Marriage: Take a vow to be financially responsible
“Money, like emotions, is something you must control to keep your life on the right track,” is the word of wisdom from author Natasha Munson to the married.
While strong emotions lay the foundation for togetherness in life, it is the pragmatic approach that makes the married life successful. And since poor financial planning can ruin any cherished relationship, spouses may well be advised to follow some basic rules– at the outset itself. From creating individual as well as joint finances to encapsulating their short-term and long-term goals including the decision to start a family, children’s education and retirement, spouses need judicious means of budgeting, credit planning and repayment of liabilities. This will hold them good in the worst eventualities including divorce and death.
#1 Create household expense budget
Step one is the true disclosure of complete details of income, past and present financial commitments, spending habits and savings to each other; this helps understand each other’s attitudes towards money. Your immediate needs will be the wedding cost, buying new furniture, kitchen appliances and decorating your new home. So, get a copy of your credit information report and go through it together. Next, prepare the household budget and decide who pays for what; you may split the bills equally, pay into a joint account or assign who pays for what. Once you conclude the budgeting, you would know how much you need to set aside for household expenses as well as what you are left with for investments and savings. Remember, giving an accurate picture of your financial life is one of the commitments you must undertake to start a new life together.
#2 To be a guarantor or a co-borrower
For all practical purposes, a couple can consider a combination of both joint and individual accounts; the joint account could take care of household expenses, EMI payments and other obligations (that the couple is collectively accountable for). Advantages include mutual awareness, timely payments and the resultant credible credit history. In the same breath, if you are intending to borrow – as sole or co-borrowers - there are few things to be aware of. If you are extending your name as a 'guarantor' (someone who would pay a person's debts if they could not), then you are legally responsible for another person's debt. If the debt is in the name of both, then the couple is equally responsible for it. In any case, a couple must consider creating a Will to avoid any legal hassles later.
#3 Keep your personal details updated
It is important to keep your credit history details (like last name, address, etc.) updated to avoid any fraud and documentation hassles when you apply for credit in the future. Towards this purpose, if you are moving home, remember to register your new address on the electoral roll (voters list) as soon as possible. You must update the same with banks, lenders, etc. to fulfill your debt obligations. For all these purposes, a copy of your credit information report is important.
#4 Till death, divorce do us part
Nuptial experts most often cite financial issues at the core of many divorces; whether it is one’s wayward ways with money or discord over how to share expenses. Most often couples find discussing basics of finance difficult due to different attitudes toward money. A split often leaves individuals in tatters due to the financial obligations associated with it. So is the case with the premature demise of a partner. If you have not followed the above steps from the day one, you could end up in serious difficulties.
#5 Divorce also means broken finances
In the instance of a divorce, a word of caution is that an ex-spouse's actions can affect a partner’s current credit score, if financial obligations are carried forward. So, get a credit information report and verify individual and joint finances to understand your liabilities. If a couple is in the final stages of the divorce, they should inform their respective lenders. And if there are large loans like (home, luxury cars, etc), one may find it difficult to refinance. In such circumstances, it is desirable to clear the loan entirely before applying for a new loan.
So, besides joint loan accounts, ensure that all the joint credit card accounts are dissolved after the loans have been repaid. Following the divorce, one must keep the credit limit low and spend within acceptable limits besides paying bills on time to have a good credit history over a period.
#6 Financial transparency for a stronger bond
In the modern world, a successful marriage could be more about the skill of financial harmony, commitment and healthy communication. When couples define mutual guidelines for financial commitments and value each other in terms of contribution and share rights and responsibilities, the bond will be much stronger.
Contributed by Mr. Mohan Jayaraman, Managing Director, Experian Credit Bureau, India
Read full article
We sit in a pivotal position in the societies where we operate. For us, using our expertise in data to help tackle big societal issues, is much more than an…Learn more
For most, a credit score may look like a simple three-digit numerical expression of an individual’s credit worthiness, assessed by a credit bureau at a point in time. But for…Learn more