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Include financial planning in pre-wedding preparations

Talking about existing loans, investments and how to save money jointly for the future can help the relationship

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Discussing one's finances is perhaps the last thing that would be on the minds of a couple about to get married. But it is as important, if not more, as planning the wedding function and honeymoon. Loan repayment, insurance policy, retirement are all things that a couple needs to figure out when they decide to tie the knot. DNA Money spoke to two couples who are to be married and financial planners to understand the nuances of how a couple plan should plan their finances - what should be joint investments, what should be kept separate and so on.

"What is often overlooked is that marriage is the start of a new phase in two individual's lives that has an impact that is not just emotional, but also financial," says Rahul Jain, head – Edelweiss Personal Wealth Advisory.

Investment and loans

It is a good idea to discuss financial goals with your partner and see how compatible they are. These are very important in case of long-term goals such as buying a house, if neither owns one. This being a big ticket purchase, the couple must plan for it together.

If there are other loans to be paid off, such as personal loans, credit card debts, education loans, that too should be discussed. These days, with banks sharing data on borrowers actively, the credit worthiness of one partner affects the other's credit profile. So it is essential to keep your partner in the loop if you are paying off a loan from prior to marriage.

"We have decided to split the home loan and the personal loan amongst each other," says Shreya Kumar, a financial services professional, who will soon be marrying Rupak Thakur, a sound engineer. She adds that each would cover one loan post marriage.

Before deciding on the investment options, discuss your financial goals. decide how much is required for each goal, how much each should contribute and what kind of financial instrument to invest in.

"Depending upon their financial goals the couple must then decide how much amount of their income can they save and consequently which investment avenues can be pursued to achieve these goals," says Vijay Kuppa, co – founder Oro Wealth. Thus, the couple could look at mutual fund investments, fixed deposits, recurring deposits, stocks, or liquid funds .

"I have started investing for short-term goals such as holiday planning, arranging liquid cash for my accommodation, etc," says Kirti Arora, who runs her own beauty salon. She is engaged to investment manager Palash Gautam. At this point of time the couple has not earmarked major portion of their money for long-term investments as they would need some cash within a year's time.

"Anyone who is about to get married, must discuss financial goals such as purchasing a house or regulating the monthly expenses with their would-be spouse, so that both of them have a clear idea of the overall financial situation," adds Arora.

Kumar says, "We have taken quite a few of the financial decisions on our own. We most certainly have jointly started saving for our house."

Common expenses

Some common expenses that a couple needs to plan for include monthly groceries, rent, utility bills, investments for future, loan repayments, child support, and so on.

"We both are earning as of now, so we have planned that we will keep the entire earning of one person as a saving," says Arora. The other spouse's income would cater to monthly expenses.

Increase in both income and expense

Once married, the very first thing a couple must look at is the disposable income. There will be two incomes, and while expenses too will increase, money to be spent on certain items may not increase as much. Such as rent, utility bills, groceries, etc.

Kumar and Thakur plan to combine their incomes post marriage.

"Post marriage, it will be just a matter of time when we divide our take-home for specific expenses," says Kumar.

How to spend money for your regular expenses is another factor to consider. Should you have separate single bank accounts or a joint account? If it is a joint account should both partners operate it?

"The couple ideally should have a joint bank account which can be operated by either of the spouse," advises Jain.

This would apply to the demat account as well. All investments could be done in the joint name of the couple and the mode of holding can be either or survivor.

"We have talked about having a joint account just for emergencies," says Kumar. As an alternative Kumar and Thakur plan to put an amount apart for any emergencies.

When setting up the contingency fund the couple must keep in mind that fund there could be periods when one of them could be without a job, and thereby income. For instance, the wife may decide to take a break to take care of her children, or the husband may take a break for higher studies. Or a medical emergency could force either of them to stay at home for awhile. These are scenarios which one should plan for.

How to go about it

The best approach to planning one's finances is to prepare a financial plan. The plan would lay down a precise road map to achieving the couple's financial goals. The plan will broadly include household and lifestyle budgets, contingency fund, risk management, debt management and savings and investments plan. "The couple should ideally stick to the plan and review it once a year," says Jain.

"One key part in this planning, which most couples generally forget, or tend to skip is retirement planning," says Kuppa. This seemingly small detail is quite necessary for a secure financial future. And the sooner you start retirement planning, the better it is, given the long-term nature of the goal. The saving instruments too need to be selected keeping this in mind.

A married couple must definitely buy health insurance jointly. Look for a policy that takes care of your immediate needs and also future family for the long term.

"One should start with a comprehensive health insurance plan that does not take care of only hospitalisation but also ensures an active and healthy living for the family, given the rising incidences of chronic illnesses, says Mayank Bathwal, CEO, Aditya Birla Health Insurance.

Newlyweds could also look for additional features like maternity cover which takes care of a near term goal of completing a family.

If both already have separate health insurance policies, then add the other spouse into a policy that meets their joint needs. As an alternative the couple may exercise a portability option to switch to an insurer whose family policy that meets these needs. A policy for couples also works out cheaper than two individual policies.

Before the wedding bills ring:

Expenses to consider include monthly outgo like groceries, rent and longer-term expenses like child support, annual holidaysInvestment for future should be discussed based on each one's goals Disclose all existing loans and status of repayment to one another Plan for home loan and repayment jointly Health insurance is also best purchased jointly for better benefits and lower premiums

FAMILY FOUNDATION

  • Decide how to share both monthly expenses like groceries, rent and longer-term ones like child support, annual holidays
     
  • Decide investment for future discussed based on each one’s goals 
     
  • Disclose all existing loans and status of repayment to one another 
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