Give your Valentine the best gift: Make the future financially safe
No one can predict what the future holds, but
everyone can prepare to meet future uncertainties.
Valentine's Day as a concept evokes a mixed
reaction from all quarters. While some deem it as a commercial event
popularised by corporates to give another reason for people to indulge, others
regard this day as a celebration of love and affection.
Irrespective of your bent of mind, it cannot be
denied that, at the core, Valentine’s Day is an occasion for all couples to
make special efforts for appreciating their significant other and renewing
their promise for a happy life together. While buying gifts, going out for
movies or dining at fine restaurants are the most common ways of celebration, a
more meaningful way to mark this day would be to lay a strong foundation for a
secure future together. No one can accurately predict what the future holds,
but everyone can prepare to meet future uncertainties by effective financial
planning.
Financial planning for couples has come of age in
India. At one point, money matters were not openly discussed and brought up
only once the couple was married. Even after marriage, financial decisions were
primarily taken by the male head of the family. This attitude towards money
management has undergone a metamorphosis. Couples today are more comfortable discussing
money matters and want to be equal partners in financial management. There are
no specific gender roles defined as both men and women are earning and are
confident of managing their finances independently. In such a scenario, a
collaborative approach towards financial planning can make the journey of
building a secure future simpler and faster.
Make this Valentine’s Day the first step in
building a safe financial future together by taking the following steps:
Define common goals
Discussing short-term and long-term aspirations can help identify the clear life goals that you would want to pursue as a couple. Buying a home together, going on one international trip every year or setting up a business, can be some of the common ambitions, and defining the same can help chalk out a plan for working towards the targets. Honest and open communication in deciding financial goals can also help address money problems by working together to address the same.
Discussing short-term and long-term aspirations can help identify the clear life goals that you would want to pursue as a couple. Buying a home together, going on one international trip every year or setting up a business, can be some of the common ambitions, and defining the same can help chalk out a plan for working towards the targets. Honest and open communication in deciding financial goals can also help address money problems by working together to address the same.
Full
disclosure
Make a full disclosure of your assets and
liabilities to your partner. Do not make your partner equally responsible for
your debts. Rather, work out a plan where one partner can be responsible for
managing the household expenses and the other partner can focus on clearing the
debt. Similarly, knowledge of each other’s assets such as property, bank
deposits and the like can help make optimal utilisation of available resources
while working towards the common goal. This exercise also helps strengthen the
trust level by making sure couples have nothing to hide on the financial front.
Decide a budget
Based on the common goals and existing assets and liabilities, the couple should work out a comfortable budget to take care of their immediate financial needs while working towards their long-term goals. Make it a practice to set aside a certain portion of income, as soon as the salary is received, towards savings and contribution to the emergency fund. From the remaining amount, repaying debts should be taken on priority to avoid the debt trap. The couple can then jointly decide how the amount remaining after fixed expenses like house rent, salary of the house helps etc should be spent. Identifying and cutting out unnecessary expenses can help the couple work on their joint decision-making skills and give them confidence that they are effectively utilising their resources.
Based on the common goals and existing assets and liabilities, the couple should work out a comfortable budget to take care of their immediate financial needs while working towards their long-term goals. Make it a practice to set aside a certain portion of income, as soon as the salary is received, towards savings and contribution to the emergency fund. From the remaining amount, repaying debts should be taken on priority to avoid the debt trap. The couple can then jointly decide how the amount remaining after fixed expenses like house rent, salary of the house helps etc should be spent. Identifying and cutting out unnecessary expenses can help the couple work on their joint decision-making skills and give them confidence that they are effectively utilising their resources.
Emergency corpus
A joint account to build a corpus of funds for emergencies could be a wise approach. Every month, the couple could contribute a certain amount to this account, over and above the savings, which should only be used in the case of a crisis. For other expenses, the couple can use their individual bank accounts. Couples should aim to have 3-6 months' worth of living expenses as the emergency funds. Having an emergency fund can relieve a couple of stress and tensions in the face of unanticipated situations.
A joint account to build a corpus of funds for emergencies could be a wise approach. Every month, the couple could contribute a certain amount to this account, over and above the savings, which should only be used in the case of a crisis. For other expenses, the couple can use their individual bank accounts. Couples should aim to have 3-6 months' worth of living expenses as the emergency funds. Having an emergency fund can relieve a couple of stress and tensions in the face of unanticipated situations.
Investment decisions
Savings are half the job done in fulfilling financial goals. Investments, to make the savings work for you, are indispensable for achieving those goals. Couples should jointly identify the avenues for investments keeping their immediate requirements and long-term goals in view. It would be advisable for a couple to divert a certain percentage of their savings to equity instruments. Historically, equity has offered long-term returns of 15-16 per cent CAGR over 15-20 years that far exceeded those of other asset classes. For couples unsure of how to approach equities as an investment option, mutual funds would be a great alternative. To create a balanced portfolio, some amount of saving could also be allocated to E-Gold or gold ETFs and liquid funds. Joint decisions and monitoring of investments motivate the couple to step up their investments in right instruments to inch closer towards their goals.
Savings are half the job done in fulfilling financial goals. Investments, to make the savings work for you, are indispensable for achieving those goals. Couples should jointly identify the avenues for investments keeping their immediate requirements and long-term goals in view. It would be advisable for a couple to divert a certain percentage of their savings to equity instruments. Historically, equity has offered long-term returns of 15-16 per cent CAGR over 15-20 years that far exceeded those of other asset classes. For couples unsure of how to approach equities as an investment option, mutual funds would be a great alternative. To create a balanced portfolio, some amount of saving could also be allocated to E-Gold or gold ETFs and liquid funds. Joint decisions and monitoring of investments motivate the couple to step up their investments in right instruments to inch closer towards their goals.
A partnership of equals
Always remember, the size of your paycheck does not determine the extent of your say in managing joint finances. Just like a relationship is a partnership of equals, management of finances is also a responsibility of two equals. Respecting each other’s outlook and having an equal say in money management can set the tone of a relationship and make it stronger. Working together to make smart money decisions will help you jointly build up a corpus of funds that will afford you the luxury to pursue joint interests and make memories together.
Always remember, the size of your paycheck does not determine the extent of your say in managing joint finances. Just like a relationship is a partnership of equals, management of finances is also a responsibility of two equals. Respecting each other’s outlook and having an equal say in money management can set the tone of a relationship and make it stronger. Working together to make smart money decisions will help you jointly build up a corpus of funds that will afford you the luxury to pursue joint interests and make memories together.
Dream - Plan - Invest - Enjoy
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