How Do I Think of Relationships with Money?

Hi, I'm Monica Hulland and this is my podcast Let's Talk Money. Every Friday a new episode will drop that gives you a snapshot analysis of one money-related topic that has meaning in your life and then I answer your money questions. My hope is to put you on the path to financial stability and freedom. So let's talk money. [Music] This week we're talking about inflation. We all understand inflation, isn't it? Prices keep going up. They rarely go down. But when you hear some of the pundits and the suits talking, they are nodding their heads very seriously about inflation, is a worry now. What is it? It is this average increase in prices year after year. There are several reasons for inflation being out there. One is called a demand pull inflation. There is excess demand in the economy and we know the basic rules of economics, which is when there is too many people buying the same set of goods, the price goes up. Supply is still the same. Therefore, producers are able to increase prices. This is called demand pull inflation. And there's something called a supply push. So you remember what happened during COVID, right? The world shut down. Supply chains got broken. What resulted was a massive increase in prices, especially in some countries. Because simply again, rules of economics. Things are not there. People want to buy prices go up. There's a third reason. Every country has something called a central bank, like we have reserve bank of India, US has the Fed. If the central bank prints too much money, it is called inflationary because look that money has to find a place somewhere. So it gets injected into the economy and people have too much cash with that cash. They buy goods and services and assets like stocks and bonds and gold. And those prices start to go up. For example, in the US, they printed a ton of money during COVID. Trillions of dollars. Their inflation rates just three years ago were nearing zero. It was very, very minimal. And it galloped to 8.3 last year, 8.3%. That's huge in an economy which has not faced inflation for decades. So inflation essentially is this rise in prices year after year. Look, we've had very high inflation rates as high as 10 to 14% in the past. But something very interesting happened in 2015. The government of India asked our central bank, reserve bank of India, to become what is called an inflation targeting central bank, which means, RBI has to keep inflation between two to six percent with a target of four percent. It has many tools in its armory. It does something called monetary policy. It manages interest rates. So it does what it has to do so that inflation doesn't rise above six, but it doesn't fall below two either. You know that inflation went above six percent during COVID, but that was a unusual circumstance. But in normal state, we should project Indian inflation to be somewhere in the range of four to six percent. How should you personally think about inflation? I know I used to get irritated when my grandparents would talk about one rupee used to buy so much and now look at things, isn't it? I am doing the same now. And you will when you get to your 40s and 50s and 60s. So future spends need to be larger. Let's say you're doing 50,000 bucks a month today. We're just doing four percent inflation. In 10 years, you'll need 75,000 a month. In 20 years, one lack in 30 years, 1.6 lakh. And if you're thinking that 30 years is too far, download an aging app. Look at your face. You'll get there. I promise. One is the spending part. The second is your investing part. When you take your investing decisions, remember that your return has to be inflation plus. In the first episode, we talked about bank accounts and we said that the savings deposit gets you 3.5%. Now you tell me if inflation is 4 and your bank savings deposit rate is 3.5. Your money is losing value just sitting in that savings deposit. You need to understand that your returns have to be higher than inflation. Most of the times, fixed deposits after you have paid the tax on them do not keep your money ahead of inflation. You're losing purchasing power with fixed deposit. Your long-term investing instrument has to beat inflation. One of the ways to do this is to invest in something called a broad market index fund. Two of the indices which are most relevant to you are Senn6 and 5050. You should google a little bit and find out what sort of funds are available. The average annual return on the broad market indices in India has been 12% a year for the last 30 years. This is what we are also projecting for the next couple of decades. So you need to find investments which keep you ahead of inflation. And a third thing is very important. Your age cohort, your 20s and 30s, you're going to actually live to 100 medical technology, we'll ensure that. A lot of you do gigs, a lot of you are in organized sector jobs. Typically by age 60, those get over. You have 40 years ahead of you. So to keep ahead of inflation, you also need to keep upgrading your skills. So that at least till 65, you are getting current rupees, you're getting current money. So remember that inflation is called a silent killer. It can also benefit you if you get into the right investments which give you inflation plus results. So we make friends with inflation understand it and then get on top of it. So now on to questions. May my producer is going to read out the questions that you have been bombarding me with. So this one comes in from Susan in Cochie who says that I live with my partner and he lost his job during the pandemic and the red winner and I've been paying for our rent and house expenses for the last two years. He got a job six months ago, but I've spent lacks on our relationship and not once have we talked about how much I've contributed to us financially and what he plans to do now that he's actually earning. How do I broach this conversation and what should I talk about exactly? Susan, I feel your pain, I feel your problem and this is such a tough situation to be in, but I want you to think about something. If he has not approached this topic himself, he's been earning for six months. You were together and when you move from me and you to us, we understand that everything is shared. Yet you have spent for two years, you might be feeling guilty about these thoughts, aren't you? Because this is something that we are taught that money is not something you should talk about to often, money is not really a good thing. These are the thoughts that we have heard, but money is important and you are having these