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 in January said they have frequent fights over money with their life partners. We look at the five reasons why couples argue about money and how to resolve or avoid them.
Overspending, the biggest villain
Our survey shows that overspending habit of their partners is the biggest cause of discord among couples. However, in most cases, it had little or no impact on family’s savings (see graphic). Experts say spending is not a problem if you save and invest for your goals. “Overspending will not affect savings if you invest at the very beginning of the month. This reduces liquidity and prevents unnecessary spending,” says Renu Maheshwari, CEO and principal adviser, Finscholarz Wealth Managers. If the partner uses a credit card for splurging, couples can establish accountability by checking each other’s card and bank statements regularly.
If partner is tightfisted
The flipside of overspending is another reason for conflict. If one spouse is frugal to the point of being miserly, the habit can be as frustrating. Experts feel that it is important 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,” says Suresh Sadagopan, Founder, Ladder7 Advisories. Or it could be that the person is trying to be an antidote to the partner’s overspending. Instead of just saving compulsively, you should link your investments to specific goals to determine how much you should be saving.
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. Rohit Shah, Founder, Getting You Rich warns against being the go-to lender in your social circle even if you have all your goals well planned for. A good alternative is to provide help in non-financial ways. “Defer the response a few times, then offer alternate help to money, such as guidance for money management. You will tactfully end any future requests and also help your friend from getting in a habit of asking,” he says. And whatever the case, do not lie to your spouse about lending.
Dealing with lies
The foundation of marriage is trust and understanding. But our survey shows that only three out of 10 people can trust their partners on money matters. Also, one out of four respondents argue with their partners for being secretive about money. Hiding purchases is the most common money lie among couples. This is mostly due to fear of disapproval of the spouse. Another reason is when money power is concentrated with one partner. This is common in the case of homemakers who feel the need to lie when they are accountable for every penny they spend, especially on personal expenses. To tackle this, couples should jointly decide household expenses and investments. The balance can be used for discretionary expenses, which each partner can spend without feeling guilty.
What couples don’t discuss
The survey shows that compared to overspending, partners don’t clash as much over the ways they invest. This indicates that couples fail to comprehend the long-term outcomes of their investments.
Overspending is a bigger villain because it is visible in the pile of unnecessary stuff lying around. However, it can be easily tackled by budgeting. Whereas if you don’t question hidden losses from your partner’s wrong choice of investments, it can 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 like the Seths, if your partner recklessly invests in stocks and equity for the short-term, the household kitty may end up losing money.
Experts say lack of financial knowledge is the key reason why couples don’t discuss investment choices. Many also ignore this issue because they don’t realise the urgency of goals far in the future.