Homemaker Dolon Champa Sircar, 36, and Niloy Sircar, 43, who is a project manager living in Kolkata, also want to make the journey to a secure financial future together. For many, planning finances and goals with their spouse is one of the ‘don’ts’ picked up from parents and grandparents. But then there are others who make an extra effort to manage their money together because they understand the benefits of doing so.
Joint decision making apart, it is also critical to share financial information with the spouse. Kartik Varma, co-founder, iTrust Financial Advisors, says, “In the coming decade, many more households will start focusing on articulating their [financial] goals and discussing them openly within the family.” Understanding why this is important and what to do to make this work will help make your family’s future hassle-free.
Why plan together?
Being prepared for potential emergencies. In case of an unfortunate event such as death of one spouse, the surviving spouse would suffer if he/she has no knowledge of the family’s finances and asset status. Similarly, if there is a medical emergency, the couple needs to know about each other’s health covers and should have access to emergency funds.
Chennai-based lawyer K.V. Subha mentions the case of Shankari (name changed) from the same city, who lost her husband in an accident, to show why this is important. Shankari was not aware of her husband’s investments and had to arrange Rs 12 lakh for his emergency hospitalisation expenses before his demise. She mortgaged the house and her jewels to pay for the bills. Later, while going through her husband’s personal belongings, Shankari found a health insurance policy, which should have been renewed a month before the incident.
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Priya 37 & Bala Venkat 41 Chennai
The Venkat couple shares their money responsibilities. Priya manages daily expenses and their investment portfolio.
"But we know what is happening in each other’s world. He tells me where he has invested and how much."
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Lovaii Navlakhi, managing director and chief financial planner, International Money Matters, Bangalore, recalls another case in which a retired client had filed and documented all his papers diligently and taken good care of his cash flow as well. But, he had not involved his wife in the money management. She had difficulty taking over the responsibility after he died suddenly.
Reasons enough to make sure your spouse knows the what, when and how of your investments (see Ready Reckoner).
Two heads are better than one. Taking joint decisions helps not just in emergencies, but also in better understanding the family’s needs and getting a firm hold on financial goals. In the process, the couple also gets a holistic view of the family’s finances, from day-to-day needs to long-term goals. Pointing the need to think ahead, Dolon says, “Our joint discussions help us understand whether we can sustain the outflow towards investments.”
A joint venture ensures that investments are not overweight on one spouse. Systematically made joint plans also help in fair distribution of wealth among family members.
If a couple applies for a home loan jointly, they become eligible for a bigger loan. Not to forget the tax advantages here. Says Navlakhi, “If a property is held jointly and the home loan is also taken jointly, for example, then both spouses can claim interest deduction.”
If holding investments jointly, opt for the ‘either or survivor’ option in the application forms as this helps if either spouse is not around. With this option, any spouse can transact on that account without having to get signatures of all the account holders.
“Power of attorney can also be given so that investments can be managed smoothly,” says Navlakhi.
Playing a mixed-doubles game can also be a great way to save on time, especially for working couples. Says Sebanti: “Due to my husband’s time constraints, sometimes I do the initial research on various investment products. But the final decision of where to invest is taken jointly.”
You could also use the services of a financial planner to make things easier.
How to play the team game
1. Discuss financial goals at regular intervals. A couple needs to jointly give direction to their family’s financial goals, whether it is saving for their children’s education or marriage, taking care of parents or their own retirement plans. Varma says, “Discussions need to happen frequently, at least once a year. It helps to keep the goals in focus and move towards them by planning expenses accordingly.”
The Maitras review their investment plans every three months. Says Sebanti: “This helps us decide whether we need to step up savings and how much to put aside for our future requirements. We are constantly looking at various investment options that will help us maintain our current lifestyle at the time of retirement after factoring in inflation.”
