Money Matters for Newly Weds
Marriage brings in a promise of everlasting togetherness and joy. The newly-weds need to work towards keeping these promises. Money matters, though boring and routine, are important to keep up these promises. Open communication in these matters, is extremely important. It is important for the couple to share their dreams, aspirations and goals with each other. This will help them work in tandem to realize their dreams. The couple needs to start out with a plan about their finances. Both of them might have separate goals. Pooling of resources to optimize goal achievement should be the aim. Budgeting will form an essential part of this exercise.
Nowadays it is quite common for both partners to have a career first and then enter matrimony. They tend have their basic banking and investments in place. Since most women take up their husbands surname after marriage, records need to be changed in earlier accounts and investments. Most of the time things do not move due to basic paper-work not being in place. Now that compliance procedures like KYC (Know Your Client) norms are required for all kinds of investments and banking systems, you need to ensure that the following basic things are in place:
- Marriage Certificate. This is the most important document. Every institution that has your name on records like your bank, mutual fund house, passport office will ask for this document in case of change of name.
- Gazette Notification: Some institutions ask for documentary proof for change of name in the form of a gazette notification.
- PAN Card: In case PAN card is held in maiden name, wife will have to apply for change of name in the PAN card. All investments in married name can happen only if PAN is available in the married name. For this the supporting document will be marriage certificate and/or gazette notification copy.
- Address Proof: The wife can use the husband’s address proof to update her address in the bank account. Supporting document again will be marriage certificate, along with PAN in new name. In case they are moving to a new home, registration papers of the rented/purchased apartment will be accepted by the bank to change the address. Then the attested bank statement can be used as address proof for further documentation.
- Change of name in bank account/other investments: It is ideal to update the change in name in bank /demat accounts first. Then at the earliest, change the name in other earlier investments like mutual fund investments, insurance policies etc. This will avoid unnecessary hassles in case any payments due are received in the maiden name when the bank account is in the married name. Change of name in demat account will take care of the holdings of stocks and bonds etc which are in dematerialized form. All these changes require marriage certificate/gazette notification, PAN and address proof.
- Ensure that all investments have nominations done. If you need to change the nominee in earlier investments to your spouse, you should do it in the real earnest.
This is as far as paper-work goes. Now you need to give shape to your domestic monetary policy. Each of you should have your own separate bank accounts, for receiving the salary. You can open a separate joint bank account for your expenses. This can be used to pool in a pre-decided amount every month, towards regular domestic expenses and other things like holidays etc. If you are living in a joint family where you are not responsible for the entire expenses, you can directly give your share of the expenses from your own bank account. In this way, it will be easier to keep tab of your expenses and records of your individual investments. Also, you need to be aware of income clubbing rules of income tax in case of husband and wife. This rule states that if a husband transfers money to wife or vice-versa, the income arising out of investments made from that money will be clubbed with the income of the person who has transferred the funds. So even if you need to give some money, treat it as a loan to be repaid back at a later date. This especially should be taken care if only one spouse is working.
Have your health and life insurance in place. In life insurance, go for term plans. They will come cheaper and at standard rates as there is less chance of having health issues at a younger age, which can complicate matters and increase premiums, later. Personal health insurance should be availed too, inspite of having an insurance cover from your employer. This will come in handy in case an emergency arises during job transition or a job loss situation. Later you might also decide to become self-employed and will be open to risk if you do not have your personal health insurance in place.
Usually newly-weds are still coping with the wedding expenses. There might be student loans which are still on, or there might be other EMI’s to take care of. There is also a possibility of support required for younger siblings in terms of education or wedding expenses. Dependent parents needs, will also be priority especially in terms of provisions for health care. Depending on your own personal situation, you will need to decide your priorities and allocation of resources. Try to match your goals and your combined resources. Prioritize goals and align resources towards more important or near term goals first. Later, as your income goes up, you can start/increase allocation towards other goals. Keep reviewing your plan at regular intervals of about a year or so.
Though all this may sound very boring during the initial rosy days, it will give a solid foundation for happily married life together.