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Figure out joint responsibilities

Monday, 2 December 2013 - 10:17am IST | Agency: DNA
Couples need to systematically manage DOUBLE incomes, expenses and investments, says Pooja Vora
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Ask a cross-section of people when they started investing for the future and nine times out of then, the answer will be ‘after getting married.’ There’s something about becoming a couple that makes you aware of present and future responsibilities. Until then, most savings and investments are sporadic in nature.

Figuring out aspects like tax planning, retirement planning, managing the operating monthly expenses, investing for other financial goals and so on with a spouse is more than just a bonding experience – it is a necessity.

Get insurance

Ramesh Ramani, Sr VP - Consumer Lines, Tata AIG General Insurance Co. Ltd, points out that living in a metropolitan city can be a rather expensive and stressful affair. Maintaining a healthy work-life balance can be tough for a couple. To ensure a well balanced future, couples tend to look out for financial schemes that are beneficial to the family and which would also aid them in planning their taxes and retirement. In this context, insurance can be a very useful tool for managing personal finance.

Varied options

Various insurance firms have attractive Insurance policies for the whole family and such insurance schemes cater to each member of the family specifically in times of unexpected emergencies. These policies vary from high daily cash allowance if a family member is admitted to the hospital,  to taking care of or funding children’s education is case of death or permanent disability of the bread winner of the family as a result of an accident, Ramani points out.

Crucial aspects

The woman of the house doesn’t have the time for her health.  That’s why insurance companies provide a perfect health cover for women that looks beyond her health insurance needs and ensures her well being in all phases of life. It is imperative for the couple to have separate insurance such as broken bones policies for their aged parents instead of including them in the family floater plan as this may limit the benefits and increase premium, he advises

Consolidate policies
An insurer may work out the best policy/ package to cater to your needs as a couple and buying policies from a single insurer may reap benefits. If the couple has taken home loan to buy a dream house, it is vital to insure it against any possible kind of natural or man-made catastrophe. If both spouses have vehicles and have insurance policies with different companies, bringing them both to one company may also reap benefits. Many insurers offer discounts for multiple-car families, Ramani emphasises.

Ideal instruments

Anand Radhakrishnan, Sr VP and Portfolio Manager - Equities, Franklin Templeton Investments, India, opines that tax planning is an integral part of financial planning. Investors comfortable with the volatility in the equity markets and looking for potentially superior risk-adjusted returns can consider ELSS and Pension Funds. The level of exposure depends on the investor’s tax planning needs and while investing in equities, one should typically look at a 3-5 year horizon given the inherent volatility in stock markets.

Joint account
Vidya Bala, Head of Mutual Fund Research, FundsIndia.com, underlines the fact that most working couples would have their own salary accounts and seldom think of a joint account. Couples would do well to have one joint bank account from which to manage their expenses as well as route their savings in to other investment channels. It is important to have a nomination for every bank account and investment made by an individual, to reduce the legal hassles for one’s spouse.

Both spouses

Applying for home loans, jointly, in case of a working couple, will enhance the amount you would be eligible for. You may also make it a point to claim tax deductions on loans jointly (in case the house is held jointly) to enjoy maximum tax deductions. It is important for the female member, especially if she is working, to cover herself with a term policy as she is also a bread winner. One should ensure that the life cover is anywhere between 5-20 times the annual income, Vidya recommends.

Medical cover
Having medical insurance cover, outside of what is provided in one’s work place, for the whole family is imperative. This should be one of the first financial planning to be put in place in a young couple’s life. Remember, the new organization you go to may not provide a cover and with increasing age, the policy premium also increases, when you take a cover much later, she points out.

Retirement planning
Couples need not wait for fulfilling their financial commitment towards their children’s education and marriage, to start their own retirement planning. A proportion of savings from the joint account can be simultaneously allocated towards retirement savings. Retirement savings should not stop with merely tax-saving investments. One should look beyond that. A mix of provident fund, equity mutual funds and debt funds are a must in your allocation towards retirement savings, Vidya points out.

Tax clubbing

Often times, people gift money to their spouse, as there is no gift tax for such a transfer. However, the income generated from such investment (deposits or bonds) will be taxable in the hands of the person gifting it, if the person receiving the gift falls in the lower tax bracket or has no income of their own. Hence, any such gift should be carefully routed in tax-free investments such as tax-free bonds, she emphasises.

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