5 Money Management Tips for Married Couples
'For better or worse, for richer or poorer'...
We've heard these words enough times to notice that money makes it into wedding vows, and for good reason.
Unfortunately, many newlyweds today, living on their own, each one with their own degree of financial independence, seem to be struggling with the concept (and execution) of sharing the wealth.
Here are 5 quick tips for newlyweds to have a healthy financial start.
- Talk About Money
The best way to do this would be before getting married, but doing it as soon as you get married is good enough. Things to share would be how much money you each make and spend every month, including a list of your obligations (contribution to family, insurance premiums, loans, personal expenses, cell phone bill amounts, gadgets and other shopping expenses, how many times you would like to eat out every month as a couple) and anything else, even, or especially, the seemingly frivolous expenses.
The sooner this conversation is had, the better, and remember - you're sharing not simply to impart information to your better half, but also to seek a mutual comfort level on regular expenses. You don't want to be labeled either the miser or the spendthrift in a couple.
- Know Your Life Goals
A big life goal of course is retirement. Another big one and definitely more urgent, is when do you plan to have children and how many would you like to have? Children are priceless, but they can also be expensive. So have a list of your life goals, from kids and retirement to everything in-between such as new cars, family holidays and so on.
Deciding when to retire can be an important one, if it is only one member of the couple that is working.
You will need a strong retirement plan, for which it is advisable to speak to a financial planner as soon as possible.
- Have an Emergency Fund and Use It for Emergencies Only
If you already have individual emergency funds, you can simply pool them, or keep them separate for lack of hassle, but know that they exist and they shouldn't be touched.
If you don't already have emergency funds, start building one together.
First, estimate how much your monthly expenses are going to be.
Second, take a figure that is anywhere between 6 and 24 times this amount (half a year to two years worth of expenses) and start saving towards it.
You can save in proportion to your incomes, or decide a better way that works for you as a couple.
- Have a Personal Budget and Try to Stick to It
Budgets, while not always easy to create and stick to, can be very rewarding.
They come in especially handy for entertainment expenditure as this is one area where you might not even notice how far overboard you have gone. Eating out, movies, shopping, and the like can often balloon out of control so fast you don't know its even happened until you see your credit card bill. If this ever happens, you don't need to panic, just know that next month you should together cut down on this category of expenses.
Have a joint account where you both contribute either equally or in proportion to your incomes. Often couples opt to have a joint account where the husband contributes, leaving the wife's income to herself. Start reviewing your joint account expenses each month to see where the money is going. Categorize it together at the dining table, into categories such as rent, utilities (electricity, Gas, cable, internet, landline), travel / fuel, EMIs, Insurance Premium, and any other categories that are specific to either of you.
Set targets, for example, 'we will not spend more than Rs. x per month on entertainment'.
Try and stay within budget, but remember that if in certain months you don't, be understanding, patient and forgiving, and remember to work towards getting back on track.
Bring up touchy money subjects with understanding and affection and you will avoid causing stress that can often be long lasting and very damaging.
- Invest as a Couple and Also Individually
As a couple, you'll have a life together that will involve major expenses on your decided life goals. Invest towards these goals based on your time horizon to the goal.
Individually, you might want to plan for certain expenses without investments from your better half, for example you might want to surprise them with a holiday. It is recommended to have both joint and individual investments. Remember however to name your spouse as your nominee on any investments you do that are not joint with them.
Money in a marriage can be dicey if not handled carefully. Remember to trust each other, be trustworthy, and put your entire sincere effort into being absolutely honest with your partner especially if you've done something they might not agree with. If you form good financial habits as newlyweds, you will respect each other and be able to work together for many years to come.
PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.
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