Getting Married? Here are some Financial Planning Tips

Did you know that 20,000 Indian weddings take place between October & December each year? With the wedding season is just around the corner, and it goes without saying that as a married couple, money will play a key role when it comes to ensuring that your joint life continues to function like a well-oiled machine. The initial financial decisions you take as a married couple will have a far-reaching impact on your combined future, so keep the following money tips in mind as you tie the knot.

Start with a Plan

Make sure you don’t sweep money issues under the carpet. It’s vital that you sit down with your partner and discuss money – be transparent not just about the present state of your finances, but about your money values as well. Try and find a middle ground.

The most important first step a married couple needs to take is to have a financial plan prepared – even if it’s a very basic, unembellished, goal-based plan. In doing so, you’ll undoubtedly uncover many issues related to your individual aspirations for the future. Your opinions on some of these may differ – that’s wonderful. You could agree to disagree for now or try to find common ground. Either way, it’s bound to prove a cathartic exercise.

First, plan your Retirement!

Start a long-term Mutual Fund SIP towards your retirement. Agreed, your retirement is probably over thirty years away at this point, but starting off early will give you a head start like you wouldn’t believe. There’s a popular financial planning concept called ‘cost of delay’ which is worth knowing – in a nutshell, this concept states that the cost of delaying long term goals by seemingly small lengths of time can be monumental.

Go Aggressive

Going by statistics alone, you’ll likely be somewhere in the age bracket of 28-35 when you tie the knot. Remember, this is the best time to start saving for your long term goals in aggressive asset classes. So the first thing you should do is open a demat account and start buying high-quality, blue chip shares every month, with the intent to hold onto them for five to ten years. You don’t need to be a rocket scientist or an expert analyst to do this successfully, and you certainly don’t need to trade actively in shares; you could even choose ten random stocks from the NIFTY index and you’ll probably be well placed in five to ten years in terms of capital growth.

Plan for Contingencies

The one thing that COVID-19 has taught us, is the critical importance of having an emergency fund. This money needs to be in liquid, low-risk assets with minimum exit barriers (such as cash funds). ‘Hide’ this money from yourself or you may end up splurging it on a new car or a flat-screen TV!

In conclusion – as a newlywed, you need to start over and take a deeper look at your combined finances. Envisage your ‘perfect future’ and start taking baby steps towards it. Just don’t forget to safeguard yourselves against risks, as you’re now responsible for two people and not one.

Cover your Bases

Post marriage, you may need to re-look at your life cover. Do so by way of buying simple term plans with no return of premiums at the end. Depending upon your income, your human life value will likely range from Rs. 1.5 Crores to Rs. 5 Crores. Buy enough term insurance to cover this amount, plus the value of outstanding liabilities that you may have. Do so early, and you’ll need to shell out a lower premium amount. Avoid taking out ULIPs and traditional policies with low returns and taxing exit clauses.

Also, make sure you buy a great health insurance plan. Spend a significant amount of time researching things like pre-existing conditions, waiting periods, maternity clauses and wellness benefits, among others. Take a floater plan only if you’re a young family – exclude ageing parents from floater plans and take out individual health plans for them if required. Although the amount of cover required is subjective, Rs. 10 lakh is a barebones prerequisite for a nuclear family consisting of a husband, wife and child.