Financial Checks and Balances for Newly Married Couples
Here’s a toast to the new life you begin once you’re married; excited to start a new chapter in your life. As you settle down into a new way of life, have you found time to understand each other views about the most important thing needed for a pragmatic, happy life? It is money. As someone who has just joined the club of ‘married’ people, you may find this question absurd. However, the reality is that money can cause many sore moments if not planned well.
No matters how unromantic it may sound, it is imperative to discuss finances with your partner. To help you start, here is a financial checklist that you should follow:
Talk about money:
Now you are no longer a solo traveler, and there is one more person who has joined you on your life’s journey. Money doesn’t always value emotions, so, for a pragmatic and happy life together, it is good to get an idea about each other’s current financial situation soon after marriage, if not done already. The sooner you start, the better it is.
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Set your family financial goals:
Once you have understood each other’s current state, it is time to discuss your financial goals for the short-term as well as long-term. For instance, do you plan to buy a house or car in the next two years? Are you planning for an international vacation or two this year? Do you plan to start a family soon? It would help if you accounted for all expenses, which:
A) Affect your disposable income, or
B) Affect your plan for savings
Create and track a monthly budget:
Start planning the household budget. It is to determine your daily spending basis on the foreseen expenses and then work out your living expenditure. By clearly drawing your monthly estimated budget and a monthly expense sheet towards the end of the month, you know how much will be saved and how much will be spent to live the lifestyle desired. Do not forget to consider the lifestyle spends such as dining out or other entertainment expenses.
While budgeting, the couple should also consider the house setting-up expenditure such as electronics and furniture. These are essential and compulsory buys, and one should know the amount which will be spent and the money-at-disposal since it directly affects your cash liquidity level.
Build an emergency fund:
Like an ant saves for a rainy day, you should also build an emergency fund to save enough for rainy days, like, medical emergencies, job loss, etc. The contribution in your contingency reserve fund should be equal to your six-month salary. If you both are currently working, contribute towards the emergency fund as per your income. It would help if you went for the maxim: Income-Expenses= Savings.
Update your investment documents for Nominee details:
After marriage, make sure to update all your current investment and insurance documents to include your partner as a joint holder or nominee.
Get life insurance & health insurance cover:
With your marriage vows, you both have promised to take care of each other through thick and thin. A life insurance cover is the simplest non-selfish investment you can make for your spouse, which will protect them, even if you are no longer around.
The first insurance plan that you should purchase is a term insurance plan, the most simple and affordable form of life insurance, with a large life cover for a relatively small premium amount. You can even buy a term plan online from the comfort of your home.
Some online insurance plans also cover critical ailments like cancer, chronic kidney ailment, heart issue, etc. You can add it to your portfolio to expand your financial coverage.
The next insurance you should plan for is a health insurance policy. Emergency hospitalization can disturb your budget, and therefore, go with a family floater health plan to cover the entire family under a single policy. Also, most health insurance plans have a maternity waiting period of 2 or 3 years. It means, buying a health insurance policy at an early stage can help you when you do family planning after a few years.
Maintain a master document or file containing the complete history of your savings and investments. Make sure to update it at least once in a quarter. Also, you can note down your bank account details and passwords in this book. Both partners should be aware of this book so that they can retrieve it if a need arises.
Too often, especially in traditional Indian households, it is common for the man to manage the finances, and the wife is clueless about money matters. This can be a disaster, especially if an emergency strikes and she is ignorant of the family finances, insurance cover, will, loans, and so on.
To avoid such a situation, both must be aware of the documentation and finances and set money ‘ground rules’ from the start. Though indeed, money can’t buy happiness, it can certainly buy those things which can make both of you happy!