You are back from your honeymoon and you had a great time. The gifts are all unwrapped, thank you notes written and delivered. Now, you need to get down to the business of settling into married life. This means a number of discussions and decisions and some compromises. The most important discussion a newly-wed couple needs to have pertains to budgeting the household expenses. It’s time to talk about money with your honey.
A frank discussion about money matters right at the outset of the marriage prevents misunderstandings and nasty surprises. If you step into married life with a clear idea of monetary issues, such as insurance, savings, expenses, and so forth, you will do yourself, and your spouse, a big favour. The most important aspect of the money discussion is budgeting as that lays a roadmap for living within your means and saving some for a rainy day. Here are some handy tips for newly-married couples on how to start budgeting.
1. Start Budgeting Your Monthly Expenses
Assess your monthly expenses jointly. What do your spouse’s expenses look like? What do your expenses look like? Taken together, how much do both of you spend? Is there any duplication? Answer these questions honestly and try to reach a consensus figure for your monthly spend. Do figure out whether all the expenses are necessary. This does not mean you have to skimp and save every rupee. It just means you need to have visibility into your expenses. Once you know how much you spend on a monthly basis, you will find it easier to tide over any financial crisis, as you can take an informed decision as to which expense can be pruned, if need be.
2. Provision for an Emergency Fund in Your Monthly Budget
It is absolutely essential for a newly-wed couple to start an emergency fund. You never know when you will need more funds. A job loss, an accident, a health emergency, or even your car needing major repairs means expenses beyond your monthly budget. An important part of budgeting for young couples is assessing monthly expenses, and then putting aside some money every month in a contingency fund. Keep adding to this fund until it swells up enough to take care of at least four-to-six months of your expenses. And remember, your emergency fund is not the same as your savings account and other investments. It is something over and above that.
3. Start Investing the Surplus
Okay, so you have created a monthly budget, and set aside some money for your emergency fund. You now need to invest your savings wisely (ensure that your monthly budget is lower than your total income and you’ll have a surplus). Your money (the surplus) has to earn money. Soon, you will be thinking about a home, a car, or a second car. And once you start a family, the expenses will hit the roof. You have to prepare for all that by investing your money wisely. The good, old fixed deposit may not be good enough, what with interest rates having plummeted. Think of tax-free bonds, stocks and shares, and liquid funds.
4. Get Out of Debt and Stay Out of It
Whatever you do, clear your debt first and foremost. Lingering loans eat up your savings as you have to pay interest on them. A long-term loan, such as a car loan or a house loan, is acceptable, but not any other loan.
5. Avail Tax Benefits for Married Couples
Avail of a joint home loan, which banks offer when both partners are working. This way, the bank will take your joint income into consideration to check out your loan eligibility. You can, thus, qualify for a bigger loan. Both of you can claim deductions separately under Section 80C, Section 24 and Section 80EE.
To conclude, step into marriage with your eyes wide open and do not let sentimentality cloud your financial judgment. Most marriages break down due to financial issues. Remember, marriage is as much a financial pact as it is an emotional bond.