-founder of MyWealthGrowth.

Financial mistakes

Ashar says that the biggest mistake a couple can make is hiding the real income. “This happens when one tries to dissuade the other from spending more. Also, a spouse might think that his/her partner needn’t know,” said Ashar.

Also, financial goals not aligned with each other can come to haunt the couple later. Lending to friends without informing the spouse, and sudden job or business shift decisions done discreetly are some of the other mistakes a partner can make.

Experts advise keeping your spouse informed of any liabilities that might befall on you. And don’t fall into the trap of overspending via credit cards.

It’s a partnership

Financial problems are a common reason for divorce.

Chetanwala highlights that a key mistake young couples make is keeping their finances separate. “In many cases, expenses were higher than acceptable.” He says that a big chunk of a couple’s financial goals are to be shared jointly, “from buying a house or a vehicle or planning for retirement or children's education.” Hence, looking at consolidated income and outflows is vital.

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There will be differences in a marriage as you can't be identical to your partner. But communicate. Keep the channels open on all things about money, not only from approaching the common goals, but also keeping both of the partners in the loop as to why things are being done and how they're being done.