Money conversations need to be dealt with sensitivity. For a married couple especially, such conversations can be tricky. But they are important, as money discussions will pave the path towards the achievement of life goals. To ensure financial compatibility, it is thus important to have an honest and thoughtful discussions on money matters.
Here are a few tips for newly married and not so newly-married couples about money conversations:
When you are in a new relationship, you tend to avoid sharing sensitive details like how much debt you’re in, as you do not wish to convey a poor financial picture of yourself to your partner. You may have taken an education loan or a car loan or a bike loan, and still paying instalments for it. You should disclose this to your partner to establish trust between each other. This will also help in giving a fair idea about the income you both will have for meeting different life goals. Details about savings, debts and expenses would also tell a lot about the financial habit of your partner.
Funding The Monthly Expense
If you’re a working couple, both of you should contribute funds needed to cover monthly expenses. You can mutually decide on a ratio each needs to contribute and may also open a joint account for this. It will build equality, trust and bonding. There is a possibility that you may both agree on using one’s income for meeting expenses and saving the other’s for future. This will all depend on the hearty and honest conversations you would have about money management.
Future Investment And Insurance
When you are in a relationship, it is important to discuss investments, financial security and insurance needs to protect each other from risks. Big-ticket investments like buying a house requires a good financial plan. Also, it is not an independent decision after you are married. Involve your spouse in all such big decisions to bring in a sense of belongingness and responsibility. You need their support in running the household or paying off the loan for such big-ticket investments.
Also, it is important to understand the insurance needs once married. You may both require a comprehensive Health Insurance policy to mitigate the risk of escalating healthcare costs. In this uncertain world, it is also important to buy a Term Insurance plan to ensure financial security for your spouse.
Family Planning, Unplanned Expenses or Emergencies
If starting a family in immediate future is amongst your priorities, it makes sense to set aside a fund to meet all the healthcare and medical expenses. Similarly, a fund dedicated to meet all unplanned and emergency expenses should be planned taking into account the incomes of both partners. Usually, you should keep aside six months of household income as emergency fund.
Are You Both On The Same Page On Goals?
Identifying common life goals, including retirement or going on a vacation will help you both list out short-term and long-term goals. Once identified, discuss how these goals can be achieved, and calculate the fund requirements. Also, it makes sense to start investing early. When you start saving and investing early, you have time on your side and therefore your compounded returns over the long term could be significantly higher.
The writer is CEO, BankBazaar.