Finance management tips for live-in couples
In India, for couples in long-term relationships, marriage carries the ultimate seal of legitimacy. Although Indian society has undergone tectonic shifts in the last few decades, the barrage of judgmental comments is something that unmarried romantic partners living together still have to deal with.
While the picture is far from being rosy, the shades of taboo that surround live-in relationships in India have definitely become a few shades lighter. In metro cities, live-in relationships are becoming more common especially among the younger sections of the population. In fact, according to a survey conducted by news app Inshorts in 2-18, more than 80 percent of the respondents expressed support for the concept of live-in relationships but they also opined that such relationships are still a taboo in India. Given the evolving position of live-in relationships in India’s social fabric, it is unsurprising that cohabiting couples face unique challenges when it comes to money issues.
Embracing the idea of keeping finances separate
Jyoti Agarwal (name changed) an actuarial analyst based in Bengaluru who has been in a live-in relationship recalls that money used to be the biggest pain point in the early days of her relationship. “When we moved in together, we viewed the live-in life with rose coloured lens – to the point that everything seemed straight like a Bollywood movie but as they say, all good things come to an end. The charm of a new relationship waned off and that’s when we hit a rough patch and finances became a major issue because in the early days we had made the mistake of merging our investments. It made things murkier and it was unsettling to know that if things end, our finances would suffer too. Thankfully, we did not part ways – in fact we are still together but we have learnt not to mingle matter of the wallet and heart beyond a certain point.”
Deepak Chhabria, CEO of Axiom Financial Services Pvt Ltd, asserts that given the lack of specific legal codes governing live-in relationships and the layers of complications added to the validity of those relationships due to questions of morality. “In India, by and large live-in relationships are not as recognized as marriage. Couples in live-in relationship may not be sure of sustenance/continuation of this arrangement. Keeping their financial affairs distinct is thus important to avoid any future conflict. If both the partners are working then ideally, they should maintain separate and independent bank accounts and their investments. This is also helpful and comes in handy at the time of filing their taxes and saves time. And in case of this arrangement falling apart, the financial affairs can be easily settled.”
Surya Bhatia, principal consultant at Delhi-based financial consultancy firm Asset Managers “You need to make sure that you are in complete control of your finances. Partners should respect the independence of each other. Fiscal prudence is of utmost importance and you should not mix emotions with your investments and maintain an arm’s lengths. Shared access of online accounts and money management tools is also not advisable.”
Investments and insurance
As partners in live-in relationships do not have the same rights and obligations as their married counterparts, the investment strategies of such couples cannot follow the formulas applicable to married partners. Parvati Iyer, chief investment officer at Femwealth.com, an online wealth management platform says, “For couples in live-in relationships, the investment strategy should be individualistic in nature. They should keep the investments separate and goal oriented. It is recommended to work towards each goal separately even if the goal is common in nature such as buying a house. In such a case the asset could be held jointly with the appropriate split clearly mentioned. These individual investments should span across various instruments such as bonds, debt and equity mutual funds. One can nominate the partner for these investments if desired.”
Besides investments, the risk management armoury should also be clearly demarcated, feels Chhabria. “The couple should buy separate and adequate life cover as life insurance companies do not allow those other than husbands or wives or blood relatives to be nominees which can become an issue but if there are children, they can be made beneficiaries. To avoid unforeseeable expenses due to medical emergencies, both the parties should have health insurance covers in individual capacities.”
While there are only a few things that can match the joys brought about by a stable, fulfilling relationship, a healthy dose of practicality can not only save you from a lot of trouble later on if the relationship falls apart but it can also benefit your bond with your spouse.
1) Couples should establish a fair arrangement for splitting household expenses early on depending on the income of each partner.
2) For couples in live-in relationships, the investment strategy should be individualistic in nature. These individual investments should span across various instruments such as bonds, debt and equity mutual funds.
3) Keeping separate emergency funds is advisable. A mainstream short term debt or liquid fund can be used for addressing financial emergencies such as job losses.
4) The investment processes for retirement plans should not be merged. A woman's retirement planning would anyway differ given her unique journey taking into account breaks and longevity.
(This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.)