Bangalore-based couple of Deepti, 25, and Sandeep Balani, 30, revisit their investment goals at least once in six months. “This helps us invest in any new schemes or options that come up in the market,” says Sandeep.
2. Share money responsibilities. Many couples divide money roles among themselves, as do Chennai-based Priya, 37, and Bala Venkat, 41. While Priya takes care of the daily planning, Venkat handles the investment portfolios. “But we know what is happening in each other’s world. He gives me an idea of where he has invested and how much,” says Priya.
3. Understand the money flow. Discuss your family budget so both know where the money is coming from and where it is going. This is critical to keep all goals, however distant they might be in the future, in sight. Doing this can go a long way in regulating the money flow towards different directions. For example, retirement planning should not get ignored in favour of children’s education, nor should holidays gobble up money that could have gone towards funding your children’s higher education.
4. Know your existing investments. The couple needs to know where the money has been invested and have a fair idea about existing assets and liabilities.
Make a Will and keep updating it. If you do not have a Will, make one at the earliest, especially if you are married. Doing this makes any kind of transfer of assets clear and trouble-free. Otherwise, the process can consume a lot of time, effort and money. Nikunj Kedia, director, PARK Financial Advisors, says, “It is important that the family members know the details of the attorney who is executing the Will. Specific details of the Will need not be disclosed if not required.”
Another simple step is to nominate beneficiaries in all investments. For instance, most of the Sircar couple’s investments are in joint names with their daughter as the nominee.
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Dolon Champa 36 & Niloy Sircar 43 KolkKata
The Sircars regularly talk about their money matters to get an overall view of their finances, be it day-to-day expenses or long-term investments.
“Our joint discussions help us understand whether we can sustain the regular outflow toward investment."
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5. Audit your documents regularly. Regularly review the list of all investments, including insurance policies, bank accounts, bank lockers, demat accounts, fixed accounts, provident fund accounts and property papers, and make updates. List the details of the liabilities and assets. Review loan documents, whether personal, car or home, and other forms of repayments. You could also list out details of major outflows like your children’s education. Priya says, “We go through our paper work every six months to make sure that everything is in order and follow up on premiums that need to be paid.”
Such an exercise is also a method of reducing redundancies like inoperative bank accounts that need to be closed. You can also review your current investment products, deploy underperforming investments elsewhere and buy any new products that come in the market.
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Sebanti 38 & Prithwijit Maitra 41 Mumbai
The Maitras not only plan their investments together and share the related work, but also review them every three months.
"This helps us take a decision on whether we need to step up savings and how much to put aside for our future requirements."
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6. Know where the documents are kept. An insurance policy or investment has no meaning if your family cannot access it at the time of need (see Documents To Keep). Ensure that your spouse knows where all the important documents are kept. You can create an online or a physical document that has the essential details of insurance policies and other investments. It should also mention where these documents are kept. Add contact details of the financial advisor or chartered accountant who may be handling your transactions. This document must be easily accessible. The actual documents can be stashed away in a safe, if needed. You can also store scanned copies of important documents on your computer. This makes for additional flexibility and ease of access.
Sandeep, for example, keeps his investment and insurance papers and also print-outs of online documents in a single file. “I make two photocopies. Deepti keeps one copy and my parents the other. The two copies are necessarily at different locations,” he says. Sandeep keeps this information with himself also.
Online tracking of investment portfolios is another option. Says Kedia: “There are websites that let you maintain a comprehensive view of your entire portfolio. Details of insurance policies can also be updated on these websites. Passwords of such sites should be documented in a secure manner and kept separately, and should be accessible.”
7. Disclose all important and material facts. Seems obvious, but doesn’t happen always. Be it income details, investments, signatures made on important documents, ancestral property or any kind of financial transaction, it should be with the consent or knowledge of your spouse. A spouse may suffer if he/she is not aware of any deal.
Making your life partner a partner in your money life doesn’t take much, but its benefits are many and long-lasting.
Source - OutlookMoney
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