Well-paying jobs, beautiful new house, a lovely child… it seems Ashmit and Sonali Seth have nothing to complain about in life. But beneath this veneer of a happy existence lurks an uncomfortable reality. Ashmit lost a lot of money in stocks last year, and Sonali is worried that he is trying to make up by taking bigger and riskier bets. “My husband lost almost Rs 10 lakh in stocks. He doesn’t share details with me anymore but I fear he still invests in shares,” she wrote to ET Wealth last year, seeking advice on how to manage her finances.
The family’s finances are indeed precarious because Ashmit no longer contributes his share in running the household. Whatever little surplus Sonali is left with after paying the home loan EMI goes into repaying Ashmit’s credit card dues and the premium of a child plan he bought for Shreya, their daughter. “As of today, I have zero savings. I want to start saving for my daughter’s education but without telling my husband. If he gets to know, he might take the money and lose it as well,” she wrote.
The Seths are not alone. A lot of families have disagreements over financial matters. Almost 55% of the 550 respondents to an online survey conducted by ET Wealth last month said they have frequent fights over money with their life partners. No prizes for guessing the reasons for these money quarrels. Most of the time, people fight over their partner’s overspending or her frugality and over financial support to relatives.
Why couples argue: Top reasons for money clashes*
Saving too much: 37.1%
Helping relatives: 32.8%
Being secretive: 25.7%
Investment choices: 22.8%
*Figures denote percentage of respondents to the online survey conducted in January 2019. There were 550 respondents, but the 11.3% who said they did not discuss money matters with their partners not included in analysis.
However, most people may be barking up the wrong tree. Very few people actually debate the investment choices of their partners. The Seths are a good example of how wrong investment choices could have a bigger bearing on the finances of a family than anything else. In this week’s cover story, we look at the five reasons why couples have money arguments and how these conflicts can be resolved or even avoided.
Survey Q1) How often do you have money arguments with your partner?
We don’t discuss money: 11.3%
Very rarely: 35.5%
Very frequently: 13.8%
Result: It’s healthy to have a money argument once in a while.
Survey Q2) How important is it for a partner to have similar money habits, attitudes?
Should be different to act as a foil: 3.5%
Not very important: 20.2%
Very important: 38.5%
Result: An overwhelming 76% feel that couples should have similar habits and attitudes.
Overspending, the biggest villain
Our survey shows that the spending behaviour of their partners— both overspending and frugality—is the biggest cause of discord among couples. Maintaining harmony in a relationship can be difficult if your partner is in the habit of spending too much. The problem only aggravates further if overspending affects saving and pushes you into debt. RBI data shows that Indian households’ outstanding personal loan and credit card debt was Rs 6.43 lakh crore as on November 2018. Renu Maheshwari, CEO and principal adviser, Finscholarz Wealth Managers tells of several clients who racked up huge debt due to overspending by one or both the partners.
However, overspending may not be a problem if it doesn’t impact savings. In most cases, overspending had little or no impact on savings. If your partner’s spending habit does not have a bearing on your savings plan, then it is not damaging and can be bypassed. Even if the overspending affects savings, it can be contained through simple strategies. “One easy way to prevent overspending from affecting the household savings is by investing money at the very beginning of the month. This reduces liquidity and prevents overspending,” says Maheshwari.
Survey Q3) Does overspending affect household savings and investments?
Nothing left to save after expenses: 9.5%
Prevents saving to a great extent: 20.5%
Has a slight impact on savings: 48.4%
Does not impact savings at all: 21.6%
Result: In 70% cases, overspending has little or no impact on savings.
Of course, one need not have money in the bank to overspend. A credit card can easily provide money for splurging. To reduce splurging, a couple should establish accountability by regularly checking each other’s credit card and bank statements. If you notice unpaid credit card balance increasing every month, then there’s a real problem and you need to take it up with your partner. “People often behave better with money when they know that their spouse will see what they are doing,” says Maheshwari. In extreme cases, one should even consider taking professional help to resolve the problem.
If partner is tightfisted
The flipside of overspending can become a reason for conflict as well. If one spouse is frugal to the point of being miserly, the habit can be equally frustrating. “Even the everyday spending decisions can be stressful for a couple where one partner is overly anxious about spending,” says Maheshwari.
Financial planners say that instead of arguing over your partner’s stinginess, you should try to understand the reason that drives this behaviour. “Usually, if the money situation was tight during the growing up years, people get conscious about spending. Fear of going broke drives them to save every penny they can,” says Suresh Sadagopan, Founder, Ladder7 Advisories. Or it could be that the person is trying to be an antidote to the partner’s overspending. Survey Q4) What do you feel about your partner’s frugality?
Result: Women are more irked by curbs on spending than men.
Experts say that savings and investments should not be done randomly. They should be linked to specific goals. “Instead of saving compulsively, determine what are you saving for and how much you need to put away for each goal,” says Maheshwari. This will clearly tell you if you are on track to reach your goals and how much should you be saving for them. “Seeing that they are financially secure can convince such people to go easy on their saving spree,” says Sadagopan.
