Working couples seem to be the order of the day, especially in the ‘Under 30' generation. You can't blame us really; the cost of living is literally blowing the roof off our heads. Earlier, our parents used to worry about how they were going to provide for their kids. With our generation, the bigger worry seems to be, how do we provide for ourselves first? The fact is most young urban families cannot afford to have a stay-at-home spouse in order to maintain a ‘decent' standard of living and attain their financial goals. It's an entirely different matter that these days many women choose to work after marriage, purely due to psychological reasons or (in the case of my missus) as a means to escape from household chores.
For couples that work hard everyday for achieving their long-term financial goals, here is a word of advice: evaluate the ‘opportunity cost'. If you don't, it is highly likely that you would be stuck in the rat race without ever achieving financial freedom. Opportunity cost is the value of the next best choice that one gives up when making a decision. For a working couple, opportunity cost is the cost of qualitative pleasures foregone as a result of choosing to work e.g. time with each other, time with kids etc. It is also the money saved if both partners weren't working e.g. not having to eat out often, no need for day care, no expensive outings for the sake of spending quality time etc. A good evaluation of the quantitative portion of opportunity cost begins with the question, what would be your monthly or annual spend if one of you had chosen to stay at home?
A truthful analysis of opportunity cost for working couples could be shocking. It could even point out that it doesn't make sense for both partners to work. Many of you may think you are working to save more, but in effect you may be saving less. This is usually because your lifestyle has expanded so much. The biggest problem that working couples need to address is the ever increasing desire to splurge just because there are two incomes. It starts with small indulgences and before you realise you have rented a three-bedroom apartment when you could have very well done with a studio. You may have heard of the saying ‘Work expands to fill time available', but here's another one for you: ‘Stuff expands to eat the money available'.
Believe it or not, both partners working does cause a strain on the personal side, which only gets aggravated with kids to take care of. Every working couple needs to mutually define what the objective of both of you choosing to work is and make sure you don't forget it. If the objectives are financial, it serves well to set periodic milestones to take stock of the situation: Have you met the objectives that you set out to achieve? Are you on track? Is there a course correction required? Do both of you want to continue to work given the state of affairs? There is no point in enduring the bitterness of personal sacrifice if the prime purpose is not met.
Keeping on track
Here's a five-step approach for working couples to attain their financial goals: Set Long term targets; Break-down long term targets into short term milestones and define how you plan to achieve them; Take baby steps and reward yourself on achieving the short term milestones; Remind yourself about the opportunity cost of both of you choosing to work; Review your personal and financial situation, course correct, plan for next milestone, revise target as necessary.
Additional money management tips for working couples: Build trust by opening up your financial situation to your partner; Make your marriage a financial partnership by planning together; Decide which of you will pay specific bills; Make sure each of you keep some money separate for personal indulgences; Set joint savings target, pool your savings and then think about how to invest; Don't take on debt without mutual consent; Ensure that the monthly family bills, including EMIs, are well within the capacity to pay using a single income, in case one of you decides to take time off work or in the event of an emergency.
If you're a young couple planning to have children, budget part of your savings towards future expense when the family has to sustain on single income
The writer is a finance specialist. He can be reached at firstname.lastname@example.org or www.shyamscolumn.com .