Adapting Financial Planning Process For Couples With Changing Times
Ki & Ko decided to get married after a long 8 years of courtship. They had decided to respect each other’s space and individuality even after the marriage. As a part of this arrangement, they have a very one of a kind way of handling their personal finances. Their Financial Planning is quite unique. They have life goals as a family and they also have their individual financial goals.
They are contributing to the common goals as well as following their respective dreams. The household expenses including the rent of the house are shared equally between the two of them. The remaining surplus is then assigned to Investment Planning towards individual and common goals. Welcome to new India. Welcome to new Independent families of young India.
As financial planners, we have handled quite a few families in the age group of 35 and more which are following the societal norms of ‘One family One Plan’. They generally have family goals like child education, marriage and retirement. May be international vacation and a nice car. The couple together will work towards these goals. There will not be any goals specific to husband or wife alone. But there is a noticeable difference in the new age couples. They have individual viewpoint of their life.
They will have some common goals like children education, Retirement Planning etc. They will plan parental care for their respective parents. Additionally, they may have goals like starting one’s own business, taking a sabbatical to explore the world, starting a NGO for some cause, embarking on spiritual journey to find purpose of life, etc.
Financial Life planning is the solution to provide solutions to this generation. We have to blend seamlessly the togetherness with individuality. We first start with Cash flow analysis and asset -liabilities. It is followed by their income versus expenses assessment and individual networths. Budgeting of expenses for both the partners is very essential to ensure that they contribute towards day to day expenses in equal proportions. Example: If Ki is spending Rs 24000 on household expenses, Ko will take the responsibility to pay rent of Rs 23000 p.m.
The next step is creation of Emergency fund. Two Separate Emergency funds for individual needs (parental care etc) and one common for household. Then Life insurances are taken after assessing the financial dependency of partner as well as their respective families. So, Ki will take Life Insurance Planning to safeguard financial liability towards Ko as well as her own parents. Same will be done by Ko. Medical Insurances are generally taken as family floater and Premium is equally shared by Ki and Ko. They will take separate policies for their respective parents and pay premium for the same.Finally, before goal-based Investment Decisions are taken, the couple’s individual risk appetite are considered as each would be investing the surpluses proportionately and the type of investments will reflect their risk profile and goal.
The recommendations for their respective goals need to be given treating them as individuals. Since there are many individual goals, their prioritization becomes important from financial feasibility perspective. Lot of time is spent understanding the logic behind these goals. The scenario is changing and more and more such parallel lives enclosed in togetherness of marriage are being witnessed. We as planners have to accept this and design the plans to suit their requirements.