Market Watch

How a couple can talk about money without fighting

Tax-saving guide for FY 2018-19
Talk money without acrimony
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Talk money without acrimony
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Little everyday decisions and significant life changing ones require joint effort from husband and wife.So, how can we make decisions about money somewhat less combative?

His, hers and ours
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His, hers and ours
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Allocate money as his, hers and ours. Except for a few exceptional cases where a common pool of money is easily used without complaint by both parties, earmarking is a good idea. It offers discretion and freedom. When one judges the other's expenses as wasteful, it leads to endless heartburn. Much better is the practice of letting the other spend a portion of the income freely without questions.

The common pool
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The common pool
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The contribution to the common pool should be based on agreed principles and budgets. Many couples find the division of money and assets unpleasant, when the relationship is cordial. In that case, assets should be held jointly.

Trigger points
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Trigger points
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Do not strive for consensus on every little money decision. Identify decisions that trigger the most argument and make time to sort it out. Couples find it difficult to agree on big ticket decisions like where to live, how big a house to live in, how often to renovate it, and how lavishly to decorate it. Agreeing on a spending limit for large expenses is an effort worth investing in.

Don't skip this step
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Don't skip this step
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Some couples skip the discussion on money out of pure denial of their actual monetary status. These households struggle with the social conditioning that the husband should play the superman provider. Every member of the household should know that money is a limited resource, and that decisions have to be made by evaluating one spend against the other. Making the spending decision a family effort is also a good way to involve children and help them understand how to allocate money.

There is no easy way out
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There is no easy way out
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There is no easy way to arrive at a consensus about where to invest. Risk preferences can vary. While one might be willing to take the risk with stocks, the other might not move beyond the fixed deposit; one might be convinced that financial assets are more efficient, the other might not be willing to revise views about real estate and gold. It is helpful to see these differences as contributing towards the asset allocation decisions of the family's wealth.

How to invest
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How to invest
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The household can decide to have its wealth in every kind of asset, from property, gold and FD to stocks and funds, and allocate the management of these assets according to the preferences of the members, annually reviewing the proportions invested in each. The overall wealth should do well with this variety.

Problems in household finances arise from quarrels over opportunity costs. One disapproves of the money spent on a parent, insisting the money is needed for the child's education; one quarrels about money spent on jewellery, arguing that it is better invested elsewhere; one desires a bigger house in a better locality, while the other sees saving on EMI contributing to a better lifestyle; one is content with Rs 50 lakh in assets and the other thinks even Rs 4 crore is inadequate for retirement. There is no agreeing on these issues, only identifying them as problem areas and finding ways to manage them can help.

Text by Uma Shashikant, Chairperson, Centre for Investment Education and Learning.

Tax-saving guide for FY 2018-19
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