Love and Finance: Top 4 Financial Tips for Live-In Partners
In India, for the longest time, marriage carried the ultimate seal of legitimacy, but now we see more and more young couples exploring live-in relationships. Now while cohabitation might seem all gung-ho! current property and tax laws do not offer the same financial protection to live-in partners as they do to married couples. Even though we’ve seen tectonic shifts in terms of societal norms, the cannonade of judgmental comments is something that unmarried romantic partners living together still have to deal with.
Having said that. It has been observed that the majority of these couples often overlook the financial aspect of living together. Now here’s the thing, financial ignorance can not only trigger relationship rifts but in case of a breakup, it might also render partners financially unstable. As you might be aware that most institutions in India recognize only blood relatives or spouses for legal transactions, rest assured if you aren’t financially well organized and sorted, you’re setting yourself up for a financial fiasco. To ensure that you don’t find yourself in a tight spot in case of an eventuality, here are some important points you need to consider when you decide to live with your significant other.
1. Merging resources, in the beginning, is a straight-up NO
For live-in couples, especially due to the open-ended nature of their relationships one of the primary downsides of pooling resources together is that couples oftentimes end up questioning each other’s spending decisions. In your quest for financial management, you could get hung up on facing judgment regarding your spending habits.
In the start don’t merge your resources rather keep them separate so that you start becoming aware of their spending habits and understanding the spending pattern. Keeping your financial resources separate also helps to preserve your financial autonomy. When it comes to household expenditure, it’s best to split and assign individual responsibilities. If the responsibilities aren’t fixed at the start of the relationship, it can lead to simmering resentment as one might end up spending more than the other.
2. Investments and assets should not be made or purchased jointly
At some point you might want to purchase a house, however, in all probability, you will not be eligible to get a joint loan as an unmarried couple, as banks offer it only to spouses or blood relatives. Now let’s assume that you agree wherein one partner takes the loan, the other contributes to the loan EMI, and both agree to joint ownership. In such a case it would be imperative to draw up legal documents that would outline the arrangements distinctly. Now assuming that in the future if the couple does get married, the purchase will appear to be another stepping stone in the natural progression of their relationship. However, if there happens to be a dreaded break-up, untangling finances and homeownership stakes can be quite the financial nightmare.
The same holds true even in the case of other investments, it is best to keep them separate. Mehak Suri (name changed), a Delhi-based interior designer who was in a live-in relationship for 5 years recalls how money became a point of disdain in her relations after some time. According to her, she and her partner like many others viewed the live-in scenario with a rose-colored lens. In the initial years, they made multiple joint investments but after a bitter breakup, they were left financially fumbling. Whether it’s building an equity portfolio or linking it to goals, or even if you have an offspring and intend to save for her/his future, it is wiser to do it as separate entities.
3. Risk needs to be segregated and secured separately
Apart from investments, the risk management armory should also be distinctly demarcated. It’s advisable to maintain separate emergency funds either a mainstream short-term debt or liquid fund that can be used during financial emergencies such as job losses. It is also wiser to purchase health insurance separately as live-in couples might not be eligible to get a family floater plan.
When it comes to life insurance, couples should purchase separate and adequate life cover as life insurance companies do not allow anyone apart from your legal spouse or blood relative to be nominees which can become a complex issue. However, if the couple does have a child or children, they can be made beneficiaries.
4. Retirement plans should not be merged
Just the way it becomes hard for couples to zero in on the right color of the room, couples might also differ on how they intend to invest in their retirement portfolio. Now irrespective of the fact of whether you choose to marry or not in the long run, and decide to stay together until retirement, the possibility of a breakup is always lurking around the corner. Therefore, it makes sense to start calculating your expenses and life span accordingly and saving for your retirement individually assuming that there may be a possibility you might be on your own.
The study of domestic money is deeply entrenched at the heart of debates around independence and equality in intimate relationships. As we continue to see an embracement of live-in relationships and slowly watch stigmas around them dissolve, there continues to be a lack of clarity about financial demarcations. “How is money spent between a couple”, and “what material security can they expect?” etc. Now it’s observed that a great number of unmarried couples accumulate a great deal of shared property but due to lack of financial know-how, fail to consider how assets would be divided if the relationship ends.
The harsh reality is that no matter the tenure of the relationship when it comes to property, our laws are still rigid and effectively treat unmarried couples as separate individuals with no joint rights or responsibilities. Hence, it’s imperative, that right at the very outset, partners should demarcate their responsibilities and keep their finances and investments separate. Even though there are a handful of things that can equate to the joys brought about by a fulfilling relationship, a healthy shot of practicality is required to secure you from any unforeseen eventuality.
Author Bio: Anisha Kathotia is the founder of Nico Wealth and a financial advisor with 10+ years of experience in personal wealth management. She helps clients build a healthy and mindful
relationship with money so they can play big with it in the long run. With an intrinsic depth and breadth of industry knowledge, Anisha is known for delivering insightful analysis and practical advice to her clients that have empowered them to make wise investment decisions.