Marriage marks a new beginning for the husband and wife. This new beginning brings its share of responsibilities that need to be actively managed. Some of these responsibilities are money-related. Money, handled carelessly, has the power to damage relationships. Therefore, it is absolutely essential for couples to talk about how they will individually and jointly manage their incomes in order to meet their life goals.
How do you assign responsibilities? How much insurance should you buy? How do you segregate and aggregate expenses? How do you work towards life goals such as having kids, buying a home, and building a retirement corpus?
In this article, we’ll look at entry points to money-related conversations that couples should have in order to avoid misunderstandings, strengthen their bond, and to race towards achieving life goals that will no doubt involve having large amounts of money.
Talk about expenses, fix responsibilities
Your expenses will certainly increase after marriage. Therefore begin your financial talks by understanding what your regular and non-regular expenses are, and what each partner could do to settle these expenses or what each partner could do to even reduce these expenses. Do exercise caution and sensitivity while talking about personal or lifestyle expenses, since questioning such expenses may imply questioning your partner’s mindset. The core idea should be to get rid of unnecessary, wasteful spending and to find more money to save and invest.
Talking about who is responsible for which recurring expense—like settling an electricity bill, or keeping track of EMIs—would reduce the burden of tracking and settling on one partner. If both spouses are working and have separate sources of income, they can plan and distribute their expenses, thereby distributing financial pressures as well.
Get yourself risk covers
Once you have a life partner, it is your responsibility to protect them from uncertainties and risks. The first step towards risk mitigation is understanding the potential costs you’ll bear when your risks become reality. How would you, for example, raise funds for a medical emergency? Or, how would a dependent wife have an income if the husband were to pass away suddenly? Insurance provides the protection you need from such risks.
Your life policy should be adequate for providing long-term financial security for your dependents. Opt for a term cover. If you’re a 30-year-old earning an annual income of Rs 500,000, you can opt for a crore of Rs. 1 crore for annual premiums around Rs 12,000.
Buy health insurance with critical care riders to cover all the members of your family and avoid spending lakhs of rupees in any medical event requiring hospitalisation or treatment for a critical illness like cancer. If you already have insurance covers, make sure you update your nominee details after your marriage. When you have children, include them in your family health cover as well. Additionally, you could also consider covers with a permanent disability rider that would financially protect you in a situation where you are unemployable and unable to earn an income.
Another form of risk cover is building a contingency fund. After marriage, the husband and wife should mutually determine the size of a contingency fund to meet emergencies like loss of job, prolonged illness, accidents, damages, or any other form of financial pressure. Both spouses should be aware of the fund and have access to it so during an emergency.
Invest smartly to jointly achieve life goals
Investing in the right instrument and at the right time is vital to achieve life goals. It’s wonderful to have a life partner helping you in working towards these goals. Your investments should consist of diversified assets with an ideal combination of risk, return and liquidity while also increasing tax savings wherever possible. Your investments should help you achieve not just personal goals – like finishing your education, going on a world tour – but also family goals like buying a house, putting your child through college, or building a retirement corpus. As a couple, you must discuss how you could individually and jointly contribute to the achievement of these goals while retaining sufficient liquidity to short and medium term expenses. This would lead you into discussing the investment options available to you: deposits, mutual funds, PPF, stocks, etc. Do also talk about inflation. Since 1971, the average inflation rate in India has been around 7.5%, therefore it is important for your investments—or at least a part of your investments—to grow quicker than 7.5% in order for you to achieve your goals.
As couples, do make it a point to disclose details of credits and debts. You may have lent money to someone, and a person in your family should know about it. You may have taken a loan yourself, and you should disclose to your spouse how repaying the loan affects your finances. If you haven’t taken a loan, do discuss the possibility of taking one in the future—for buying a home, for example. If both partners are working, they may want to combine their incomes to jointly take a loan and thus jointly take advantage of tax benefits while simultaneously making it convenient to repay the loan. Also, remember than marriage comes with responsibilities that would need you to occasionally spend beyond your means. Credit cards are the easy way out of such problems, but avoid the temptation to max out on your card and always—always—repay your card bills on time and in full to avoid falling into a debt trap. Higher loan rates and debt burden results in tainted credit records which can impede your family’s ability to access credit in the future.
Review your plans
It is not necessary that the plans you come up with are perfect. Every now and then, tweaks may be required. Therefore, review your plans regularly and discuss how both of you can make the plans better. Sometimes, your life goals could change, and this may require large-scale changes to your financial plans. What is important is that the husband and wife remain on the same page as far as their individual and joint goals are concerned.
If you’re confused about how to save and invest, do consult a professional investment planner to help you draw the best money plans.
The author is CEO, BankBazaar.com