ET CONTRIBUTORS|
Sep 02, 2017, 06.19 PM IST
By Patanjali Somayaji
Marriage is a landmark event in one's life. But after the initial euphoria comes the realisation that from now on you have to adjust to a whole new way of living which includes managing your finances. There is nothing romantic about money talk - but it is one of those things that you must discuss with your spouse, and the sooner you do it, the better it is. So here is a financial checklist to help you get started.
1. Your attitude to money
• Do you live from salary to salary, or do you save? Do you like risks (investing in stocks and equity funds) or are you risk-averse (fixed deposits and debt funds)? Do you make impulse (and expensive) purchases or do you research and plan them out? Do you believe in being debt-free or are you comfortable managing personal loans and credit card debt? What is your take on lending or borrowing money to or from family and friends? ..
2. Discuss your personal and financial goals
• Goals can be personal or financial, as well as short- and long-term - from higher studies, a hobby, volunteering for a charitable cause, a sabbatical or job change etc, to starting a family, annual vacations, buying a new car, buying a house, planning for retirement, and so on.
•You can break these down into monthly/yearly for short-term goals, and beyond that for long-term goals.
" It is important that you review them together on an ongoing basis to ensure you're both in sync and on the right track.
3. Consolidate your individual assets and liabilities
• Put down how much you both earn, spend, and save each month. List down details of your bank accounts, investments (stocks, mutual funds, gold, property and so on), income sources other than salary, existing loans and credit cards.
• Decide how and where you wish to invest and plan your asset allocation strategy.
• Beginning your married life without any personal loans or credit card debt would be ideal.If not, work on how soon they can be closed so that both of you are debt-free.
4. Managing spends together
• Previously, you had individual bank accounts and credit/debit cards. After marriage, even though you can continue with these accounts, consider opening a joint bank account and get supplementary credit cards to manage and track household expenses better.
• When to spend, who will spend on what, what percentage of salary will go into the joint Account - since these are personal decisions, each couple will have a different perspective on this.
• A lot will depend on whether both of you are working or not. What's important is that this is defined and agreed upon.
5. Make a budget and track it
• One of the most important aspects of financial discipline is learning to live within your means, and making a budget will help you do that.
6. Create an emergency fund
• An emergency can occur any moment - it could be the loss of either partner's job, illness, death or a natural disaster - and you should be financially prepared to tackle such situations.
• Once you've reviewed your spends, set aside at least 6-12 months-worth of living expenses and commitments as part of an emergency fund to help you tide over this period.
• Where and how to keep this money is a personal choice - it could be in a different savings account, a fixed deposit or even a liquid fund.
• The key here is that this money should be easily available or liquid for the both of you. The last thing you want is to wait for a couple of days or run around for paperwork just to access these funds.
7. Managing documentation
• Since long, women have usually changed their last name after marriage. Some use both maiden and married last names. Nowadays, women often prefer to leave their name unchanged due to hassles and paperwork. Whichever option you choose, ensure the marital status is updated in all documents and at work - with your spouse as next of kin or person to contact.
• Are you both of you currently living in the same city or in different cities, and which one (or both) of you will move? Are you living in your own house or on rent? Will you stay with your parents or separately? Depending on these, one or both of you will have to get your address updated in your passport, bank, credit card, broker, mutual fund, and with your employer.
• If you operate joint accounts, it may be a good idea to link it to a joint email ID as well, so both of you are aware of bill statements and other communications regarding those accounts or cards.
• When you were single, your mother or father would have been designated as a nominee or beneficiary for all your bank, insurance and investment accounts. After marriage, you can change those to your spouse's name and for future accounts as well. Once married, it is a good idea to make a Will and review it regularly. Estate or succession planning avoids needless mistrust as well as family and marital discord, besides litigation. You can even make a Will online now.
• Correct and updated documentation is important to avoid problems later because of a wrong last name, address or nominee.
8. Review your insurance coverage
• Do you have a life insurance policy? Check if the cover is adequate or whether to increase it. A term insurance policy is best. It is likely you also have a health insurance policy - either taken yourself or via your employer. After marriage, you can choose to increase the cover or opt for a family floater health insurance policy, while retaining your personal policy.
• Are your respective parents financially dependent on you or do they have their own source of income? Are they covered under a health insurance plan? As they grow older, so will the cost of treatment and medicines, and you may have to make a provision for that. There are several health insurance plans for senior citizens, and though the premiums are high, the cover is worth it.
• Check for under coverage, duplicate or missing coverage and fill in the gaps.
9. Be financially-aware and trust each other
• Too often, and especially in traditional households in India, it is common for the husband to manage the finances and investments, and the wife is unaware about money matters other than day to day spends. This can be a disaster if there's an emergency and she's totally clueless about the family finances, pending loans/bills, insurance cover, existence of a Will and so on. • It is important for both to be aware of finances and documentation, as well as setting money "ground rules" at the start. Fights and disagreements due to each other's money habits can escalate and lead to bigger problems.
The writer is chief operating officer and co-founder of Walnut, a personal finance management app headquartered in Pune.
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