What do married couples do when it comes to their finances?
I recently asked a female member of a team I am working with, “So, how do you make your investment decisions?”
“Oh, that is taken care of by my husband” was her very prompt answer.
Well, I wasn’t surprised!
When I look around at my friends, family, relatives, I see the same thing everywhere.
As a society, this is probably how we are. When it comes to couples, the financial decisions are automatically left in the hands of the male spouse.
The female, even if she works and has an independent income cares much less about finances, specially investments. At best, she might invest in Bank Fixed Deposits or open a PPF account.
Now, there is no escaping the fact that a couple has to take joint responsibility for financial matters.
It helps a lot when the female spouse takes an equal responsibility in the financial affairs.
You will understand the reasons and benefits as you read further.
So, if you are wondering what to do and how, here are 5 financial must-dos for married couples. Read on…
#1 Dear Couple, talk about money
Tell me honestly. Do you as a couple sit down and talk about money? How often?
Somehow the topic of money is considered taboo for discussion until it starts getting out of hand.
It is important that as a couple you are in sync on your income, spending and investments. You have to mutually decide your financial goals and work towards them.
Talking has benefits. When you talk, you get to understand each other’s perspectives and agree on an approach and a method of handling your finances.
It is possible that the male is more of a risk taker while the female has a lesser appetite for risk. As a couple you might agree on which movie you should go and see, but it is equally important that you agree on which property to buy and at what cost, including the financial requirements that it will demand.
Only a thoughtful conversation can create an agreement on such issues. This by itself will prevent any future discord relating to money, spending and investments. There is a hidden benefit too. The transparent discussion strengthens the trust between the two of you.
#2 Get the correct documentation in place
This is one big weak area for most people and that includes couples too. If you are not taking adequate care of documentation, your and your spouse, in case of emergency, could be potentially looking at dealing with a lot of trouble.
Typically, we tend to be lax with it. When we fill up applications or investment forms, we miss out on a simple data point such as nomination. Or, we rely on agents or relationship managers who in the hurry to complete the process, leave out those details. The typical excuse is you can always do it later. The later never comes.
If there are financial documents, which were created before marriage, you need to update them with the latest details including nomination.
God forbid, in case of any emergency, the spouse should not be left running around for details or want of proof of ownership. Here’s what you must do.
- If you have been recently married, you would want to ensure that your spouse’s name appears as nominees or beneficiaries in all your financial documents – your bank accounts, investments, insurance policies, etc.
- You might also want to open a joint account that both of you can operate for your investments or loan repayments.
- You should also create a well defined index and keep all documents at a mutually agreed fireproof place (within the house, office or bank locker). This should include the health insurance cards, copies of life insurance policies, bank account online access passwords, portfolio trackers, trading accounts, anything and everything that can be needed by the spouse, etc.
- If the documents are virtual, they should be stored in a common folder and shared with each other. Online storage is free to a large extent with services like Dropbox, Google Drive and Microsoft One Drive. In fact, your should scan all the physical documents too and store them online.
#3 Do regular reviews and updates
Financial facts change. Your income, spending, investments will change over time too. It will be great if, as a couple, you can regularly sit down and take stock of your finances.
- This could be done monthly or quarterly, as you might be comfortable with. In just a couple of hours every time, you can take stock of what do you own (stocks, mutual funds, gold, real estate) and what do you owe (personal loans, home loans, office loans) etc.
- Any new information regarding your finances should be reviewed and discussed. If one of you or both are going to get a raise in your income or a bonus, it would be good to mutually decide how should the extra income/bonus be utilised.
- You should also divide your financial responsibilities in terms of tracking of investments, ensuring that the bills are getting paid, expenses are tracked, etc. You might also want to decide what bills or premium payments will be paid from whose salary. This could be important from a tax benefit point of view too.
You should document everything discussed so that you know exactly what needs to be done by either in case such a situation arises. That will also ensure that you spot any financial issues early and keep yourself out of trouble.
#4 Invest in each other’s financial education
When it comes to finances, it is best to assume that we don’t know a lot. Hence, an investment of time in financial education is probably a very good idea.
As mentioned before, typically the male spouse has the primary responsibility of knowing about finances. He should make an effort to bring the female spouse also upto speed on money and investments.
The vice versa could also be true. This is what should be done.
- Initially, spending an hour a week could go a long way. You can talk about basics of money, banking, budgeting, various investment options, how to do online transactions, using credit cards, etc. There are several wonderful resources on the Internet – blogs, videos and audio – that you can use to add to the learning experience.
- Subsequently, you could go a step further and discuss the way a portfolio is built and maintained. You should discuss how to choose stocks, mutual funds, or any other investment instruments for a portfolio.
If you have grown up kids, involve them as well. That’s the best foundation they would have on the subject of money.
This is important to prepare each other to deal with any emergencies that might come up in the future.
#5 Bring a financial advisor on board
Well, it is not always hunky dory with couples. When it comes to money matters, there can be huge differences. Which phone to buy, where to holiday, which car or washing machine, LED TV or music system, when to buy the home and how much to save for retirement, each one of them can be a subject of potential discord.
While differences can be sorted out with a dialogue, sometimes it might be necessary to get an unbiased third party perspective.
This third party is best represented by a financial advisor, who with his/her professional approach will bring in bring in several benefits.
One of the most important ones would be to educate both of you in getting a better grip of your own understanding of financial matters. The perspectives the advisor shares with you can help you take better financial decisions.
For example, if you do not have exposure to equity or are planning to buy a property, the advisor can help you properly educate and understand the implications, pros and cons, based on which you can take a much more informed decision.
Your differences on how the finances should not put a complete stop to the process of financial planning and management. When you feel that is the case, you should promptly get a financial advisor on board.
There is no denying that love is the most important aspect of a married couple’s life. Having said that, I would bring your attention to the following:
“Money can’t buy you love,
but it can buy you bail.”
“It is the measure of your laurels,
and the root of all quarrels”
I wrote the above lines in my poetic description of money.
It is important that couple takes joint responsibility of financial matters and become equal stakeholders in the financial future. Thus, they can avoid any possible issues related to money in the future.
Between you and me: As a couple, how do you and your partner approach financial matters? It would be great if you share your experience too. I look forward to your comments.
Note: I have been fortunate to meet female spouses who do a much better job at managing money and investments than their partners. I would want to see all female spouses that way.