Finding your life partner and settling down is an important milestone in your life. It marks a new beginning and a new journey that the two of you embark upon newly married life as couple.
As you start your family, an important thing that you need to do is chart out your finances. When doing so, creating a layer of protection is essential so that your financial plan does not go awry. But many individuals ignore the need for a protection layer. According to a survey by a leading insurance company, term insurance penetration in India stood at 28% only showing that only 3 out of 10 Indians invested in the policy. Another survey showed that about 30% of the population lacked health insurance.
Why? Because people don’t realise the importance of insurance. Insurance plans can help you plan for a secured financial future and save for your collective goals.
How do you do that?
A term and a health insurance plan become quintessential in a married couple’s financial portfolio. Have a look –
Term insurance
A term insurance plan provides financial security in the event of a premature demise. If the breadwinner passes away, the plan replaces the lost income for the family and gives them financial assistance.
As such, the newly married couple needs a term plan for a secured financial future. They can opt for a joint term plan covering both of them. The sum insured should be optimal so that the surviving spouse would be financially secured if either partner passes away.
Health insurance
Secondly, a health insurance plan is a must for a newly married couple . If you have an existing health plan, include your spouse in the coverage. If you have independent plans, merge to a family floater policy covering you and your spouse under a single plan. Opt for maternity cover in the plan so that when you plan a child in future, the plan would cover the cost of pregnancy and childbirth.
When investing in a health plan, look at the coverage restrictions and choose a plan which allows the maximum possible coverage. Also, look for a lower waiting period on maternity coverage so that you get covered at the earliest
Once you have taken care of your protection needs, it’s time to chart your finances. Here’s how you can do so –
Assess your total income
This is relevant if both you and your spouse work. Since both incomes are coming from the family, you need to assess the total aggregate income that both of you earn in a month. This would give you an idea of the inflow which, in turn, would help you plan a budget.
Aggregate your expenses
After the income is aggregated, the next step is aggregating the expenses for a newly married couple . Needless to say, as a member is added to the family, the overall expenses shoot up as the newly added member also has personal expenses.
So, list down the expected monthly expenses that your family might incur in an average month. Also, make a budget of the expenses so that you can avoid overspending.
Once the expenses are aggregated, deduct them from the aggregate income to find the disposable income that you can set aside for investments.
Estimate your collective debts
Debt management is integral to financial planning because debt repayments eat into your income. So, list down the debts that both of you have. Pay off the bad debts first, i.e., debts that have a higher interest rate and no tax benefits. Then, include debt repayments as a part of your monthly expenses when planning out your budget.
If there are multiple debts, consolidate them for ease of repayment.
Identify your future goals and their timelines
Next, you should identify the future goals of your family. For a newly married couple, some of the common goals might include the following –
- Taking an international trip
- Starting a family
- Planning to buy a car
- Investing in their dream home, etc.
So, identify your goals and also the timeline when they are to be fulfilled. This would help you pick the right investment avenues depending on their investment horizon.
Assess your risk profile and invest
Once you know your goals, your horizon and the disposable income that you have (expenses – income), you can create a financial portfolio. Assess your risk profile and invest in assets that match your risk tolerance and also align with your financial goals.
It is better to create independent financial portfolios for each spouse as they might have different risk appetites. Moreover, independent portfolios can help each of you to maximise tax savings on your incomes. However, though independent, design each portfolio in such a manner that it creates a corpus for your collective financial goals.
Keep an open line of communication, financially.
The financial planning of your family should be done together. In the words of Fawn Weaver, “The greatest marriages are built on teamwork”. Most often than not, women tend to leave financial matters to their husbands. This is not feasible. Both partners should collectively make financial decisions and plan their family’s finances. Moreover, the line of financial communication should stay open at all times so that partners can discuss the family’s finances comfortably.
As you step together into this new journey, you should secure your finances so that you can ensure the security of your family. Use this financial checklist and manage your finances, together. For more check https://blog.oneassure.in/