The thought of writing this article came from my personal experience as I recently got married in January 2011 and have started a family. The honeymoon is over. Now comes the hard part. Now it’s time, if you haven’t already, to talk seriously about your money and your financial plan as a couple.
Being a financial planner, I understand the value of money and used to discuss and share with my wife about the household expenses, our financial goals and dreams and investments to make our future secure etc but is that the case with all other Newlyweds couple?
What should you do with your money now that you are husband and wife? What should be on the list? And, equally important, how should the financial goals be prioritized? Being a Financial Planner, I would strongly recommend you the following most important things to do in the short-term:
- Have a conversation. Sit down and have a frank discussion about each other’s money history. Don’t be ashamed of mistakes made in the past. Commit to not repeating the mistakes again in your new life together. Be sure, when talking about money that you check egos at the door. This is usually a problem for the men. Quite often we can’t show any signs of vulnerability.
- Create a spending plan or budget. Develop a written budget and make sure that each person knows about all of the expenses. In addition, you should decide together how both of you will contribute to household expenses. Even if one person is the primary bill payer, the other spouse needs to have an idea of what’s going on.
- Set goals together. Besides getting a handle on income and expenses, it’s wise to talk about the future and what you want individually, as husband and wife and perhaps as a family. This does not mean you have to have the same goals but it’s important to get buy in from each other on your hopes and dreams. Some Financial Goals might seem silly to him but if it’s important to her, problems can be avoided if goals are shared from the beginning and priorities are set.
- Build an emergency fund. Create an emergency fund that equals three to six months of living expenses, say your monthly living expenses is Rs. 25000 than you can keep one month living expenses in your savings bank account and remaining five months living expenses in either Short term debt funds/Liquid funds.
- Save for your home. Begin saving for a 20 percent down payment on a home. But, don’t overextend your budget.
- Save for your retirement. This is one of the most important which a couple should start implementing at the earliest. Earlier you start, more the benefit of compounding you will get at the time of your retirement. Just to give you one example- If you are starting SIP of Rs 5000 in good Equity Diversified Mutual funds from age 25 and assuming your retirement age to be 60 and your income growth to be 10 percent every year, so you will increase your SIP amount by 10 percent every year and the return expectation is 15%. Can you think how much amount you will accumulate at age 60? The corpus you will accumulate at age 60 would be Rs 13.45 crores. So plan your retirement early to live abundantly after retirement.
- Avoid debt and EMI. Stay away from credit card debt. One of the important aspect of Financial Planning is spending money wisely and stay away from fancy of spending money through credit card and EMIs which will eventually result into debt trap.
- Create a financial Commitment. In some cases, you may want to consider crafting and signing a joint financial commitment to help you and your spouse stick to your financial plan.
Should you and your spouse start to clash about money, I would strongly suggest it’s wise to meet up with a Certified Financial Planner (CFP) who are more of Family Financial Doctors to your family. Financial planners are not marriagecounselors or therapists, but they can help address money issues and also help you and your family in achieving your financial goals and live life with Financial Peace & Financial Freedom.