FINANCIAL PLANNING: Married couples should set joint goals

A newly married couple is often given a lot of advice on how to make the marriage successful. With both parties earning and spending, it becomes important to set financial goals together. Here are a few suggestions. 

Discuss financial values and goals: Talking transparently about money is imperative to setting financial goals together. 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 partners are earning, the cash flow is higher. Hence, the splurging tendency also increases. Most people create a spending budget. When unexpected expenses crop up, the spending budget goes for a toss. The best way to deal with this is to have ‘saving budgets’ that follow the concept of ‘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. 

Invest to achieve your goals: 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of expected household expenses which is easily accessible while rest of it in can be in a liquid fund which can be withdrawn in a day.

Creating assets: While focusing on creating assets, couples should stick to a prudent limit when it comes to loans. It is advisable not to spend more than 30% of gross income on EMIs. Exceeding these limits might result in cash flow problems. 

Life insurance: The number of dependent family members should determine the basis of adequate life insurance. The couple should buy term insurance policies to meet life insurance needs. Depending upon future financial goals, income needs, and outstanding liabilities a financial planner will be able to guide the couple 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. 

The writer is founder of HappynessFactory.in