Marry in haste and repent at leisure is a popular saying. One fact that takes a toll on modern marriages that are increasingly ending in divorce is financial incompatibility. Here is a look at the stress points that may develop in relationships

That marriages are made in heaven is now passé in India too. Today more marriages result from romances that bloom at the workplace and on social networks. Often, the boy meets girl; they fall in love at first sight and move into a live-in relationship—no questions asked or explanations sought. In the traditional situation it was left to the elders of the families to carry out discrete inquiries into the social standing, financial status, character, et al, besides the customary matching of horoscopes before moving a formal proposal. All castes and communities generally followed this modus operandi, with slight local variations, across the country.

In the changed milieu, boys and girls of today do not hesitate to present their parents with a fait accompli—“Dad and Mom meet … with whom I’ve fallen in love and plan to marry.” This proposition generally is reluctantly accepted by the elders—sometimes with a bit of sane advice to spend more time in getting to know one another better before plunging into matrimony and to remind impetuous youngsters that marriage is a long-term relationship not only between the two of but it binds their extended families as well.

In these days of Double Income couples, it is imperative to pay attention to Financial Compatibility well before marriage, instead of repenting later. Financial incompatibility often becomes a festering sore; it magnifies even the smallest difference of opinion into a time bomb that ultimately explodes and results in a break-up.

Ascertaining each others’ financial compatibility is not at all difficult. All it calls for is some clear-headed observation, gently probing and discreet inquiry about the lifestyle and spending habits of one another. It is easy to notice whether someone follows the basic financial discipline of living within one’s means or splurges on fine dining, partying, clubbing, designer clothes and accessories such as watches, glasses, high-end gizmos such as mobile phones, laptops, jewellery, luxury holidays. Unchecked spending is invariably a red flag that lead to debt traps—especially if the spending is through credit cards.

On the other hand, there can be extreme miserliness in the name of frugality. Cribbing about spending on essentials or forever claiming to have forgotten one’s wallet or being short on cash—this is another extreme and just as bad. There is no need to hire the services of a private eye to notice these traits. If you are both high-spenders, you can go into a debt trap together; if you are both miserly, you may manage actually work out quite well.

The take-home pay or monthly income

For starters, think seriously about your own salary and that of your would-be partner. Don’t get carried away by fat “compensation packages” calculated on the basis of “cost to the company’’, which can be extremely deceptive. Your spending money is the net take-home after all deductions that is credited to your bank account.

If in business or profession, to ascertain its nature and source of income are also important—it could as well be a shady, fly-by-night business. The market standing of the business needs to be ascertained by independent enquiries.

Indebtedness

Unlike their parents for whom the very terms borrowing and incurring debts are anathema, the new generation has the advantage of easy access to personal loans that provide a jump-start to creating assets or acquiring necessities.

Today, it is easy to obtain hefty home loans invariably mortgaged on pooled income of the couple soon after marriage. Often you can get personal loans to pay for expensive interiors and the latest gadgets also funded through EMIs. It results in starting ones married life heavily in debt. Pre-existing liabilities such as an outstanding education loan, outstanding or guarantees provided for others, can be stumbling blocks that need to be factored into enquiries.

Another propensity for debts will be evident from the presence of multiple credit cards in anyone’s wallet—a clear indication of an individual’s credit dependence. Plastic money is indeed a very convenient mode for acquiring practically anything and everything without having to shell out money upfront, forgetting that there is no such thing as free credit. Problems arise when the payments fall due; unpaid bills carry penal interests that can go as high as 40% pa or more.

Ideally, not more than a fifth of one’s income should go for debt servicing EMIs for the simple reason there has to be enough left for other domestic needs, medical emergencies, savings and investments.

Couples who borrow together—especially their hefty home loans—must remember that one financially reckless partner can ruin the credit history and credit score of the other. This has serious, long-term consequences that outlast a bad marriage by almost a decade. A default on your credit history puts an end to future borrowings in India today.

Contributing to the family kitty

Unlike those living in the West, in India it is still customary to live in a close-knit joint family comprising parents and siblings. Everyone who starts earning is expected to contribute to the family expenditure, including medical and educational spends. Some sons even continue send monthly remittances to their parents as tokens of their love and affection. It is also not unusual for the earning unmarried daughters to chip in too till they move out or to help put together a nestegg for their own wedding expenses.

It is important that both partners are clear, upfront and in agreement about continuing monetary contributions to their respective families, otherwise they become sore points later. Both partners also need to discuss and communicate with their families whether or not they wish to continue living in a joint family. While breaking away from a joint family was considered a major betrayal just a few decades ago, the easy availability of home loans has now made it a norm. In fact, the joint family now exits either out of economic necessity or among the super-rich, with sprawling homes.

Being forewarned of the potential pitfalls this is just what young couples ought to go about by first ascertaining the financial compatibility of their would-be partners.

A check list of suggestions

1. A little attention to financial compatibility ensures that you don’t marry in haste and repent at leisure.
2. Wearing rose coloured glass during courtship is lovely, but not closing your mind to some facts and figures is even better.
3. Asking for financial information (earning, assets, liabilities, spending, etc) may be the fastest way to kill a romance, but it is a solid foundation for a happy and stable marriage.
4. Taking family elders into confidence early enough is a sensible move. They know you best and since they are not the ones wearing rose-tinted glasses, can be relied upon for a balanced judgement. Don’t forget, they are the ones you will turn to if things go wrong.
5. Knowing the family is just as important as knowing your spouse-to-be, this is the biggest compatibility test, especially if you plan to live in a joint family.
6. Many couples realise the benefits of a joint family only when they have face the stress of bring up children while needing the double-income to pay a mortgage and other debts. Thinking this through with a clear and open mind is important.
7. Last, but not the least, always hope for the best but prepare for turbulence too. Double incomes, joint loans, joint bank accounts and unclear division of responsibility when it comes to spending and contributions are serious fault lines. Setting up a pool account for joint expenses and also maintaining a separate bank account may sound clinical but makes sense.
8. From the income and wealth tax point of view it is essential to identify the contribution and share of each partner in the funding of pooled or joint assets. Even in the absence of any explicit understanding on sharing this and other assets, courts will invariably weigh this mode of identification.

Most of all that is said here is based on hard core real life experiences and certainly not fiction—a red flag on the road to matrimony!

(Nagesh Kini is a Mumbai-based chartered accountant turned activist.)