Money Management Tips for newly married couples!!!

Married last November, Rahul and Ruchika were enjoying their life to the fullest. Both had a high salary paying job, big apartment in a posh locality; everything was just perfect for them. Soon their honeymoon period was at a halt as on one day Ruchika was thrown out of her job. Ruchika is a management graduate from IIM and did her PG by opting for an education loan. She was paying it for the last 2 years and was managing it out from her salary. With the sudden loss of her job now the burden of repaying the loan was on Rahul. For the first few months, he was able to handle it properly but was then unable to manage it as their living expenses were high and no one was ready to compromise. Finally, Rahul decided to break his savings to pay the loan.

This is the story of many newly wedded couples who do not talk about money matters before marriage and as a result, they make some investment errors or financial mistakes that can take years to fix. There are many points to discuss like who will pay the rent? Who will bear the load of EMI? How will you divide your monthly expenses? You will combine it or will keep it separate?

There is an answer to every question but people need to act early and discuss the money matter openly. So, here are few tips to make sure (as a couple) you properly manage your finances jointly or individually for a lifetime.

1. Openly discuss about money matters – It is best to do it even before getting married, if not then discuss it with your spouse as soon as possible. It’s important to discuss about spending habits, any debt which anyone is repaying, saving habits, current investments, and about future goals. It helps in creating a better understanding of money matters.

2. Emergency Fund – These days both husband and wife earn which results in living a better lifestyle.  Money comes in from both sides and it looks like nothing could go wrong. However, they need to understand that in case of any job loss or any unforeseen event they can end up losing everything. Putting money aside is necessary for rainy days. It will not only help in reducing stress during an emergency but will also help in saving the other investment.
Tip – An Emergency fund should have 3-4 months worth of living expenses.

3. Insure Yourself – Nobody wants to die or wants to see the hospital bed, but now that you are married and have a dependent family it is important to have sufficient life cover and health cover so that in case of any unforeseen event your family or dependent does not suffer. If earning spouse already has a life cover then cover needs to be increased and in the case of health insurance, both should have a floater policy or at least an individual policy.

Tip – At least 10 times of your annual salary should be the minimum cover for life insurance and cover equivalent to your annual salary should be the minimum floater cover for health insurance.

4. Create Budget and track it: – If one of the spouse is saver and other is spender, then you should create a budget which respects both. Do not worry about your differences rather you can enjoy it by reversing the role. Saver can decide about spending part and spender can suggest methods to save. Once this is done, you can start reviewing it every month to get the exact position of your spending and saving limit.

5. Review your bank accounts: Once married both partners can decide from which account to pay insurance premiums, invest every month and from which account to pay for monthly expenses. They can also keep personal expenses and investment from their individual account and can allocate a joint account towards monthly expenses and joint investments. This strategy may help in reducing stress related to regular expenses and investments.

6. Start Investing – After few month of marriage, the couple should start investing for their future needs and goals. They should sit together to discuss about their future goals, prioritise and start investing towards achieving them. If they are new towards investing they can take help of an expert who can guide them in a better way.

7. Update nomination/other details in financial instruments – Mutual Funds, Bank Account, Demat Account, Insurance Policies, Real Estate are some of the instruments which require updating nomination after you get married. Also in many cases the last name of spouse and address is changed which needs to be updated. This can be helpful to other spouse where he/she would be in a proper position to claim the ownership on these accounts in case of any unforeseen event.

8. Review your investments – Once the investment cycle is started, all you need to do is to review it regularly. You need to determine if any changes are required in the asset allocation strategy. This can be helpful in the long run in shaping your financial life. 

It’s very important to have a plan and prepare for any emergency when it is related to money. If both spouse will work together to handle their budget, investment and spending habits then they will be in a better position to handle any kind of unforeseen event throughout their life. Remember, if you don’t talk about money now, you will have to deal with it later but there is no guarantee that it may not harm your feelings.

Note – This article was originally written for and published on www.Moneycontrol.com in 2014.
Image Credit: www.google.com

Author –

Ayush Bhargava
Certified Financial Planner
Ujjain

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