Financial planning: Here’s a checklist for newly weds

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One of the biggest investments you can make in life is in choosing your lifelong partner. You need to ensure that you are on the same page when it comes to many things. This Financial Planning Day, here are three things that newlyweds should discuss when it comes to being on the same page for their finances.

Taxation

Taxation is a complex topic and is highly personal to the family situation. Before marriage, each person files and pays taxes separately. Once married, if both partners are earning, it might be the case that there might not be much room to save additional tax. However, if there is only one primary earner, there may be some additional tax benefits that couples can avail particularly with regards to medical insurance and in respect of notional rental incomes on house properties. Whatever the case may be, it is good to work together to maximize the efficiency of the combined income and assets that are available.

Expenses

When it comes to spending money, there is no correct way of approaching spending for purchases made collectively. What might be helpful is to create a joint savings account and debit or credit card from which all joint purchases can go. The couple can then collectively discuss how much each person should contribute to that account each month. This has multiple benefits: it can ensure financial discipline by making sure that spending is kept in check within a certain amount, it ensures that expenses are fairly distributed. And, because regular expenses are budgeted for in advance, the likelihood is lower that one partner feels like the other is taking advantage or resents the spending of their spouse. It also clarifies to each individual how much of their spending happens on their own account and can therefore help with individual budgeting as well.

Insurance

Once two people are married, it is important to assess the needs of insurance. Before marriage, each partner might not have had financial dependents and therefore the need for life insurance might not have been there. If insurance has been taken before marriage, then after marriage, if both partners are earning, there might not be a need to enhance each partners coverage by much. However, if there is only one earning member, it is important to look at the needs for life insurance and take an appropriate cover that might be higher. And similarly, there is a case to be made for re-assessing the health insurance needs as a family.

Financial Goals

Each person is unique and has his or her own life goals. Many are surprised at how different their partner’s financial goals are. It is important to talk about what financial goals each person has for themselves individually, and what expectations they have jointly as a couple. Many a time when it comes to things like children’s education there is a mismatch in viewpoints. Some may want to send their kids off to boarding school whilst their partner would want their kids to go to school nearby, others may want to have their children do their further studies abroad whilst their spouse would want them to study closer to home, still, others may want to fully fund their children’s education by saving in advance whilst others may want to look at funding it through loans and so on. This is also true of other joint goals like buying a house or buying a car. Each of these approaches has trade-offs and couples need to have a conversation about these tradeoffs and come to a consensus about their financial goals. Once there is clarity about these financial goals, then the investment strategy follows from there.

The element that is common in each of these points is communication. Good communication and regular discussion of the family finances are critical for all members of the family to be on the same page. This is key for working together to achieve your family’s financial goals and ensuring that it is successful over the long term.

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