Is merging finances with your Spouse right for you?
Typically, in India, there are a lot of things that follow a marriage. What's Mine is Yours, and What is Yours is Mine - holds true for a large part of the population. It's a system that has been a norm across generations. However, nowadays, there are a significant number of couples who refrain from this practice when it comes to finances. They believe that independently managing their money even after getting married is a better idea. So, is merging your finances with your spouse a good idea?
What does merging finances mean?
Merging finances is different for different couples. Some couples consider their finances joined if they merely hold a joint account, while for some, it may mean combining every financial element like income, assets, investments, expenses etc. Hence, it is crucial for you to first understand what combining finances involve. You can then decide if combining finances is a good idea for you and your spouse. Essentially merging finances means combining your incomes, savings, investments, debts, household expenses, and budgeting. It also means understanding the spending and saving patterns of your partner and altering yours at times.
Here are factors that will help you decide if you should take the plunge to merge finances with your spouse:
Honest communication is key to surviving any relationship in the long run. It is necessary to have transparency in conduct for trusting each other. And this element of trust is crucial if you wish to share your wealth and assets with your spouse. Regular conversations around managing finances is a good habit to inculcate as a couple. It helps to create financial goals and plans to achieve them whether you merge your finances or not.
Saving & Spending Habits
A clash in the saving & spending habits of a couple can cause a rift. Here, you need to understand that every person has a unique way of handling their money. As you decide to spend the rest of your life together; both of you should be on the same page regarding saving and spending patterns. You may want to discuss your financial goals such as buying a house, taking a yearly vacation, education for your kids, retirement and so on. Don't forget to work on those short-term goals like household expenses, leisure spending, etc.
Balance of Income
Both of you may not bring the same amount of money to the table. The nature of your employment also needs to be considered. A job means a steady salary. A business may mean volatility. Irrespective of whichever scenario applies to you, it is essential to have a mutual understanding and respect for the roles of both of you in the household. The decision of merging your finances will depend on how well you understand and accept these differences.
One of the baggage you may come across would be debt. This is not a favourable situation to be in for either one of you. This is primarily a significant concern if there are big expenses like purchasing a new house or new car expenses lined up immediately. Here, having a clear understanding of the nature of debts is crucial for you. Long credit card bills speak volumes about the inherent spending pattern of your partner, whereas a student loan debt means a one-time hassle to deal with. In either case, if you want to merge finances, you need to plan and prioritise expenses as a couple, so you get rid of a debt at the earliest.
Wealth Creation Opportunities
Combining money comes with its perks. Savings and investments grow faster by compounding. You and your spouse are a team when your finances merge. Combined finances also give you the realisation of your life goals quicker.
Alignment of Objectives
You and your spouse may have different clashing goals. For instance, you may want a baby while your spouse may wish to pursue higher education. It isn't easy to fetch common ground in such situations. In such a case it is important to accommodate your differences. Merging finances is easier here if life goals are redefined and your objectives as a couple are aligned.
If your partner seems to be an addict to extravagant or unreasonable spending, they may spend mindlessly, and the debts will be high and recurring. Here, clear communication with your partner about your current financial situation and future financial goals is necessary. Weigh the pros and cons of merging your money along with your relationship dynamics and take an informed decision.
Decisions that concern both money and relationship can be complicated. It’s entirely a personal decision and so there is no correct answer to whether or not one should merge finances with their spouse. Whats important is to align your objectives as a couple and have clear and transparent communications about your finances. Taking help of a financial advisor might help you make a more informed decision.
Disclaimer:ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. The contents herein mentioned are solely for informational and educational purpose. Investments in securities market are subject to market risks, read all the related documents carefully before investing.