8 money tips for those planning to get married

Planning to get married in 2012? Here are eight things you must know before you say 'I do'.

It is said that marriages are made in heaven and celebrated on earth. This popular belief is true since it is a special bond shared between two souls, who tie the wedding knot after promising to be companions for a lifetime. It brings significant stability and substance to human relationships. It plays a crucial role in transferring the culture and civilisation from one generation to the other, so that the human race prospers. The institution of marriage is beneficial to the society as a whole, because it is the foundation of the family, which in turn is the fundamental building block of the society.

On financial front is it very significant that both individuals discuss the financial responsibilities as post marriage its 'We' and not 'I'. Honesty is always the best policy, especially when it comes to money management in a marriage.

Money is one of the biggest discords among newlyweds, especially in big cities. Problem of spending and investing as 'I' among married couples instead of 'We' is one of biggest problem behind poor investment decisions. It basically arises from lack of communication. That's why it becomes much more significant to start discussing about money matters well in advance before marriage itself.

Most of the times to-be-married couples don't communicate their investment decisions due to oversight or procrastination. In addition, individualism too is creeping into personal finance these days and couples are steadfastly refusing to share their financial information with each other. It's unbelievable but true. If I earn, I have all the right to decide where I spend (forget about investments) is the reasoning. Sharing salary details, annual bonus, credit card limits with partner is an absolute no-no. For them, it's giving other person space in money matters. In nutshell, ignorance is the bliss when it comes to each other's finances.

Notion of individualism and financial independence could defeat the very purpose of sound financial planning. If one doesn't know what the other is doing with the money it can be disastrous. Hiding some huge debt is also sometimes one of the reasons not to share financial information with partner. But they often forget that one needs to find solution to the problem and not to aggravate it.

In addition, it is significant to come to terms with financial reality after marriage. Single income can convert to double, but so can be debts; buying assets may become easier, but insurance liability could increase; your spending or savings habits could be disastrous mismatch, but your long term goals may be same. In some cases, money can be reason for all the marital discords.

Courtesy: Investment-mantra.in

1. Get ready to share responsibilities

Money management in a marriage is not about having a quick discussion with each other and then one person carrying the ball for the couple. It involves both parties working together and sharing responsibilities equally. For example, both husband and wife need to take part in decision-making, budgeting, and bill paying.

In addition, if responsibilities aren't divided and something happens to the "financial" spouse, the other spouse can be left clueless. Bills may go unpaid, debt may accumulate, and what once was a solid financial position can deteriorate rapidly. In the interest of preserving you and your spouse's welfare, make sure each of you is aware of your entire financial picture and is in charge of managing a portion of it.

Make sure you are ready to give your 100% to manage finances in an optimal way. Put your full effort into the financial matters of your marriage. If you are giving excuses each time you go on a spending spree or are blowing off your budget, you are not giving 100% to your marriage or yourself, and that attitude will come back to haunt you. To properly work as a team, you must have the same goals in mind. Work together to come up with and find ways to accomplish those goals. Always encourage each other and build each other up.

Be aware of your own weaknesses and strengths, and play off the strengths of your spouse to bring synergy to what you are trying to accomplish.

2. Be open about your financial health and spending habits

Make sure both of you talk, discuss, debate, and communicate as regards planning your combined finances. Be it your income or expenses, savings or debts, liabilities or assets, habits or cravings -- talk about everything in detail. Talking not only helps meet your goals but also irons out misunderstandings and differences. Also it is significant in the context that it keeps both partners in the loop and in the absence of one spouse; the other is not left in the lurch.

Make sure you list out your debts such as car loan or credit card bills and assets like jewellery, real estate or stock investments. Do talk about your attitude towards money, your values, what you plan to do with it after marriage. These inputs will act as building blocks for the new financial equation and make it easier to formulate goals and stick to a plan to achieve this. Make sure at the end of this activity, you have some idea about goals and approximate budget.

In other words, make sure each person has a good understanding of where you stand financially as a couple and the expectations that the other holds.

