Financial Planning for Newly Weds
Marriage is like starting a new life for the newly- weds and married life has its own challenges along with the twists and turns. This calls for various adjustments in the lifestyle of the concerned people and also initiates the birth of dreams which they want to achieve together.
The couple will require some documentation changes after marriage which can be put forward as below –
a) The marriage certificate should be in place as it will be needed for changing the maiden name of the wife.
b) The Pan card also will be required to be applied for or modified as the case may be as it is one of the most vital documents for investment purpose.
c) Change of address proof is another important aspect which has to be initiated by the couple – the easiest process is to add as a joint nominee in the husband’s account with the help of the marriage certificate.
d) Change of nomination in prior investments or insurance is another area which needs to be looked into by the couple to prevent future complicacies.
In general couples have some plans for their future for which they should plan as early as possible in their married life as that will help them approach the goals in a systematic and disciplined manner. Let us discuss some of the common goals of a newly-wed couple below.
New home – The couple may plan to have a new home and for this they need to check their available corpus, joint earnings and growth in income over the coming years. They may also have to consider the future plans of the wife to continue her job so that the dream home does not turn into a burden if she quits her job post motherhood or for some other reason.
Child Planning – The couple may plan to have a baby early in their married life or may delay the same based on their age and financial conditions. If the couple are well into their 30’s they might consider early childbirth whereas if the couple are in their late 20’s they may be able to postpone the same. Parenthood will create additional responsibility and they need to decide whether the mother would join back work soon after pregnancy or will delay her return by a few years. The delay will call for planning for the loss of income where the mother was working prior to childbirth and also take into account the additional expenses for the new member.
Budgeting – this process will open up the nature of the couple in respect of their spending habits and shall call for a detailed discussion if the partners vary in their spending habits. Budgeting plays a very vital role in giving shape to the dreams of the couple. A financial planner can play a very crucial role in this aspect by making the couple understand the advantages of following a budget and help them realize the difference between discretionary and non discretionary expenses. The virtues of having a detailed understanding about budget can play a big role in framing the spending habits of the child also.
Life insurance – this is a very vital aspect to be considered by the couple and the amount of insurance should be considered based on factors like protection of future earnings including a conservative growth rate based on the industry, average life expectancy of the family members and the also the dependents on each of them individually. This again will necessitate a holistic view of the couples’ plan for their life and it will be wise for them to consult an expert. If the wife is not working the husband’s coverage should be enough to see her through till her life expectancy after considering the average economic inflation into consideration. If both have plans of working close to retirement, their corresponding incomes will help in keeping the coverage to lower levels. The amount of contribution the couple makes to their dependents should also be considered.
Health Insurance – the couple should opt for health insurance at the earliest as this can cause huge dent to their finances in case of any sudden illness and can upset their future plans. It is always advised to have an individual plan even if there is a corporate plan in place. Delay in purchase of health plan can cause unwarranted hazard if there are some health issues due to lifestyle or work pressure and the same will be considered under pre-existing diseases.
Investment Planning – The couple should jointly decide about their future aspirations for their children, retirement and travel plans etc. After considering these goals they should chalk their plans for investing the disposable surplus income into instruments which will be able to beat the inflation and thereby generate positive returns in the long run. The choice of financial instruments should be considered in consultation with an expert who can guide them in this process after considering the residual time for achieving the goal. Ideally if the goal is 2 to 3 years away they should not opt for equity and select debt or fixed income instruments and where the goal is more than 5 years away the proportion of equity should be gradually increased.
Estate Planning – Though this is one grey area which is present in Indian households for ages but it is one of the major concerns for the surviving family members towards the distribution of wealth. The preparation of a will can be the easiest solution to this concern and the wealth can be distributed according to the wish of the deceased spouse.
The newlyweds can plan their future in a realistic manner by consulting a financial planner and should consider the following points while considering their goals. The couple should have patience and faith in the planner and should not change their plans and do reckless investments out of peer pressure or change their minds if they notice volatility in the financial markets. Yearly, half yearly or quarterly review of the plan should be done so that the progress of the plan can be tracked and any necessary changes as recommended by the planner can be implemented.