thoughts. One way to think about is to imagine if you had been the person who had not paid for two years, what would you have done? My hunch is you would have broached it immediately. A month later you were said, what should we do about this? It also could be that he has accumulated debt over the period and he's paying it off, but even if that is the case, should he not have spoken to you? You know, Susan, the way that we treat money is one of the top causes for friction between couples, the world over. We grow up in different houses, we have different value systems about money and a lot of our behaviour has to do with the way we react to having or not having money. When you know that you need to have a talk with him, my suggestion to you is to keep emotions out of it. It is difficult not to break down, not to get that emotional burden that I was not respected and trusted enough, but I think you have some work to do on yourself. So you come to a place where your voice doesn't crack, your eyes don't fill up and you're able to have this talk with him that I have spent for two years and I have been very happy to do it, but what was lost was my savings for two years and I really need to build that up and you've been earning for six months. How do we move forward with this? You have to be prepared that the talk can cause a rift that is irrevocable, but one way to think about this also is, if you've been very long in a relationship, you want to continue it because of the number of years that have been spent. As economists, we call it something called sunk cost, which is that you go on spending more because of what you have spent already. In no way am I telling you to break up, all I'm saying is that you should know when you choose the talk, one road leads to a breakup. I'm hoping it doesn't, I'm hoping that there is a story that he has which is bonafide and true and I hope that the relationship and the money relationship continues, Susan. So the next question we have has come in from Puna. Sujuta says, "My girlfriend and I are thinking of moving in together. How should we think of our joint finances. Sucitah from Pune, you've asked the right question. You're asking me before you're moving in and that's fantastic. Money is really the reason a lot of couples tend to break up. The fights about housework and money. So you need to have the money to walk before you move in. I would advise you to use a three account system. You and your girlfriend both have separate savings accounts, which is your salary account. Or incomes drops into that and you have a joint account which you call my spending account. You both fund that account. You'll know approximately what you spend in the month. If you or your partner, one of you probably earn more, your choice is that the person who earns more credits that account extra. Right? So you work that relationship out whether it's equal or pro-rata and you will have to get into the nitty-gritty as to what our joint expenses. The most obvious ones are rent, home health, basic food, eating out holidays together, Wi-Fi, keep adding to that list. Your personal expenses are yours alone. Cosmetics, clothes, shoes, watches, gadgets are kept out of the joint finances. Remember to build assets only in your own name. Understand that the asset belongs to the person who has paid and in whose name the asset is. Build assets in your name. Your partner can be the nominee on your assets. All right? If the relationship is stable and you plan to stay long term, you can think of putting your partner's name on the nomination. But especially in the earlier years, you keep the investments to yourself, maybe make somebody in your family as the nominee. If the money conversation is amiable and non-confrontational, the relationship will begin on a stable base. So you must have this conversation with your partner and congratulations for moving in. So the last question for today is from Salim from Hyderabad, who said, "I began earning six months ago and I still live at home. I'm not sure how to contribute to the household expenses. I feel awkward offering to pay my parents. What is the right thing to do?" Salim from Hyderabad, "I'm sure your parents are super proud. You're starting to earn." And they are one of the few parents who still have the joy of having the kid at home. And I'm sure it's great for you as well. You know, most Indian parents would not want you to fund the house. And I can speak as a parent myself that our Indian culture doesn't extend to getting the kids to pay their food and rent when they live with us. But think of gifts for your parents. I mean, you're beginning to earn. You've got a lot of disposable income. Be generous with what you buy for your parents and your family. That's one way of saying, you know, the gratitude for the life that you've had. Also, I would think of starting to buy some high-value stuff for the house. Fruits, dry fruits, anything which you know that your family likes and has, you know, appreciated over the years, you find your self-excuses to bring that home. What you need to understand, Salim, is that you are in a very sweet spot as far as your finances go. You don't have expenses which you have to make every month. So your savings ratios can be as high as 60 to 80 percent. Use this time to aggressively save for your future because it isn't that you'll be staying here forever. Isn't it? Or even if you do, at some point you will start to take the burden. Once your father retires or mother retires, you will start to take the burden on yourself. So you have this golden period ahead of you where you can really bump up your savings ratios. So Salim, spend well and save aggressively. And that's a wrap for today. I enjoy answering your money questions. Remember, I don't look at individual portfolios, I don't recommend products. Look upon the space as a place to ask strategy questions, doubts and just basic things that you might not understand. Each time you have a good money outcome, I feel that I have one. To make sure that you don't miss an episode, press follow and help your friends get money smart by sharing a link with them. You can reach out to me at [email protected]. Tag my social media handles @theraponecahallen and finally remember that you should have money and money should not have you. So let's talk money again soon. Bye. Let's talk money is hosted by Monica Hallen. This is a Made in India production. Career director, May Mariam Thomas, project manager, Sean Fansom. Head of Audio Production, Kartik Kulkarni, producer, Megna Gulati, sound editor, Sartha Kree, artwork design by Alika Gupta.