How should we share expenses? Should we share bank accounts? This is a question from a young 20-something millennial who has come to interview me for a woman-focused website. She’s about to get married and is wondering how to deal with marriage and money. Some stories her friends have told her worry her no end. How did you do it, she wanted to know. There was no concept of his or hers, we just pooled everything and spent as little as possible, I say. But I think the lessons from our lives of 25-30 years ago will have little resonance for today’s young. They are starting off in a better place in many ways. For most of my generation there was no question of my money or your money—it was the family’s money. In many cases, it was the joint family money. But for the Indian urban mass-affluent millennial, the deal is now very different. They rightly should think about and sort out money matters before they get married.
The young interviewer’s worries are not unfounded because after the first flush of romance and marriage wears off, money, its spending, its saving and the power that money brings into a relationship does become a significant issue in a marriage. A 2013 study titled, Examining the Relationship Between Financial Issues and Divorce, found that “financial disagreements are stronger predictors of divorce relative to other common marital disagreements”. Basically, if money is the reason for most of your fights, then there is a higher chance of a divorce.
A starter step for a two-income home is to create one joint spend-it account. He has his income account, she has hers, into which their salaries credit. He has his invest-it account, she has hers, from which all investments happen. The spend-it account, from which all joint spending happens, is funded on a pro-rata basis—the person who earns more puts in more. Maybe 40% or 50% of take-home income gets into the spend-it account. Rent, groceries, school fees, society fees—all the expenses that living together entails are met through funds in this account. Equated monthly instalments (EMIs) and investments come from respective invest-it accounts. Discretionary spends are made from what is left over after spending on basics and investments for each person.
So expenses get shared, but what happens if the spouse likes to spend on the more expensive stuff? I remember long back as a student, when I shared a flat and kitchen expenses with several other girls in the UK, I found my frugal Indian habits and spends really stretched by the brand, quantity and food type choices made by the others. I would have never spent so much on gourmet ice cream, but found myself sharing the cost of somebody else’s lifestyle choices. My pain was short-lived, but what happens when you are married to a person with a heavy spending hand? This is a negotiation. One of the many negotiations that a marriage entails. The partner needs to be able to see your problem with his or her lifestyle choices around basics such as food. She wants organic which is seven times more expensive, he doesn’t see the point. He wants imported feta, while she thinks paneer is a good substitute. This one has no easy answers and needs to be worked on a first principle basis. The rule that you agree on must work for all the decisions.
You can decide how far you want to stretch this thread. Split the expenses according to how many regular chores and child care each does. For example, if one spouse is spending more time looking after the home, her share of household expenses comes down. Or if she is the one skipping work more to look after a sick child, she pays less for regular expenses, her discretionary expenditure goes up. If he is the one taking the car for repair, he gets to pay less that month.
If this looks like it is taking the fun out of marriage and reducing it to a cold division of money, rework the rules. See what works for you. See how far you want to take his money, her money and our money conversation. But if you are a housewife (or a house husband), do ensure that there is enough money for your discretionary spends and that all the assets built during the marriage are in joint names.
Marriage is anyway a tightrope walk in the initial years, let not money become one more thing to upset the balance. It is a good idea to have a feet-on-the-ground approach to your joint money lives. Couples who have harmonious money lives stay together longer.
Monika Halan is consulting editor at Mint and writes on household finance, policy and regulation