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To begin with, our heartiest congratulations to those who are about to tie the knot and to those who have just entered the bond of matrimony. Cheers to a life of madness!!
There are funny anecdotes galore on every web page, book or any ‘romcom’ about the relationship of a married couple but very few on the financial status, post-marriage. The reason is that newlyweds often focus their energy entirely on exploring each other and building relationships to have a romantic and perfect future. The vow “for richer or for poorer” often takes a back seat in the initial years. It is only when children, medical emergencies or legal accidents crop up that a couple looks into the economics of marriage.
However, over time much has changed in the way this institution has evolved. The early concepts of marriage involved the union of two families involving the traditional roles where a man and a woman needed to play separate parts. With the growth of nuclear units, now marriage is more like a carriage where both man and woman play an equal part in keeping it in motion. Having said that, one major aspect that comes with marriage is financial responsibility. This article speaks of how marriage and finances go hand in hand and how you can lead to the happily ever after phase by managing both effortlessly. Let’s begin!
How Saying “I Do” Impacts Your Finances?
With marriage comes responsibilities family responsibilities, legal responsibilities and financial responsibilities take the front seat. Where the dream ends, reality begins. Before preparing a post-marriage financial strategy, you need to know how marriage influences your financial decisions, as finances and marriage problems usually go hand in hand:
Financial Goals
As individuals, since your life objectives are different, your financial goals for savings, insurance plans, and health might also be poles apart.
Solution:
Sit together and discuss your common financial goals and the tenures within which you would like to reach them. Be specific about the details to ensure understanding in future. Tweak your individual goals if need be. Chalk out your paths to financial milestones like buying a dream home or car, planning for firstborn, children's higher education and even your retirement
Risk Appetite and Asset Distribution
Would you ride a bike at the same speed when you ride alone and when you take your wife with you? But she might want you to speed up. Your risk tolerance level has come down after marriage, but your wife’s might have remained the same or increased.
Solution:
Hence, a crucial aspect of a joint investment is your partner's risk appetite or risk tolerance. Your partner will also want the same because you would like to go for high-risk, high-return investment options. He or she might be completely traditional and prefer safeguarding the capital rather than going in for a very high return. Have an honest and open discussion without undermining each other's strategies. You can also be wise and talk to an investment advisor who can give you options that suit your risk tolerance. Distribute your earnings to fixed deposits, bonds, market-linked instruments or direct equities. Whatever the instrument is, start with small amounts regularly and top up your investments with any extra income or funds received as gifts or in inheritance.
Investment Plans
A part of knowing your partner is to understand his or her future planning, financial or otherwise. You may want to purchase an expensive car, but your partner might want a spacious house. You may want to save more for health coverage, but your spouse might want to spend more on travel experiences.
Solution:
In such cases, some joint investment schemes or accounts can be highly beneficial for couples, for which they need to align their goals and risk tolerance. The options include a joint brokerage account for trading in stocks, a joint savings account, and joint retirement accounts. While it is advisable not to liquidate or combine all pre-wedding assets and investments, it is expected that any new assets acquired are shared equally, especially if the contribution to the purchase of it is equal. In a home loan, if you and your wife are co-applicants and co-owners, it helps you to be eligible for a bigger loan and a higher tax benefit. Even if the contribution is individualistic, co-ownership is advisable, considering future mishaps like death and disability.
Health and Life Insurance
You may come from a background where you had to take on all family responsibilities, and hence, regular income or financial stability is important to you. On the other hand, your partner may belong to an affluent background, and she never had to think twice before spending. In this situation, it is pragmatic to align your thoughts about the health and security of your family.
Solution:
Financial security and stability are the key aspects both partners look for in a marriage. Only earning and wealth accumulation will not be a good marriage or financial advice for newlyweds. Be proactive and invest in a good term plan for life coverage. You can buy separate term plans if both of you are working. But buying a term plan is a must if your partner is a homemaker and is dependent on you financially. This will protect her and your children in your absence, especially when paying off your debts or EMIs and continuing your children's education uninterrupted. Ensure your spouse is mentioned as a beneficiary or a nominee to all your insurance plans and is aware of your investments. Joint life insurance will cover both in the same policy so that a surviving member receives financial relief during the loss of life.
You can enhance your health insurance coverage by including your spouse in family floater plans, with only a slight premium increase. It is more economical than purchasing separate plans. Our health insurance plans like Care Classic, Care Supreme, Care Secure etc. all have facilities to include your partner either in the form of a floater or nominee.
Bank Accounts and Budgeting Basics
Managing your bank accounts may seem slightly difficult in the initial phase of your marriage as both of yours priorities vary. Also, the idea of basic budgeting and savings influence your decision making when it comes to plan your finances after marriage. Here proper and calculative budgeting plays an important role.
Solution:
Ideally, a couple should have three bank accounts. One salary or savings account is needed for each joint account. Your savings should cover monthly personal expenses like bill payments, shopping, and conveyance expenses. In contrast, joint expenditures like EMIs, property maintenance, groceries, vacations, children's education, etc., are to be made from the joint account.
If you are just getting started, you can use the 50:30:20 rule as a basic budgeting rule. It shows you how to split finances into three categories in a marriage.
- Put 50% of your money towards needs: These are expenses that must be met under any circumstances, such as utility bills, rent, groceries, health care, EMIs etc.
- 30% towards wants: These are things you enjoy and can be optional expenses like subscriptions to channels or magazines, restaurant meals, hobby supplies and travel.
- 20% towards savings: This includes long-term financial goals and involves savings for retirement, higher education, purchase of a home, etc.
You can use a 50/30/20 budget calculator to know the exact amount to be spent on each
category from your monthly income post-tax.
For example, you may assume you have a post-tax, take-home income of 1 lakh.
- Your mandatory and miscellaneous expenses, including insurance premium: 65000/-
- Your short-term goals like investing in a new gadget or family vacation: 15000/-
- Your long-term goals, like a retirement fund and a house purchase:20000/-
These are rough estimates and will vary according to expense habits and the tenure of the goals. However, keeping the remaining 20% unchanged is always advisable for a secure financial future.
Till Death Do Us Part!
Different couples may have different strategies for financial management. But each has its advantages and flip side. Having separate accounts can give each partner, independence flexibility and better financial control but might pose challenges while setting common goals, budgeting expenses and legal complexities in estate planning. Expenses can be split proportionately but are more complex to handle and track without a good interpersonal relationship.
Joint accounts may seem to be the way out. It offers simplicity, transparency, and convenience in budgeting and controlling expenditures. However, the partners need to be financially responsible, with similar spending habits and a clear communicative relation among them. Or else, it ends up causing irreconcilable conflict and damage to the marriage. A hybrid of the two may seem a middle path to peace but again, it will require clarity and transparency in communication and financial goals.
In case you find it challenging to decide on the road to be taken, there is nothing wrong with seeking guidance from a professional advisor at regular intervals. Like people, situations, earnings and financial goals also change with time. So be open to discussion, be transparent in your communication, have mutual trust and respect and welcome help whenever required in this journey, to grow old together.
Disclaimer: The above information is for reference purposes only. Kindly consult your general physician for verified medical advice. The health insurance benefits are subject to policy terms and conditions. Refer to your policy documents for more information.
