Handling finance is a significant challenge faced by young married couples. Both of you have a different mindset in terms of managing finance and also different spending habits. Thus, it is crucial that you reach an agreement and set-up financial goals which would be like, few short-term goals, few medium-term, and few long term goals.
Such kind of goals will help you measure your financial success and also make it easier to track your progress towards your goals. Also, you can even categorize your goals into ‘needs’ and ‘wants’ which can help you prioritize your efforts.
Some short term goals are
Savings: It is a high priority goal and a need-based as well. Use your 6 months income as a yardstick to measure how much you are saving.
Retirement Planning: At present, your retirement may be decades away, but incorporating it in your short term goals will help you build the necessary discipline required for building a healthy retirement corpus.
Buy Insurance: Buying insurance is another need-based goal for which you must take adequate action by taking adequate cover as per your needs.
Incidental Expenses: Expenses like a vacation, unexpected monthly expenses are mostly based on wants. Incur such expenses after you have made for savings and investment.
Asset Purchase: If there is an asset that you are looking to purchase, then do remember to assess its benefit-to-cost before making the purchase.
Some medium-term goals are
Child’s Education: This is the number one priority goal, and you should start accumulating funds for it as soon as the child is born or maybe even before that.
Realty investment: If you already have an ongoing loan, then make the goal to repay it as soon as possible so that you can direct the funds to invest in a second property.
Streamlining Retirement Plan: Assess your accumulated funds and the regular contribution based on how much changes in inflation and other variables. Then decide on whether to continue with the same amount or increase the contribution.
Incidental Expenses: There are always unplanned incidents and expenses. Thus, create a self-sustaining corpus to fund those incidental expenses.
Some long-term goals are
Child’s Education: It has to be always a top priority. It must begin with the ‘child’s birth and continue until the time it’s required.
Child’s Marriage: The creation of this fund can begin after buying a property.
Estate Planning: Real estate investment is necessary, and its plan should be made effective as your family is now settled, and you have enough assets.
Retirement Corpus and Liquidity: Continue your assessment along with it also consider to transfer the funds in a more stable option for guaranteed returns.
Post Retirement Expenses: This is a want based goal, and you can start ‘it’s fund along with a good retirement fund.
It is recommended to start your financial planning with regards to income, expenses, investment, and savings right at the start of your married life or maybe even before it.
Here are some tips for you to make the best use of your dual income
Invest in the Real estate: Buy a house for yourself if you don’t have any property. It will save the rent you pay each month along with a lifetime of an asset. Home loan eligibility gets increased when both earning couples apply jointly.
In case you already have a property then consider investing in the second one which can then generate rental income. Although before buying consider other factors like future selling price, rental income, cost-benefit ratio, etc.
Contingency Fund: An emergency or contingency fund can be a lifesaver in case of any unfortunate incident or financial emergency. Experts suggest having at least 3-6 months worth of expenses. This fund should be in the form of a short-term deposit which can be accessed as and when required.
Debt-Free Living: Pilling debt is a major issue young couples deal with when it comes to handling their finances. Whether you take a Car Loan, Home Loan, Personal Loan or Credit card, it is always better to pay them off before the time as it will save you some interest payment.
As per the RBI directive, banks do not charge pre-payment fees on the floating rate Home Loan. You can make use of the below action plan when you are stuck with multiple debts.
Budget: Be a little strict with yourself and cut down some unnecessary expenses to make some difference. Make a logical and realistic budget and follow it religiously.
Choose first debt to pay-off: There are two ways to manage your debt either you can pick the debt with the highest interest to be paid off or you can select the loan with the smallest principal. The former being called a ladder method, and the later is called the reverse ladder method.
Insurance: It is required to provide cover for your life, your ability to earn, and gives the necessary peace of mind as well. You should invest in life insurance and medical insurance. Although a few other insurances cover, you can avail too as per your needs.
As a couple, you have vowed to share your life, thus, setting goals and achieving them together. Since both partners are earning, both should be investing in long and short term investment options strategically to make their future secure.