3. Do frame a budget, baseline the goals

In the absence of a budget, it will be impossible to keep tab on your spending which will have a domino effect on your savings and investments. A budget not only inculcates financial discipline and regulates your cash flow, but also makes it that much easier to meet your financial goals. Base lining the goals can be the next logical step. Frame your long and short-term goals in accordance with your priorities and earning capacities. Do establish an approximate timeframe for each goal -- it can be buying furniture, car or a house. Also you can talk about financial implications post birth of child, savings required for his/her education and marriage, vacations and of course retirement. It's never too early to start planning and saving for such goals as compounding effect of investments works in your favour.

To ensure fulfillment of objectives, it is critical to make a budget. Start with bigger expenses like home loan EMIs, house rent or insurance premiums and go on to smaller ones such as grocery , utility or credit card bills. A budget that includes tracking your spending is only way to know where your money is going. It will make sure that that if you need to save more to achieve your goals, you cut down on your spending.

4. Work out implementation strategy

This is the most significant aspect of financial management for newly weds. Should one merge the finances? Who will make sure the plan is on track? This depends on how couples want to plan it out. Though one can retain their individual accounts to manage individual expenses, a joint account for household expenses, including grocery or utility bills is recommended. Also a joint account for emergency fund or payout for premiums can be considered wherein a specified amount can be deposited each month. There is a flexibility to operate in case of each other's absence. Bottom line is that the couple should be comfortable managing their finances.

Even if one partner is financially savvy, it doesn't mean other one should remain in dark. Both the members should be aware of their investment avenues, savings and expenses, modes of transaction, passwords, due dates for premiums, bills etc. This ensures that in case of an eventuality, you are not clue less about your investments.

5. Evaluate your insurance needs

Before marriage and without dependents, an individual can do with relatively small insurance cover then after marriage, especially if you are the sole earning member of the family. So a term life insurance is critical. Your cover should be enough to pay out your outstanding loans so that your spouse isn't burdened by it. Ideally you should have 10 times your annual income as life cover. Upgrading your health insurance is also significant. Even if you are insured by your employer, it is advisable to buy a separate policy. On an average a combined cover of Rs 5 lakh for a couple will be an ideal one but again it depends on other numerous factors.

6. Know about taxation benefits

As a married couple, one is eligible for high home loan and both can claim tax deduction on repayment. A joint home loan offers a benefit of Rs 1 lakh each under Section 80c of Income Tax Act (for repaying the principal) and additional Rs 1.5 lakh each on the interest repayment under Section 26.

7. Take care of documentation changes

If you go for a name change after marriage, ensure you indulge in necessary paperwork. One of most crucial alterations involving name change is PAN card change, besides passport , KYC , bank account etc. Adding wife's name in all existing insurance policies and investments won't be a bad idea.

8. Put emergency fund in place

Life comes with no guarantees. So even if both are earning well, it doesn't mean you cannot be waylaid by an accident or an illness. Be prepared for such eventualities and start saving for emergency fund, which should at least stash at least 3-6 months worth of expenses.

In nutshell, working towards a common goal can make things so much easier for you and your partner. 1+1 = 11 remember. Make a consolidated record of investments. For instance, every time your SIP is executed make that entry in the file. Details of insurance policies -- amount of life cover, tenure, premium and policy numbers, fixed deposits, PPF deposits, bonds , bank and demat account numbers should be clearly mentioned. Discuss your investments, loans, expenses and budgeting. Idea is to consolidate financial portfolio of both so as to complement each other's investments.

Consolidation basically leads to doing away with the duplication and sub-optimal use of investible surplus. Husband and wife can gain substantially when they combine their financial forces. They are able to manage debt better, buy a bigger life cover for themselves and most importantly have more investible surplus. Harmony in finances will definitely help spend better, yet invest more and avoid duplication.

Summary

Marriage and money can be tricky, but the best thing you can do is to be open and honest. Start off on the right foot by talking about money management and coming up with a solid plan to deal with budgeting, spending, and investing. The sooner you do this, the better. If you form good money management habits as a newly married couple, you'll be able to work as a team through whatever life throws at you for many years to come. Planning as 'We' is also significant as to aware of investments made if one of them meets an untimely death. Though nothing can be more traumatic than loss of dear ones but there can be financial repercussions too if that person has solely handled all investments. Sometimes we tend to be disorganised with our investments as we think that nothing can happen to us.

So it's high time we understand the significance of 'We' so as to lead healthy financial life.