Relationships are hard work. Perhaps one of the more challenging, yet often overlooked part of being a couple, is money management. I am not talking merely of saving money for the future, but even the ways in which couples tackle everyday expenses can make or break their relationship. Here are five ways in which you can nurture your relationship with smart financial choices:
Talk
This is the first and most crucial step, especially for couples who intend to live together. Set aside time to talk specifically and honestly, about how much both of you earn, the kind of spending you do, the expenses that you’d want to split and how you intend to save for your shared future as well as emergencies. Some couples prefer to maintain a certain level of financial hygiene, where a few basic expenses, such as rent are shared but everything else is maintained by each individual. Some couples like to pool their money in a joint account. Some people might also be prone to spending more – an aspect that needs to be discussed in depth in context to your relationship.
Once you’ve mutually agreed on a way in which you will tackle expenses, you can proceed with the practicalities, such as opening a joint account. Be aware that it is far simpler for conventional married couples to open a joint bank account together. Opening a joint bank account as a same sex or unmarried couple can seem like a herculean task, but it is possible.
Decide on your respective share
It is not uncommon to have a gap or imbalance in incomes between couples. If the degree of variance is too high, then it is important that the person who earns less is not put under pressure to contribute an equal amount to the household. Arrive at a percentage of contribution that is commensurate with your respective incomes. It is just not fair otherwise.
Where does the money go?
Split your savings between investments that suit your life. Remember that anything can happen in the course of time and while it is important to nurture your present relationship, it is equally important to save for your future, whether it’s for your child, a home or a holiday.
If you are thinking of having children, for example, invest in a long-term insurance policy that will mature in 20 years. If you’re investing in real estate or in a house, think about when that loan will be settled and what will be left when you’re closer to retirement. Adequate life and health insurance policies for both parties are a must. Couples can pool their money together through joint mutual funds or a joint bank account and fixed deposits. Mutual funds allow you to invest together – either by ‘joint’ holding or ‘either or survivor’ holding.
A joint holding gives both of you equal transactional rights, which means you’ll need the others’ signature if you want to sell the units. In case of the ‘either or survivor’ holding, one person’s authorization is enough. On paper, the only rule required for two people to hold a joint investment account is to be KYC compliant individuals. However, the actual application process can be very arbitrary. Some banks accept joint investments irrespective of the nature of the relationship, while some banks insist that a relationship needs to be established. It must be noted that in an ‘either or survivor’ holding, only the first unitholder gets tax benefits. But one way to ‘hack’ this system would be to invest individually and have the other person named as a nominee in the investment.
Create and track a budget
Take some time to create a budget for your household that the two of you intend on sharing. This is essentially putting down on paper the fixed and variable expenses that you will share every month. A sample budget would have your joint contribution on one side and the money that you want to set aside for your rent, utilities, groceries, transport/conveyance and entertainment (eating out, movies etc) on the other side. Once you’ve figured out categories, you can share a google spreadsheet to enter in your respective expenses and see how you’re staying on track. You can use apps such as Honeydue, DollarBird or GoodBudget that allow couples to collaborate on their budgets.
Share the loan
Debt can be a huge source of stress in a relationship, so if you’re taking on a large loan, take it together. This is especially for those couples who are looking to invest in a house. Get both your names on the document. This way, both of you can benefit from the income tax benefits that come with taking on this massive obligation. The general rule with respect to loans, however, is to have an honest conversation with your partner before you get into it. If you don’t have the bandwidth for the EMIs or if the EMI leaves very little left for the two of you – then it’s better if you don’t borrow at all.
{Rupee Rani is a monthly column on personal finance. Send in your questions and feedback to rupeerani@thenewsminute.com}