As a married couple, you cannot wish away the financial responsibilities that just keep piling as your sphere of life expands and family obligations increase. Fiscal prudence will pay off. If you were married early, your disposable income can help you make financial decisions. It is the beginning of the most crucial period of your financial life. Working out the finances is one of the first things that you need to do.
Before you've even settled into your marriage, issues like budget, home buying, debt, saving, spending, giving, and investments hover around. You have to be far-sighted and build corpuses for emergencies, buying home/s, children's education and retirement.
The most prudent act is to begin your planning quite early. If you are one of those who has never practiced thrift before marriage, it will take sometime to get into the mode.
To begin early is the perfect time to set financial goals. If you aspire to a fulfilling life and see yourself giving your family the best in resources, education and recreation, try to be strict with yourself and think ahead.
House/car, foreign holidays, foreign education for your child, a retirement home and having enough to support other dependants, are high on the agenda. So if you're planning to buy a house, start saving for the initial down payment. In fact, the best thing to do is to try and pitch in with as much initial payment as possible so that you can keep the installment repayment obligations lower.
Once you start a family, you'll be bogged down with both expenses as well as obligations for their future, struggling to keep pace with the growing demands.
So that makes the time before or after marriage the perfect time to make that huge financial decision towards the purchase of a home.
Budgeting
It all starts with sound and realistic budgeting. Work out a budget that you can both agree on. Take into account the monthly budget and your other financial goals. Go through your past months' worth of spending under the various spending categories-dining and entertainment when you go out, groceries (meals in), car payments, credit card payments and so forth-and also set targets that cut your spending enough so that your rate of savings increases.
Insurance cover with a medical insurance policy
Begin with insurance needs for the working spouse/s. This also ensures income protection for yourself and family in the case of a serious illness or untimely demise.
Go for a term policy since they are the cheapest form of insurance and provide large risk covers for very low premiums and opt for additional riders such as accidental death, disability and critical illness benefit as well. A family floater policy would come cheaper.
Ideally, you should calculate the present value of all expected earnings till retirement and take out a term insurance policy of this amount. Then, work out the surplus after all these commitments and then, invest it wisely to achieve your other goals.
Surplus
Saving for financial goals becomes a much easier and manageable task if both the spouses are working. As a double income family, you can invest all of your surpluses after having purchased the car or house or your most immediate buy.
Work out your monthly investing plan
Investing the monthly surplus is the ideal way of going about it. The most preferable and predominant asset class of choice when you begin early is equities.
Equities offer superior returns over the long term of 5 to 10 years over other asset classes, coupled with the fact that both long-term capital gains as well as dividends are tax-free.
Contingency Fund. It is good to have a contingency fund for at least six months of expenses, which you can access during emergencies or during temporary loss of income. You can park this money in liquid funds or bank fixed deposits with overdraft facilities.
Decide on your bank account structure. Will you keep your money in separate accounts, joint accounts, or a little of both? Many married couples are comfortable with this arrangement of pooling and sharing of accounts. It especially works when communication is open. |
