Most couples plan their strategies together but make mistakes while investing. Here’s how they can avoid the common errors
Make no mistake. Ignorance is no longer bliss. In fact, many couples goof-up while investing together because they are not financially transparent to each other and don’t share a common goal.
KEEPING SECRETS
You may find questions from your spouse as an intrusion into your privacy, but financial planners believe that sharing financial details with each other is the first step that a couple takes towards their family financial goals. If you plan to invest together, then it’s important that you should be transparent to each other on the financial front. The whole idea is that you should be able to determine how much you will set aside for investments after making all the deductions for personal and household expenses.
IMBALANCED APPROACH
As a couple, you may have huge assets and hold stocks, but it’s important that you should direct a part of the investments for emergency operations. To prevent an unforeseen event, financial planners recommend maintaining a balance among the funds you are willing to keep as liquid cash, short-term investments and long-term investments. A family should keep three to six months of household expenses in liquid form and invest the rest in high-yielding asset classes. This not only ensures availability of cash in emergency situations, but also helps you develop a self-sufficient and self-reliant approach, even in contingencies.
LACK OF CONSENSUS
Financial planners feel that the key to maximising returns on your investments is portfolio diversification. Often, partners take advice from different advisors and invest according to their own risk appetite and understanding of the markets, and fail to diversify their portfolio adequately. Either they invest too much in one asset class or are too diversified. To solve this problem, the partners should sit down together, perhaps argue and reach a consensus on either a common financial advisor or at least a common plan of action in terms of which asset classes to invest in.
IGNORE TAX BENEFITS
The first investment that couples generally make with their earnings is to buy a house. In most cases, the couples take a joint loan to finance the home with an idea to avail of maximum tax benefits available on housing loans. You, however, need to remember that tax benefits for interest on housing loans depend on the ratio in which you and your spouse share the loan. If both are claiming tax exemption, then the loan should be funded equally. Therefore, it is better to pay a housing loan separately from a single account to avoid complications. In terms of paying general taxes, Gupta says it is important to remember that in case of financial investments, all tax implications are on the first holder, irrespective of whose money it is.
MODE OF OPERATION
Another precaution that you need to take as a couple is with regard to the mode of operation of your financial investments. If your mode of operation is “anyone” or “survivor”, your partner may be able to dispose of your asset without letting you know. To safeguard yourself from the consequences of such circumstances, financial experts recommend that it is better to have “former or survivor status” or “joint” status as your mode of operation. This way the consent of both partners is crucial when any kind of transaction takes place.
NOMINATION ISSUES
If you are a family with children, then you should take care of nominations. In certain joint investments, if your nominee is a minor, then you may not be allowed to perform the role of an appointee. You will have to choose another person as an appointee. The safer option, however, is to go for an investment where your spouse can either be the nominee or appointee on behalf of the minor.
Make no mistake. Ignorance is no longer bliss. In fact, many couples goof-up while investing together because they are not financially transparent to each other and don’t share a common goal.
KEEPING SECRETS
You may find questions from your spouse as an intrusion into your privacy, but financial planners believe that sharing financial details with each other is the first step that a couple takes towards their family financial goals. If you plan to invest together, then it’s important that you should be transparent to each other on the financial front. The whole idea is that you should be able to determine how much you will set aside for investments after making all the deductions for personal and household expenses.
IMBALANCED APPROACH
As a couple, you may have huge assets and hold stocks, but it’s important that you should direct a part of the investments for emergency operations. To prevent an unforeseen event, financial planners recommend maintaining a balance among the funds you are willing to keep as liquid cash, short-term investments and long-term investments. A family should keep three to six months of household expenses in liquid form and invest the rest in high-yielding asset classes. This not only ensures availability of cash in emergency situations, but also helps you develop a self-sufficient and self-reliant approach, even in contingencies.
LACK OF CONSENSUS
Financial planners feel that the key to maximising returns on your investments is portfolio diversification. Often, partners take advice from different advisors and invest according to their own risk appetite and understanding of the markets, and fail to diversify their portfolio adequately. Either they invest too much in one asset class or are too diversified. To solve this problem, the partners should sit down together, perhaps argue and reach a consensus on either a common financial advisor or at least a common plan of action in terms of which asset classes to invest in.
IGNORE TAX BENEFITS
The first investment that couples generally make with their earnings is to buy a house. In most cases, the couples take a joint loan to finance the home with an idea to avail of maximum tax benefits available on housing loans. You, however, need to remember that tax benefits for interest on housing loans depend on the ratio in which you and your spouse share the loan. If both are claiming tax exemption, then the loan should be funded equally. Therefore, it is better to pay a housing loan separately from a single account to avoid complications. In terms of paying general taxes, Gupta says it is important to remember that in case of financial investments, all tax implications are on the first holder, irrespective of whose money it is.
MODE OF OPERATION
Another precaution that you need to take as a couple is with regard to the mode of operation of your financial investments. If your mode of operation is “anyone” or “survivor”, your partner may be able to dispose of your asset without letting you know. To safeguard yourself from the consequences of such circumstances, financial experts recommend that it is better to have “former or survivor status” or “joint” status as your mode of operation. This way the consent of both partners is crucial when any kind of transaction takes place.
NOMINATION ISSUES
If you are a family with children, then you should take care of nominations. In certain joint investments, if your nominee is a minor, then you may not be allowed to perform the role of an appointee. You will have to choose another person as an appointee. The safer option, however, is to go for an investment where your spouse can either be the nominee or appointee on behalf of the minor.
