Many a time we find couples bickering over trivial matters involving money. The wife feels triggered by her husband’s extravagant behaviour while the husband is annoyed at her wife running the household on a shoestring budget. This is true of many households with the men looking after the financial matters while the women take care of the household. Though in many cities, you will find both the husband and wife earning as the need for a double income blurs the age-old segregation of duties. However, most families stick to the age-old tradition of letting men control the financial reins. However, does the responsibility to earn translate to an ability to deal with finances too?
The answer may not be in the affirmative in most cases. Take, for example, the recent news of a woman filing for divorce after she learned how her husband had invested his life’s savings in Yes Bank shares and has now lost the money with the shares having lost their value after the bank filed for bankruptcy. The wife claimed how her husband Ayush had spent more than ₹20 lakh on Yes Bank shares, and now he has a negatively sloped equity curve and is on the verge of being homeless. The husband’s inclination to buy penny stocks and shares that have lost their value underscores his understanding of personal finance.
A wrong turn in finances can damage relationships beyond repair. Heated arguments over financial control are one reason for many marriages falling apart these days. A lack of financial acumen can see many couples living paycheck to paycheck while many find themselves on the brink of poverty after a few years. This mostly happens when either the husband or wife has no understanding of finances or how to deal with them or is simply not interested in setting financial goals from a long-term perspective. The tendency to maintain the status quo with the husband resisting any attempt by the wife in sorting out the family’s finances is another reason for many families witnessing wealth erosion.
Investing and securing finances together
Changing the existing state of circumstances through a heated debate will not help. A frank discussion is the need of the hour. Couples must sit down to discuss their financial goals and spending habits. Make a list of essential and non-essential expenses first. Be open to the idea of your partner managing the finances. Hesitation surrounding money discussions at first can be replaced with open discussions around financial decisions based on experience and know-how of how money works. Couples could start discussing tax-loss harvesting, their investments, loans and debt to understand their individual and mutual financial goals. Include retirement planning in your discussions as couples may differ on the age at which they want to retire.
Couples aware of their financial goals should work together towards their goal achievement. Savings is the first step post which they may start investing depending on the corpus they wish to accumulate. To beat inflation, a major part of the earnings must be invested in equity instruments. Not all may be adept at interpreting stock movement. Such couples can consider shifting their investments to mutual funds and exchange-traded funds (ETFs).
Gold is another great option to invest in for couples trying to shield their investments from the effect of inflation. Parking money in sovereign gold bonds, gold mutual funds and gold ETFs yields returns as the price of gold continues to move up in short bursts in response to inflation and interest rate hikes. A part of the money must be set aside in debt investments like money market instruments, fixed deposits and others.
What many couples forget is the need to set up an emergency fund to pay toward contingent liabilities in the event of a sudden loss of income due to unemployment or any other reason. To insure means to secure, which means that couples must pay attention to buying insurance plans like health insurance to pay for their hospitalization and medical bills, term insurance for a financial backup in case of sudden death and disability income insurance cover that becomes active when the policyholders file their inability to earn due to sudden disability stemming from accident or disease. Insurance plans come with a set of clauses that couples must not ignore to avail their benefits. All mutual funds have certain management and administrative expenses that must be compared alongside their returns to invest in the best mutual fund for a prolonged tenure.
Lack of knowledge is one of the reasons that many couples fail to save and invest adequately. Sadly, financial literacy is still a much-ignored concept among many families in this country. This reflects badly on their investments, their tax outgo and their choice of insurance. Couples must learn together the basics of savings, investing and financial transactions before taking any major decisions. Alternatively, they may seek the help of a personal finance manager who can guide them regarding appropriate savings and investment decisions. Little savings for the rainy days must not be discounted.
Remember that a couple that saves and invests together stays together!