Managing money as a couple requires a lot of planning since it is no more about a single individual. Certain families have only one working member whereas, in others, both the husband and wife are employed. Either way, managing expenses efficiently and investing the surplus is the key to good financial health.
While some people are hesitant in bringing up money matters to their spouse, it is crucial to do so. Both partners must know what their expenses are and how they can deploy their surplus in an efficient manner. Feel free to talk about financial goals with your partner. If you require help in these matters, seek the advice of a professional financial planner.
One should be aware of all sources of income; if both partners are earning, it is advisable to talk about income and expense patterns with each other. If you happen to have only one source of income, it is advisable to spend carefully early on and invest regularly to build a retirement corpus.
Every couple should ensure that basic financial information, such as bank details, loan schedules, credit card details and pins, insurance, etc., are shared with each other. One of the best ways to keep your spouse in the loop about finances (even if they do not understand them well) is to maintain proper files. For example, you can have one file for all bank documents, which include bank statements, cheque books, and debit and credit card information, and another for investments in various instruments, and so on.
Make a budget
A budget can help you plan your finances. If you stick to your budget each month, you will be surprised at the benefits. It is likely that you will end up with more money in bank each month than you thought was possible. The budget should also take into account the spending pattern as a couple. Expenses should be divided into discretionary and non-discretionary, which will help cut excessive spending. Once you have prepared the budget, take into account various financial goals, such as retirement, child education, building a house, vehicle, etc, and prioritise them. After this, you need to allocate funds towards each goal, partially or completely, depending on net investable surplus.
Have a contingency fund
It is advisable to have a contingency/emergency fund to dip into during unforeseen circumstances. This will shield the individual/couple financially in case of any unfortunate event like loss of job, sudden increase in expenses, etc.
Diversify
A diversified approach to investing is the key to wealth creation. Various asset classes can be considered depending on your risk appetite. An efficient mix is what will help deliver a good return.
A systematic investment plan (SIP) into equity mutual funds is one of the options. SIPs give one benefits from both an up-market as well as a down-market. Those investing through SIPs tend to purchase more units when the market falls and fewer units when it rises. The average cost per unit declines over a period of time, thus being an effective tool of risk management. Also, have a term cover in place, which will take care of the family’s financial needs in case of the unfortunate demise of the bread winner.
The writer is CEO & founder, Right Horizons
