Just married? Congratulations!
After all the revelries and the newness of marriage have slowly tapered, you know the time to get back to the business of living is just around the corner.
Marriage is a partnership and it is best to look at it as objectively as you would romantically. Cultivating a solid marriage takes time and work, and so does trying to merge your lives and your money.
Financial security is as significant as emotional well-being between couples can be. Your common financial goals could be influenced by one or more goals – save to buy a home, buy a car, children’s education, plan for retirement, and so on.
Clearly, one of the most key aspects of financial discipline is – learning to live within your means. And financial discipline will come with a clear-cut budget. Save first and then spend is a really good strategy!
Beginning a Partnership on Good Financial Footing
v .First things first, discuss your personal and financial goals – higher studies, hobbies, volunteering for a charitable cause, starting a family, vacations, buying a car, buying a house, and so on. Lay it all down and discuss the merits of each of these investment options for your married life and what it means to both of you.
v Break down the goals into short-term and long-term and review them on an ongoing basis to make certain that you’re on the right track.
v Prior to marriage, you may have had some financial commitments, for instance, loans. Consolidate your individual assets and liabilities.
v Assess how much you earn, spend, and save each month along with details of your investments like stocks, mutual funds, gold, or property. Include any other income sources other than salary, existing loans, and credit cards.
v The last step will be to relook at your common goals, decide how and where you wish to invest and plan your asset allocation. This would be a good time to disband any existing investments that do not have much financial viability and reallocate it towards common goals.
Let’s look at five popular investment options for couples that will focus on long-term gains.
v Real Estate
A home is one of the best investment options in India and the most expensive purchase most couples will make in their lives. Investing in a first home is often the first step toward living your new life together. Young couples should invest in a home only as big as they need it to be, with good amenities and in well-connected locations which makes the commute to and from work, easy. These factors will ensure its resale value, allowing you to sell it more quickly and at a better price when the time to upgrade comes.
Acquire a property within your means, keeping in mind your current and future finances and balance these with your current needs. Newlyweds can purchase a larger home as the family and financial capability grows. You can also use real estate investments to hedge against inflation, and earn more returns from rental income too.
v Monthly SIP (Systematic Investment Plan)
Many young couples prefer to start their investments when they have a great sum to invest – they are not convinced that investing a small sum frequently will help them to accrue larger amounts in savings, causing them to defer their investments indefinitely. We have news for you.
Investing a mere Rs. 5,000 through a monthly Systematic Investment Plan (SIP) in an equity scheme can create a corpus of Rs. 1 crore in a little over 20 years.
That’s right. It is judicious to set aside small amounts to invest in monthly SIPs for profitable gains, streamlining your finances and to enjoy higher returns. SIPs are high-risk investments though, so you need to be cautious about the investment corpus. Invest small in SIPs.
v Life Insurance
Most couples ignore this vital investment. The main benefit of buying a life insurance policy is that it not only covers the policyholder for a lifetime, but also pays out the sum assured along with bonuses to the family. So, as a couple, having a life insurance cover will ensure that if anything happens to either of you, the financial burden will not fall on the spouse, and help to maintain financial stability. What’s more, you can enjoy tax deductions on life insurance payments.
There is wisdom in buying life insurance as early as possible because the longer you wait to purchase life insurance, the more expensive it gets. Besides, if you develop a medical condition which requires hospitalization or surgery, you are likely to pay higher premiums.
Usually, a life cover of about 10 to 15 times of your annual income is considered ideal, factoring in your age and requirement.
v Health Insurance
Given the escalating cost of health care and medical treatment, it is becoming increasingly important to invest in health insurance. You probably have a health insurance policy through your employer. After marriage, you can choose to increase the cover or opt for a family health insurance policy, while retaining your personal policy.
If your respective parents are financially dependent on you, it is better to cover them under a health insurance plan. As they grow older, so will the cost of treatment and medicines. There are several health insurance plans for senior citizens, and though the premiums are high, the cover is worth it.
The market is flooded with products, offering various types and sizes of covers. The features, terms and conditions, limits and sub-limits are often hidden in fine print and their interpretation is confusing. Go through the fine print to ensure that you choose the right plan.
v Emergency Funds
Life is unpredictable and emergencies can occur anytime – it could be the loss of your partner’s job, illness, death, or a natural disaster – and you should be financially equipped. Going beyond all other types of saving plans, an emergency fund should be built to take care of the expenses for three to six months.
Remember that it might take time to liquidate other assets that you have already catered for. In that eventuality, life does not have to come to a standstill for your family. The emergency fund could be set aside in a different savings account, a fixed deposit or even a liquid fund. The last thing you want is to wait for a couple of days or run around for paperwork just to access these funds.
Conclusion
Newlyweds today face a very different set of experiences than those of a generation before. Sharing your financial responsibilities after marriage need not be stressful if you both develop a clear financial strategy.
At the end of the day, transparency is essential. The earlier you both talk about finances and debts are shared, the better and easier it will be for both of you. If you inculcate good money management habits as a newly married couple, you’ll be able to work as a team no matter what life throws at you.
......................................................Suresh Kumar Dharanikota, Auditor, ponnur@9441503681
