Marriage changes an individual’s life in many ways, bringing a lot of joy, additional responsibilities and worries in small measures as we try to adjust to the new person in our lives. After marriage, both of you might be working or either one of you. This will determine your income source and as for expenses, it is largely based on the standard of living that one maintains. There are a lot of things that a couple must clarify right at the onset of their marriage such as life goals and financial aims. In fact, keeping in mind the rate of inflation, it is sensible to start planning for children’s education, marriage and retirement right from the first day of marriage.
Managing Money and Family Planning
Mostly, in India, people begin any serious investments such as gold or property only after marriage. Money management takes serious undertones as family planning also enters the picture. Many couples make the mistake of paying greater importance to either money management or family planning, whereas both must be managed simultaneously. Expenses towards children begin right from the point of their delivery, schooling to their higher studies. There is an argument both for and against starting a family early in life; on one hand, it means that you will be through with all the big responsibilities of your life by the time you retire; and on the other, it means more financial stability before you take on the responsibility of a child.
Changing Precepts of Marriage and Money
Contrary to the previous era when the majority of the weddings went unregistered, most of the urban marriages are registered formally, often in the marriage hall itself where the wedding is conducted. There are numerous legal rights and obligations that come into action once a marriage has been legally formalised. There are a few age old financial precepts of marriage which hold true even today such as:
- Have at least one bank account which is held jointly by the couple. This is very helpful especially when you are making investments or taking a loan jointly.
- As far as possible, apply for home loans jointly, as the chances of sanction rise. Also, in case both the partners are working, then both can enjoy tax concessions.
- Register all real estate property in both your names for administrative as well as loan purposes.
- Change the wife’s name on all legal documents including bank accounts, PAN card, passport etc.
- Have a budget to keep track of your monthly expenses and how to manage them.
Financial Planning for the Newlyweds
As in the case of all personal financial planning, it is essential to have a short term, medium term and long term financial plans which can be used as a definite plan or as a yardstick by which you can measure your financial success and also keep tab of the roadmap you have set for achieving your joint goals. These goals may be further categorised into needs and wants to mark their importance.
The table below is an example of a general financial goal.
|Time frame||Goal||Need/Want||Points to note|
|Short term||Accumulate savings||Need||6 months’ income is generally used as a yardstick.|
|Buy insurance||Need||Adequate cover as per your needs|
|Purchase assets (car, home etc.)||Want||Assess cost benefits as opposed to the amount to be borrowed|
|Retirement planning||Need||Disciplined long term investment|
|Incidental expenses (vacations, monthly expenses etc.)||Want||Should be made after savings and investments from the surplus to avoid over-spending or borrowing|
|Medium Term||Children’s education||Need||Start accumulating funds from the child’s birth|
|Real Estate Investment||Need||Consider prepaying the loan and investing some other real estate property|
|Streamline retirement plan||Need||Assess the accumulated retirement fund and continue investing surplus towards the same|
|Incidental Expenses||Want||Create a self-sustaining corpus to regularly fund incidental expenses such as holidays, random purchases etc.|
|Long term||Assess Retirement corpus and Liquidity||Need||Continue the assessment of retirement corpus and reconsider investment funds allocation to more stable sources to earn guaranteed returns. (eg. Less equity more bank deposits etc.)|
|Children’s higher education||Need||Must begin at an early stage and continue right up to the point when the actual expense occurs.|
|Children’s marriage||Need||Can begin at a later phase after buying a house|
|Estate Planning||Need||Should be effective from the stage where you have accumulated enough assets and your family is settled|
|Post-retirement expenses||Want||Should begin along with investment for retirement fund|
Financial planning is a dynamic process that will evolve as the years pass and the couple assumes new roles and responsibilities. However, it is essential to have a shared vision and attitude towards expenses as this financial stability is highly essential for a stable future.