You and your partner may have been setting #couplegoals for yourselves but have you included your financial goals in them? Here’s some advice to get you started.
You’re ready to hit the next milestone with your partner and are even considering moving in together. This is a big step given that living together under the same roof will reveal a lot of aspects of your personalities that until now were unbeknown to you both. Living under the same roof would also entail taking care of the household expenses together and the icky topic of co-managing your finances. When you’re in a relationship, the last thing you want to fight about is your finances. Some might say that when it comes to your finances, you and your partner are invariably likely to disagree on many counts as you both may have different approaches to finances. This is exactly why we advocate discussing finances with your partner before you take the crucial next step in your relationship.
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The idea of discussing finances with your partner might seem premature when you’re not even sure if you want to take the relationship forward with the person. We’re not saying that you should discuss finances with someone you just started seeing right on the first/second date. How and when you choose to discuss finances with your partner is entirely your prerogative. We’re only advising that you do it before you decide to take the next serious step with him/her. There’s a simple reason for this. Imagine you’ve moved in with your partner only to find out that he has a mountain of debt-pending Credit Card bills that amount to some lakhs of rupees; the concept of savings is alien to him and he spends his days living paycheck to paycheck. Not everything will appear very rosy about your relationship then, no? When you both are diametrically opposite in your views on money, conversations about finances are bound to get upsetting and unpleasant. In this article, we’ll tell you why maintaining a joint account with your partner while keeping your personal account intact is the best way to ensure that both your finances and romance are alive.
The advantage of a joint account:
Ideal for taking care of household expenses:
Unless you both work out an arrangement, living together under the same roof would mean sharing expenses for a host of things-from buying kitchen essentials to paying your monthly utility bills, maid expenses etc. You can, of course, make an arrangement where either of your entire income will be utilised in taking care of all expenses and the other’s in saving for purchasing big-ticket items or paying for vacations.
If each of you keeps taking turns to pay for every item, it not only becomes cumbersome to keep a track of whose turn it is to pay for what, one of you might also begin to exercise more say basis the expense that you’re paying for. For instance, if you’re paying for electricity, you might end up dictating to your partner about how he needs to cut down his usage of the air conditioner in the summer months. Arguments over seemingly petty issues can snowball into nasty fights that you both can work towards avoiding if you maintain a joint account for regular household expenses as well as big-ticket items like furniture, vacations etc. Every month, depending on your affordability and income, each of you can divert a certain portion of your income into this joint account and dip into it for regular expenses. A high-interest joint Savings Account can be a good idea if you want to reach your money goals faster.
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The disadvantage of a joint account:
All your transactions will be subjected to debate and scrutiny:
While dipping into a common pool of savings to take care of your household expenses may make a lot of sense, a joint account also means that all your transactions including those either of you may have made towards personal expenses will be up for discussion and scrutiny. This might lead to frustrating money arguments with each of you having to explain to the other why you spent that 200 bucks on buying cigarettes or ordering in a meal.
This is why you should consider getting a joint account with your partner for taking care of your common expenses.
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Independent account will keep your finances separate:
If you both are independent working professionals, there’s no way you would enjoy being answerable to the other for any expense that you make with your own hard-earned money. When you both are pooling your income into a common joint account, there’s no clear separation between your money and your partner’s, so technically, it’s hard to determine whose money you would be spending towards your personal expenses. Maintaining an individual account for your own needs and expenses in addition to the joint account can take care of this problem. This way your finances remain separate and you both get to exercise greater autonomy over your finances.
As a couple, you may have similar milestones in sight but as individuals, you may have different investment goals and risk appetite. While you might like to put your money in traditional investments like PPF and Fixed Deposits, your partner might want to opt for riskier investments like Mutual Funds. Since you both have different risk appetites, it wouldn’t be fair for your partner to bear losses to his hard-earned money that might accrue from your investments. With independent accounts for both your investments, this pitfall can be avoided.
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Keep revisiting your money goals as a couple:
While you may have set money goals as a couple right at the start of your relationship, however, remember that as your relationship evolves and you both evolve as individuals, your money goals are likely to change. This could be owing to reasons like one of you decide to take a study break; sudden job loss; either of you starting your own business etc. It’s, therefore, a good idea to keep revisiting your money goals as a couple and have honest conversations as your goals keep shifting.
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