If you are married, do you actively involve your spouse while taking investment decisions? It is typical for the male member in the family to manage the finances, even if his spouse is a professional having a high-paying day job. In this article, we discuss why it is important for you (husband or wife) to actively discuss your family’s investment decisions with your spouse.

Money Issues

Often, money-related issues cause conflict between couples. The question then is: Should you avoid the conflict and take investment decisions without involving your spouse? Or should you resolve the conflict and actively involve your spouse in all your investment decisions? We believe that you should actively work towards taking joint investment decisions. And before we discuss the advantages of taking joint investment decisions, consider some areas of conflict.

One, it is typical of your spouse to have a different money mindset compared to yours. You may, for instance, be conservative with your investments while your spouse may be somewhat aggressive. Men are more likely to have a higher risk appetite than women. But look at the positive side to this conflict- you and your spouse balance risk levels in your family! And if the money mindset differences are more intense, you and your spouse should undergo financial therapy to remove any traumatic money-related experiences either may have experienced in early life.

Two, you and your spouse are most likely to hide certain expenses from each other! Now, hiding expenses from each other often happens because you want to avoid confrontation with your spouse- whether the expense was wasteful or not. Rather than argue over this issue, why not agree that each of you can spend not more than 5 per cent of the total monthly expenses without having to explain about it to the other?

Two’s company

So, why should you actively discuss with your spouse regarding your investment decisions? For one, it is typical for one member to chase returns and for the other to think of future consumption needs. So, if you want to invest in a recently launched high-return high-risk investment, your spouse is most likely to remind you that the investment has to fund your daughter’s college tuition in 5 years. Such healthy discussions could prevent you from making risky investments that are not aligned with your investment objectives.

For another, in case one takes ill or dies, the other can confidently take care of the finances, having been involved in the decision-making process. We find this issue affecting many households, where the wife is unaware of the investment decisions made by her husband. Such unawareness can lead to two consequences. First, your spouse can be cheated by some unscrupulous agent posing to help your family. And second, your spouse may hastily sell certain investments, not knowing why you made them in the first place.

So, how should you create a family investment portfolio despite a diverse mindset? Your investment portfolio has to necessarily contain stocks and bonds. You can, therefore, “mentally” assign equity to yourself, if you are risk-seeking and the bonds to your spouse, if she is risk-averse. That way, you can both have your desired investments and yet, harmoniously combine the assets into a single portfolio.

Conclusion

There is an additional benefit in taking joint investment decisions- it leads to healthy spending; you and your spouse will be able to appreciate the need to save more for future family needs. This will help in a more harmonious relationship. Finally, if you and your spouse are gainfully employed, strive to manage your household with one-and-half salary, if not on a single income. This way, you may not suffer much if one income stops. Also, if possible, ensure that both of you do not work for the same employer!

(The author is the founder of Navera Consulting, a firm that offers wealth-mapping and investor-learning solutions. Feedback may be sent to >knowledge@thehindu.co.in )

Related Topics
comment COMMENT NOW