Often we find couples arguing over trivial matters involving money. The wife feels triggered by her husband’s extravagant behavior, while the husband resents his wife running the household on a tight budget. This is true of many households where the men take care of the financial affairs while the women take care of the household chores. In many cities, however, you’ll find that both husband and wife earn as the need for dual income blurs the age-old division of duties. Most families, however, cling to the age-old tradition of letting men take the financial reins. However, does the responsibility of earning also mean the ability to manage finances?
The answer may not be affirmative in most cases. Take for example the recent news of a woman who filed for divorce after learning how her husband had invested his life savings in Yes Bank stock and has now lost the money as the stock lost value after the bank filed for bankruptcy. The woman claimed that her husband Ayush more than spent €20 lakh on Yes Bank stock and now he has a negatively sloping equity curve and is about to become homeless. The man’s propensity to buy penny stocks and stocks that have lost value underscores his understanding of personal finance.
Mishandling finances can irreparably damage relationships. Fierce disputes over financial control are one of the reasons many marriages break up these days. A lack of financial acumen can leave many couples living paycheck to paycheck, while many find themselves on the brink of poverty after a few years. This usually happens when either the husband or wife doesn’t understand or manage finances, or simply doesn’t have an interest in setting financial goals from a long-term perspective. The tendency to maintain the status quo, with the husband resisting any attempts by the wife to put the family’s finances in order, is another reason why many families are witnessing wealth erosion.
Invest together and secure finances
Changing the status quo through heated debate will not help. An open discussion is the need of the hour. Couples need to sit down to discuss their financial goals and spending habits. First, make a list of essential and non-essential expenses. Be open to the idea of your partner managing finances. The initial hesitation in discussing money can be replaced with open discussions about financial decisions, based on experience and knowledge of how money works. Couples might start discussing tax losses, their investments, loans, and debt to understand their individual and shared financial goals. Include retirement savings in your discussions, as couples can differ on the age at which they want to retire.
Couples who are aware of their financial goals should work together to achieve them. Savings is the first step you can invest depending on the capital you want. To combat inflation, a large proportion of income must be invested in equity instruments. Not all may be able to interpret stock movements. Such couples may consider shifting their investments to mutual funds and exchange-traded funds (ETFs).
Gold is another great option for couples trying to protect their investments from the effects of inflation. Parking money in government gold bonds, gold mutual funds, and gold ETFs produces returns as gold prices continue to rise in short bursts in response to inflation and interest rate hikes. Some of the money must be invested in debt investments such as money market instruments, time deposits and others.
What many couples forget is the need to set up an emergency fund to pay off contingent liabilities in the event of a sudden loss of income due to unemployment or other reasons. To insure is to protect, which means couples must be careful to purchase insurance plans such as medical insurance to pay for their hospitalization and medical bills, term life insurance for financial protection in the event of sudden death, and disability insurance, which kicks in when policyholders report their disability due to sudden disability as a result of an accident or illness. Insurance plans come with a number of clauses that couples must not ignore in order to claim their benefits. All mutual funds have certain management and administrative costs that need to be compared to their returns in order to invest in the best mutual funds over a longer period of time.
A lack of knowledge is one of the reasons why many couples do not save and invest enough. Unfortunately, financial education is still a concept that receives far too little attention in many families in this country. This negatively affects their investments, their tax expenses and their choice of insurance. Couples must learn the basics of saving, investing, and financial transactions together before making any major decisions. Alternatively, they can enlist the help of a personal finance manager who can advise them on making the right savings and investment decisions. Small savings for the rainy days should not be neglected.
Remember, a couple that saves and invests together stays together!
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