Let us look as certain aspects relating to financial planning which newly weds can adopt for a smooth financial life.
Prepare a budget for expenses
You can sit together and jot down the expenses you need to make on a monthly and annual basis - existing EMI's, rent, household expenses, fuel, discretionary expenses such as shopping, dining out and entertainment, contribution to parents and the like.
This would help in setting limits for expenditure and keep the expenses under check.
If both husband and wife are working, they may decide to open a joint account in which a fixed amount can be contributed by both every month towards the common expenses.
Consolidate your investments
This is a very important step and yet a lot of couples take a long time to get this done. It is possible that you may have made certain investments prior to marriage. Post marriage, you need to consolidate and check if your investments as a household are making sense or they need to be revisited. For example, if both the partners have been investing in insurance policies for savings and continue to do the same in future, without looking at whether it is right for them and their future goals, they could land up in a financial mess.
Discuss and deliberate on your financial goals
It is important for couples to sit together and discuss about what are some of things that they would like to achieve in future. It could range from purchasing a property or a car to planning for a child and retirement. Certain goals can be common while certain others may be individual goals. By sharing individual goals with your partner, not only would you involve them in your dreams but also help them identify why certain things may be important for you. The flip side is that it may lead to arguments or dissents, but sharing openly will help you eventually find a middle ground.
Keep a contingency back up
Having a contingency fund in place is a must-do for everyone and not just newly weds. Set aside 4-6 months expenses in extremely safe and liquid investment options. This contingency fund should not be touched for regular expenses and should be strictly kept aside for any emergency that may arise such as medical need or a loss of job. This fund could be recouped if utilised and it should be increased whenever your expense levels increase.
Consolidate your debt
As a household you need to keep your debt levels in check. It makes no sense if the husband is servicing a personal loan and the wife is investing her money in a fixed deposit. Her surpluses could be used to get rid of the personal loan. Again, consolidate your loans and see which ones you need to target finishing first. Surplus resources of both should be used for this irrespective of who may have taken the loan. In a marriage, it is important that the couple thinks what is best for "us" rather than for "me".
Update financial documents
This is also as important step which is ignored by most people. Marriage certificate is first important document which you need to have in place. In case of name change by the wife, all important documents such as PAN and Passport may require updation. Also the older documents may carry nomination of parents or have no nomination at all. The nomination should be changed to spouse across all the important documents such as insurances, PPF, bank accounts etc.
Protection against risks
The couple needs to ensure that they are both adequately protected for risks to life, health and property. Some of the important covers which they may need are life insurance, medical insurance, personal accident cover and home insurance.
Generating savings and investing them towards long term goals - Once the expenses have been budgeted, the couple should have a fair idea of what they should be able to save. Savings should be a non-negotiable target. Savings should be invested in the right investment products which in turn should be tied to the important future goals which the couple may have planned for.
Courtesy: Perfios Money Manager