If you are unable to convince your partner, take the help of a professional adviser to ascertain how much you should actually be socking away. Only 14% respondents agreed to take professional counselling for this problem out of the 42% respondents who find their partner’s thriftiness irritating.
The penny pinching spouse should also do a cost-benefit analysis of the frugal behaviour. If saving on the littlest of things does not result in big savings in proportion to your income, you may be smothering your family’s aspirations for no reason.
To lend or not to lend
Lending to relatives and friends is the third major cause of money arguments. About 33% respondents said that financial support to relatives was frustrating. But supporting the family or a friend in need is alright as long as it doesn’t affect your own financial plan. “This can be part of the overall miscellaneous budget, which should not exceed 5% of your take-home income,” says Rohit Shah, Founder and CEO, Getting You Rich. It’s like the cautionary note for the oxygen masks in an aircraft: make sure your own mask is secure before you help others. “Your own goals of emergency corpus, adequate life and health cover and goal-based savings plan should not suffer,” says Shah.
Survey Q5) What do you feel about financial support to relatives?
Acceptable if within limits: 51.7%
Annoying because it affects our lifestyle: 7.3%
Frustrating because relatives take undue advantage: 32.5%
Unacceptable because it derails our own goals: 8.6%
Result: One out of two people finds it acceptable if the support given is within limits.
Shah warns against being the go-to lender in your social circle even if you have all your goals well planned for. Borrowers tend to take undue advantage of those who cannot say ‘no’ to requests for monetary help. Lending interest free money to people in need may give them an easy way out of their financial problems and encourage them to ask for more. By turning into a compulsive lender, you may be compromising your family’s goals and aspirations.
A good alternative is to provide help in non-financial ways. Shah says that requests for money should not be fulfilled in the first instance. “Defer the response a few times and finally offer an alternate help to money, such as guidance for money management. You will tactfully put an end to any future requests and also help your friend from getting in a constant habit of asking,” he says.
Lending in social circle or family also entails the risk of damaging relationships. Be sure to discuss this with your loved ones during the initial discussion and agree on a timeline for repayment. And whatever the case may be, do not lie to your spouse about who you may be lending to or how much.
Dealing with lies
The foundation of marriage is trust and understanding. But our survey shows that one out of four respondents argue with their partners for being secretive about money. Also, only three out of 10 people can fully trust their partners on money matters.
Survey Q6) Do you trust your partner’s integrity in financial matters?
Not at all: 16.1%
To a great extent: 27.1%
Result: Almost 70% of people don’t fully trust their partners on money matters.
Hiding purchases is the most common money lie among couples. Ironically, this is mostly because they fear disapproval of the spouse and are trying to avoid a conflict. Another reason is when money power is concentrated more with one partner. This is most common in the case of homemakers. “When homemakers have to constantly keep asking for money for their personal expenses they start feeling accountable for every penny they spend. As a result, they feel the need to lie,” says Priya Sunder, Director of financial planning firm PeakAlpha Investment Services.
One less common but more dangerous secret is to hide an expensive habit such as gambling or compulsive shopping. Concealing such habits stems from guilt. “A spouse may feel guilty about funding a costly habit at the expense of savings. So they hide it to cover the financial irresponsibility on their part,” says Sunder. This can make matters worse by stacking debt.
Survey Q7) Do you suspect your partner has secretly…
*Percentages will not add up to 100 because of multiple responses Result: Overspending is the biggest issue for men, while lending to friends, family irks women most.
Couples should share responsibilities to tackle this problem. They should jointly decide household expenses and family investments. The balance can be used for discretionary expenses, which each partner can spend without feeling guilty. This sharing should not be in proportion to what each partner earns. “If there is no guilt towards spending because you have met your commitments, there is no need to hide. Spending is not a crime,” says Sunder.
What couples don’t discuss
The survey shows that compared to overspending, partners don’t clash as much over the ways they invest. This is not an indication of implicit trust in each other’s investment choice. Rather it signals at a bigger problem—couples fail to notice the unseen outcomes of their investments.
The issue of overspending is the bigger villain in most households because it’s visible in the pile of unnecessary possessions lying around. Though this can be resolved easily by budgeting. On the other hand, if you don’t question hidden losses from your partner’s wrong choice of investments, it’s likely to damage your finances adversely. For instance, an ultra-safe but low yield portfolio of insurance, fixed deposits and gold may lead to suboptimal returns. Or if your partner recklessly invests in stocks and equity for the short-term, the household kitty may end up losing money.
Sruvey Q8) Has your partner put too much in…
Result: Men dislike locking up money in safe options, while women generally abhor taking high risks with money.
Experts say lack of financial knowledge is the key reason why couples don’t discuss investment choices. “We hear a lot of our clients say that they leave investments completely on their spouse because either they don’t understand it or that the high earning spouse has assumed complete control over investments decisions,” says Vipin Khandelwal, Founder of Unovest, a financial advisory firm. Also, many people ignore this issue because they don’t realise the urgency of goals far in the future.
It is important that both partners participate to make the process holistic and more goal oriented. A discussion helps bring an understanding on a risk profile more suited to both. “By involving the other spouse you are likely to tap into any wisdom that the other spouse may add to making the right investment decisions,” says Khandelwal.