Marriage is not just about two people coming together to create a new life but it is also about taking responsibilities together such as managing finances, sharing expenses, investment planning etc. Finance management and investment planning are one of the key success indicators of a good marriage.
The whole institution of marriage is seeing the emergence of power couples, where both the husband and wife come with a very strong financial independence. Often, there may be very individualistic financial goals, which is why there is a need to integrate these goals and plan your financial future in unison. Synergy is the key.
When married couples strengthen their financial future, this will not only be an efficient way towards financial planning and wealth management but could also hold the key to a peaceful and harmonious married life.
1. Communicate and acknowledge your differences
Financial dreams are never alike. What your spouse dreams of may rarely be one of your milestones. It is important that you sit down and communicate your dreams and assess, and how you could meet midway to have a financial vision that is conducive for both of you such as:
- Holiday planning
- Business or entrepreneurial goals
- Family planning/ cost of raising and educating a child
- Any significant purchase such as:
The acknowledgement may also be necessary from the point of managing your daily household expenses and budget accordingly.
Tip: Have an open and no-holds barrier conversation about what you expect from each other; and also, what do you wish the finances to achieve for you in your respective lives, and then cumulatively together for both of you. Individual goals should not be sacrificed for family goals. At the same time, family goals should not be sacrificed for individual goals.
Additional Read: Does your financial plan account for lifestyle inflation?
2. Discuss your financial responsibilities
If you both remain earning members, then you may want to split the responsibilities towards your household requirement, investment commitment, EMIs etc. Assess the overall inflow of cash and chalk out a plan on how the same would be managed including:
- Bank accounts
- Credit Cards
- Loans, etc.
Tip: One means of achieving this is to have a joint account where you both transfer funds and provide for transactions from the same account, primarily for joint expenses such as bills, rent, groceries, family holidays etc. This is easier to manage, monitor and review. To top it, the transparency gives a greater sense of clarity of how more can the money be invested by managing expenses buckets.
3. Creation of emergency fund
Change is the constant of life and unexpected surprises are part of it. This is truer than ever in current times. With the uncertainty surrounding jobs and cashflows, health problems have increased amidst the grim macro-economic and the pandemic situation. These factors have only iterated the requirement for the creation of an emergency fund which will enable tackling financially stressful situations with better ease. The sooner, the better.
Arguments surrounding finances can be a key deterrent for a newly formed relationship. Fallouts among couples due to financially stressful situations and the inability to handle them prudently are more common than we think.
Always store your debit card PIN, net banking passwords and other sensitive documents in a secured folder. Share the password with your spouse, so that in case of any emergency, your spouse will have access to the same.
Also, plan your emergency POA (the plan of action) – which would be the credit card to be utilised for unforeseen expenses, who all need to be informed in case of exigencies, preferred doctors and healthcare professionals etc.
4. Hedge your health and life risk
Now that you both are a family, you have to take care of each other in every way including financially. If you both are financially independent, then in all likelihood, both of you are contributing towards your current lifestyle. If you want your partner to continue to live the current lifestyle, then you would have to avail yourself of an adequate life cover.
Tip: Life insurance is necessary for both spouses, especially for the earning members of the family.
It becomes all the more important if you have made any large purchases via credit/loan and you have an EMI commitment towards it. You surely do not want your partner to be burdened.
With the healthcare inflation at 15% as compared to the retail inflation of 6-7% per annum, it is inevitable for you to opt for adequate health insurance coverage which will ensure that any illness does not crumble your financial dreams.
Points to note in a health plan for newlyweds are Maternity coverage, no room rent cap or co-pay, pre-existing ailment coverage, etc.
Tip: Opt for adequate coverage of medical and life coverage so thatyour savings and other financial goals are not hampered because of medical exigencies!
Additional Read: Key steps to achieve financial freedom for women
5. Include your long-term goals
Commonly, you start investing haphazardly initially since you do not envision buying a home or retirement in the near future. These may be dreams which are probably there in the back of your mind but may arise only over the long term. It is best if you could bring these into the picture and start planning for these needs much in advance.
The sooner you start, the better it is. There is nothing like getting a head start on your long-term goals. The magic of compounding of returns unfolds only over the last few years and the longer the tenure, the higher will be the corpus. It is also easier to achieve your goals without any hiccups.
Remember: Update each other’s nominee details in bank accounts, investments, loans, etc. so that there are no surprises in the long run! Keep your marriage certificate ready and handy.
6. Joint owners and co-borrowers to your home loan
When you buy your new abode, if you are both earning members, then you can optimize the tax benefits by jointly applying for the home loan. For this purpose, the house should also be held in joint names.
Further, most banks provide a 0.05% interest rate concession for female borrowers, hence, it would be prudent to apply for the loan with your wife as the primary applicant and you as the co-borrower.
Also, both of you will be able to claim the tax benefit on the home loan principal amount under section 80C and interest paid can be claimed under section 24.
Remember: Handle personal debt first, especially the high-interest ones. Don’t pile it on your spouse.
As newly-weds, you have the opportunity to create your lives the way you wish to. Both of you have a long way together. You should communicate often and stay on the same page finance-wise to ensure that you lead a happy and fulfilling life. However, if you need help, the experts at Tata Capital Wealth are more than happy to assist you.