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20 August, 2019 22:18 IST
Financial Planning
   
Financial Planning for Couples
Source: IRIS (20-FEB-19)

A married couple is often given a lot of advice on how to make the marriage successful. However, they also deal with big questions like 'how to spend' and 'how to save'. With both the parties earning & spending, it becomes important to set financial goals together. To help the couple with this, here are a few suggestions.

> Discuss financial values and goals: Money being a sensitive subject, most couple avoid talking about it transparently. However talking transparently is imperative to setting the financial goals together.

Money is an integral part of getting to know each other. After knowing each other well, the couple should exchange their values about finances. Together they should come up with a mutually agreed programme involving financial goals and a roadmap on how to achieve them.

> Saving Target: When both the partners are earning, the cash flow is higher. With higher cash flow the splurging tendency also increases. Most people create a spending budget. This strategy more often than not fails when unexpected expenses crop up and the spending budget goes for a toss. The best way to deal with this is to have 'saving budgets' that follows the concept of 'Pay Yourself First.' What is 'Pay yourself first'? It is the idea that one pays themselves a certain percentage of their income every month which they will save towards achieving their financial goals. The rest of the income can then be spent guilt-free towards other expenses.

> Invest to achieve your goals: The investments goals should be divided into short term which are met within two years like purchasing a car, medium term which are achieved within two to five years like purchasing a house, and long term which take more than five years goals like, saving for your child’s education or your retirement.

Setting up a contingency fund or emergency fund is another prerequisite before you start investing to achieve your goals in case of loss of employment or an unfortunate accident. An emergency fund should be equal to six months of personal expenditure, including EMIs, insurance premium and other fixed expenses which should be governed by the risk profile of your job and stability of income. Your savings account should have equivalent of two months of expected household expenses which is easily accessible while rest of it in can be in a liquid fund which can be withdrawn in a day.

> Invest in Experiences: Given the current pace of the world, it is essential for the newlyweds to spend quality time with each other. Investing in experiences and activities, they enjoy as a couple is an excellent way to go about it. Setting money aside in liquid funds for these activities & experiences, so it's easily accessible, will leave the couple organized and stress-free.

> Creating Assets: While focusing on creating assets, the couples should stick to a prudent limit when it comes to loans. It is advisable that the couple doesn't spend more than 30% of their gross income on EMIs. Exceeding these limits might result in cash flow problems. The couple can prudent the size of the car and buy a house only after reaching a certain level professionally.

> Insurance:
Life insurance: The number of dependent family members (child, seniors citizens, unemployed wife) should determine the basis of adequate life insurance. The couple should buy term insurance policies to meet life insurance needs(Online policies are less expensive). Depending upon the couples’ future financial goals, income needs, and outstanding liabilities their financial planner will be able to guide them as to how much cover is needed. They should avoid buying investment oriented insurance products where they pay a higher premium and might not receive adequate life cover.

> Health Insurance: It is advisable to buy individual health insurance policies for both partners even though their employer provides them with one. This way they will still have an insurance cover even if one of them resigns from their job. For added protection, they might want to buy critical illness policy and accident cover. Again, consulting a financial planner before purchasing health policy is advisable.

Couples often pay a heavy price when they use the DIY (Do It Yourself) approach. Since Financial planning for couples is a meticulous job, it is difficult to capture it in one article. Use the services of a financial planner or online financial planning sites that can serve as an advisor for achieving financial success.

(Contributory by Amar Pandit, Founder of Happynessfactory.in)

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.


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