Both Rao and Amudhan, in their early 30s, invest about 30% of their respective incomes in their own names. “We take turns to pay for household expenses and pool in for vacations. We pitch in for each other if one of us is facing a shortfall in a particular month. But, we have a strict ‘no- questions-asked’ policy on what we do with our earnings,” Rao said. It helps that they are both frugal and do not take on debt that can affect their future.
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Also in Bengaluru, Mayank Mishra and his wife Ojashwi Singh follow a similar approach but are meticulous about recording their spends, to the extent that they list each household expense, from groceries to their 4-month old child’s diapers , on Splitwise, a mobile application that tracks bills and other shared expenses. “We followed this system during our 10 years of dating. It has worked for us,” said Mishra, a software engineer.
Splitting bills on a mobile app may seem extreme to some, but most working couples do not believe in combining their finances. Financial experts attribute this to two primary reasons–financial independence and, in some cases, insecurity stemming from one’s own past experiences or of those around them. “I work with a couple who want to keep finances separate and the wife even lent money to her husband on the promise that he would return it. I found it weird initially but later came to know they were affected by a close friend’s troubled marriage,” said Vinit Iyer, principal officer and managing director, Prudeno Wealth Advisors.
Working women in particular prefer to keep their finances separate. Kalpesh Ashar, founder, Full Circle Financial Planners and Advisors, said this usually happens if they have a family background where they have seen their mothers or sisters being excluded from financial planning.
Some couples, though, want to keep finances separate, to enjoy their earnings in their own ways. Take the case of IT consultant Sona Banerjee, 33, who has a completely different money personality compared to her husband Joyjit Pal, 34. Banerjee likes to spend freely and gives importance to a comfortable lifestyle. “I had a financially challenging childhood, so I want to own a car and buy myself other luxuries. Having my own money allows me to spend on things that are important to me,” she said .
Banerjee and Pal, also an IT consultant, split utilities, rent and investment towards the common goal of a house and spend the rest on their interests and are happy with this arrangement. “Pooling our money would put us in a position where we need to negotiate or seek permission from each other to spend. Say, I spend a big chunk on a purchase that’s important to me but one that he doesn’t believe in, then I would feel guilty that I’ve spent his money. And it will be the same for him,” Banerjee said. Pal likes to invest. “I even gift Sona stocks on anniversaries and her birthdays,” he chuckled.
To merge or not
Merging finances doesn’t necessarily mean that a couple should have joint accounts. Kolkata-based Pradipta Roy Chowdhury, 30, and Ananya Dutta, 27, consider their income as one and have budgeted how much to spend on rent, groceries, utilities and save for a house and their kid’s future. “We have kept our bank accounts and investment folios in our individual names for ease of operations,” said Chowdhury, who works with a consulting firm. They have their financial responsibilities carved out. “I pay the electricity and water bills, buy the major chunk of groceries, while Pradipta funds big-ticket expenses and maintains our emergency fund. We both invest from our salaries,” said Dutta, an architect.
Finances can be kept separate by a couple in two ways: one, shared expenses, liabilities and goals that are managed through a joint or individual accounts even as personal aspirations and expenses are kept separate; two, all money matters, from assets to all expenses, are kept separate entirely. The former, a hybrid approach, is more common and has more benefits, say advisors.
“The expenses can be worked out meticulously after looking at both their salary structures or tax eligibilities. Say, if one of them has an HRA component in their CTC (cost-to-company), it would make more sense for that person to pay the entire rent instead of splitting it,” said Ashar.
Meanwhile, Mumbai-based Saurabh Mehta and his wife Bhairavi Mehta have merged their finances and take all money decisions together. Mehta said this has helped them optimize tax savings. “Our fixed deposits are in my wife’s name as she is in a lower tax bracket compared to me. This ensures we don’t lose more in taxes,” he said. They are completely transparent about their finances. “It helps during unforeseen circumstances where one of us knows where to withdraw the funds from,” Mehta said.
Financial planners say the big upside of managing finances together, partly, if not entirely, is that it prepares you for unforeseen circumstances. For instance, if the husband is a joint owner of the wife’s assets and not just a nominee, he will get the assets in case of the untimely demise of the wife. Iyer has a strategy for women who have any inhibitions about making their husbands a joint owner. “They can create a will with their spouse as the beneficiary. This will ensure smooth transfer of assets in case of her demise while she doesn’t have to worry if the marriage fails,” he said. However, assets bought in wife’s name to save tax or to save registration cost in the case of a house are considered the wife’s assets and if the husband claims it in case of a divorce, it may lead to legal dispute. “As per laws, a woman is entitled to alimony and maintenance, which includes right to residence. While she may not get half of her husband’s assets, she will be granted a reasonable maintenance amount by the courts,” said Mrunalini Deshmukh, a senior matrimonial legal counsel.
Nitesh Buddhadev, founder, Nimit consultancy, said couples can reduce conflicts by working together towards common goals. “After you have contributed towards the household, you feel much more free to give money to your parents or siblings. We strongly advise our clients to pool their shares of expenses and investments towards common goals in a joint account. Working together creates a sense of ownership,” he said
Ashar, a Sebi-registered investment adviser, said future financial goals will be affected if spouses don’t work in unison.
“How do you measure your financial progress if you don’t work together? Say, a couple wants to buy a house worth ₹3 crore. If one has ₹50 lakh to spare and the other ₹1.5 crore, that house goal will not be achieved unless they join hands,” said Ashar.
From a legal perspective, keeping separate finances will help in case of a divorce. Spouses cannot lay claim to assets that are not in their names. Yet. “as per laws, a woman is entitled to alimony and maintenance, which includes right to residence. While she may not get half of her husband’s assets, she will be granted a reasonable maintenance amount by the courts,” said Mrunalini Deshmukh, a senior matrimonial legal counsel.