Marriage is a partnership in every sense. It means sharing time, extending emotional support, getting rich, and growing old together. Along the way, it also means supporting each other’s finances and monetary goals.
Usually young couples do not give financial planning the time and effort it warrants, probably due to the monotony of the topic.
However, they soon realize that a significant part of building their lives together involves managing and collaborating over finances. Couples often fight about spending habits. Planning your finances together is an important measure to ensure smooth sailing.
Here are a few tips to get you started:
1. Set Financial Goals
Discuss your plans and goals with your partner. This may include changes in lifestyle, your aspirations, major investments (like a house or a car), a foreign tour, relocation, etc. List out these goals and prioritize together.
2. Track your Money
Watch your combined income and expense for a few months to figure out how your money flows. Identify patterns and list these as your fixed outflows. Keep an eye on your household expenses. There are some excellent smart phone apps like Expensify, 22Seven etc. that can help you get organized.
3. Set a Budget
With your financial goals in mind, frame an optimum budget for your family. Identify your expected incomes and chart ways to utilize it judiciously. Allocate a fixed (and gradually increasing) amount for living expenses, emergencies, investments, insurance, and savings.
4. Set up Accounts
Once you are married, you might want to set up a joint bank account with your spouse. Find out how much of your money will go to the joint account per month. It is also important to maintain individual accounts, so that you have financial independence. Spend money from the joint account for household expenses and confine personal expenses to the individual account. Opt for the ‘Either or Survivor’ mode of operation.
5. Retirement Fund
Decide on a retirement goal. You can use a retirement planning calculator to find out how much money you will need to invest in order to reach this goal. Allocate a fixed amount to contribute towards your retirement fund per month.
6. Emergency Fund
Pool some of your money into an emergency fund. This should be used only in case of medical emergencies, etc. Such amounts should be in the form of cash or near-cash assets that can be accessed quickly.
7. Savings and Investments
Saving money is wise. However, doesn’t it make more sense to let your money work as hard as you do? Invest for the long term and choose avenues that can help you invest systematically and give you real returns by beating inflation. Seek professional guidance and chalk out a financial plan. You can opt for equity-linked mutual funds, unit linked insurance plans, etc.
8. Update Nominee Details
Update your existing investments, insurance schemes and other documents to include your partner as a joint holder or a nominee.
When it comes to insurance, it is better to start early. Whether your family is single income or a double income, insurance is imperative for both partners. Carefully select and identify the insurance plan that meets your needs.
Plan well, spend wisely and save always!
Adapted from an article at https://www.tomorrowmakers.com/