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How do we go about splitting joint expenses and handling finances as a couple? 5 money management tips for couples.
By Manika Premsingh
As more and more women have become bread winners, traditional roles and expectations from marriages are also undergoing a sea change. Gone are the days when women would largely be taking care of the house while the men would go out and bring home the bacon so to speak. With women often adding to the finances of the family today, there are new questions arising. For a couple looking to get married, a key question is – how should you tackle individual finances when the lives join?
As an Indian woman, whether you are looking to get married, or simply start living together as a couple, working out answers to this critical question can prevent any confusion or tension at a later stage. Awareness of your rights and responsibilities is the first step to ensuring your personal well being as well as that of the both of you as a couple.
So here are 5 practical tips on joint finances for all you couples coming together:
As two people coming together to build a life and live under the same roof, it is important to have a common corpus of funds that can be used by both the partners for household expenses. How much should you maintain as funding in the corpus depends on your regular common household expenses like rent, utility bills and basic groceries. It helps to have a broad idea of what your household expenses are as individuals, and how they will change when you come together as a couple. Start with a broad number for the household expenditure. Each of you should contribute to this expense in proportion in the ratio of your earnings. You could also decide to split the expenses equally in absolute numbers, but that can put a disproportionate burden on the person earning lesser, as there can be significantly increased expenses on account of co-habitation. However, if this is not the case, (possible when either of you already owns a property, for instance) you might want to explore other contributing ratios as well.
Besides basic household expenses, both individually and as a couple you will be making discretionary expenses that can include anything from travel and luxury goods eating out and indulging any other interests. While the activities and even some of the goods (like electronics) might be shared interests, one of you could be better placed to buy them than the other, and can therefore provide for these expenses far more easily. If there is relative equality of earnings, then it goes without saying, that a halfway or near-halfway split is easier. Of course, the split does not need to be for each item every time, but if you have specific expenditures to be made, one half of the partnership can cover some expenses, while the other one can cover the rest.
While expenses are an important day to day aspect of living together, as a couple you also need to find common financial goals to be achieved as well. It is possible that one of you might be more of a saver and the other more of a spender. In this scenario, the spender is less likely to think in terms of the trade-off between spending today and spending tomorrow and vice-versa. However, even with differing attitudes, each of you will agree on a bare minimum financial amount to have for your future, when the both of you have retired, in the event of loss of earnings for each or both of you, and if you plan to have a family, the amount to be set aside for your child’s upbringing and education. Particularly for the joint expenses among these, it is important that you invest together in a safe and reliable scheme. Again, the contribution to joint savings can be in terms of the ratio of earnings.
While it is important to ensure joint savings to meet future expenses and ensure a quality of living together, do not ignore individual investments. This is especially important in the event of a split in the couple. Even if you think that you will never split up, this financial decision needs to be taken not on emotion but in order to cover all risks. If the both of you are employed, it is likely that you already have independent provident fund contribution being deducted from your salary every month. Besides this, whatever investments you can make outside of the joint ones, should be made in your individual names.
Lastly, if there are still persisting issues around savings and spending that you jointly are not being resolved, please take professional advice from both a financial planner as well as a lawyer. With finances being an important aspect for a modern couple’s journey together, do not side-step issues when particular choices are called for. Overtime, these can snowball into bigger concerns that might compromise the relationship. Receiving timely assistance might just be answer in such situations.
Indian women in particular need to be aware of ensuring a healthy and sustainable financial life, since in many cases this could be the first generation of earning women, or substantially earning women. Both you and your partner will be better off with clarity in these matters and this can ensure a happier healthier overall life too!
*Photo credit: 401(k) 2012 (Used under the Creative Commons Attribution License.)
Manika is an entrepreneur and the founder of Orbis Economics, a research and content organisation
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