Before they marry, couples need to discuss how they will share their joint wealth, says Uma Shashikant.
It
is the season of weddings, and as I attended my share of the events,
several questions crossed my mind. It is tough for families to view
everything from a monetary angle. There are social and peer pressures,
emotional gratification and many other aspects to a wedding, besides the
ones associated with living together. I risk being told off that there
are things that money cannot buy. However, all of us know the power of
money and how poor financial decisions can hurt us. Money matters can
easily stress families, especially young ones who have high
expectations. The emotional, social, psychological, even karmic angles,
make these decisions complicated. Perhaps, it would simplify things and
help us deal with these questions if we have a money framework that we
can follow.
First, I am amazed at the amount of money that is
spent on weddings even by the simplest of families. Perhaps the
flourishing parallel economy has deeply influenced our social events.
The grandest weddings are still conducted by those who seek a good
excuse to spend the black money they have hoarded and earn some social
brownie points. The new standard these extravagances have set for the
simpler folk is disturbing. The money spent on weddings is easily a
multiple of the savings of the family.
A goal or an expense that
cannot be met comfortably by the current regular salary needs a
well-thought out saving and investment plan. However, several families
scoff at including weddings in their financial plans. The confidence
about future incomes makes youngsters big spenders. However, middle-aged
parents, who are spending a large sum, may be compromising another
goal—retirement or the education of another child. This is why the
funding of a wedding needs to be a project that a family should plan
seriously well in advance.
Second, several newly-weds end up
being a part of the extended families. It is not uncommon for children
to stay with parents after marriage along with their spouses. I see
doting parents living with their children and raising their
grandchildren, thus enabling the younger generation to pursue paying
careers. But what about the finances? Who manages the household
expenses? Who bears the EMIs and loans? Is there a common spending pool?
Is there a fair contribution to it?
A household with multiple
incomes and common expenses needs a working plan to run smoothly. A plan
to take care of the macro items without getting into the nitty-gritty.
For example, if there are advantages of living with parents, do the
younger members invest the savings in rent, housekeeping and childcare for the future benefit of the parents? I find that most
households begin with trust, goodness,
generosity and kindness, but the lack of a sensible spending and
sharing plan results in acrimony, leading to a deterioration of
relationships.
Third, weddings are expensive,
from the functions and trousseau to the honeymoon. Later, to please a
new spouse, there may be more expenses on travel, gifts, eating out, and
the like. Reduced saving ratios, higher credit card expenses, and
occasional hand loans from friends are all par for the course. However,
without pre-planned savings, or a plan for repayment, unbridled
enjoyment can result in financial stress and a high-cost debt. Many
people are unwilling to discuss finances or the affordability of an
expense with the new spouse. Most are likely to spend with a sense of
joy and entitlement. It is important to make a mental map of where this
will go in the long run. Cash-flow maps for spending and repayment need to be maintained, budgets
should be made even if these are not
disclosed, and care should be taken to ensure
that all fun is not about spending money. Including lowcost fun
activities and setting the tone for affordability, sooner than later, is
important. Debt traps are not good to deal with in the early days of
marriage.
Fourth,
young couples tend to set benchmarks for their standard of living based
on their peer group. To have their own car, home and a lavish lifestyle
is too enticing to be ignored. There is a need to prioritise and
sequence the goals to avoid stress. Buying a car and home, and bringing
in a huge EMI because of an employed new spouse, can turn into a risky
proposition, especially if the spouse would like a career break to raise
children or if one of the spouse’s job faces a risk. Having too many
loans and EMIs, and clubbing multiple financial goals can stress
finances seriously. It may be a good idea to see what portion of the
joint income can be devoted to these possessions and how it would be
funded and managed.
Fifth,
young couples find it tough to discuss ‘your money’ and ‘my money’.
Many are still not comfortable with pre-nuptial agreements. Money is
personal to each person who earns it, and attitudes to money can be very
different. I know of a household, where the husband saved his income,
while the wife used hers to run the household. The couple sadly broke
up, and the wife was left with no assets. Each spouse needs his or her
corpus to fall back on. How, how much, when and where are the decisions
that need to be taken.
Sixth, everyone needs a finance buddy.
Many of us are unwilling to discuss money issues with parents, spouses
or siblings. We don’t want them to know we have enough, or that we are
running short. We all need a friend who knows what our money attitudes
are, and helps steer us when we are in trouble. Someone with whom we can
discuss alternatives without worrying about being judged. It can be an
outsider, adviser, tax consultant or an uncle. Many of us clam up when
faced with a crisis and having a friend helps in resolving money issues.
There is a lot that changes in our money lives when we decide
to get married. It may be worthwhile spending time to think about our
money attitudes, capabilities, wealth and willingness to spend before we
end up quarrelling about it.
Source : ET Wealth - 21-Jan-2013
