Wealth Guide: Valentine's Day Special - 5 money moves young couples should make for stronger financial future

Marriage greatly influences your financial life. Your financial goals and future plans change by what your spouse brings into the financial picture. Young couples nowadays prefer to follow their aspirations and dream big. However, achieving all these goals requires a strong financial plan. To help you with same, this Valentine's Day, Radhika Binani, Chief Product Officer, Paisabazaar.com, advises  five money moves that would ensure that you and your spouse are on the road to build a strong financial life together:

Discuss your finances to be on the same page

“To start married life on a solid footing, every couple must have an honest conversation about their financial situation, goals, and future plans. Such discussions bring partners on the same page, thus helping them in making better decisions and also laying a ground plan on how to meet these goals without compromising either one's lifestyle or aspirations. Apart from engaging in such conversations, couples should prepare a budget to keep their finances in place and avoid overspending. You and your spouse should make monthly budgets for savings and investments, and also ensure that this practice is followed diligently,” says  Radhika Binani.

Maintain an emergency fund

“The first step towards a strong financial plan is to create and maintain an adequate emergency fund to tackle financial exigencies or to meet unavoidable expenses during periods of income loss caused by unemployment, illness or disability. Ideally, an emergency fund should be big enough to meet unavoidable expenses like your rent, utility bills, insurance premiums, EMIs, child’s tuition fees, etc. for at least six months. In case both of you are earning, consider maintaining a joint emergency fund with respective contributions per month or opt for separate emergency funds,” Binani added.

Purchase adequate term and health insurance

“With marriage comes the responsibility of taking care of each other, not only emotionally but also financially. As living and medical costs continue to rise, having adequate insurance cover is a must. If only one of you earns, make sure he / she has the adequate term life insurance at least 10-15 times of his/her annual income. If both of you earn, make sure you have term and health insurance for each other. Term life insurance provides your family with a replacement income in case of your premature death, which helps your family financially, in terms of loan repayment, or investing for crucial financial goals and meet lifestyle expenses in your absence. Compared to ULIP, money back and endowment insurance plans, term plans offer much bigger life covers for very low premiums,” she further added. 

“In addition, a single incidence hospitalisation can wipe out a sizeable portion of your savings. Hence, couples should ensure to buy adequate health covers, preferably family floater plans as well as critical insurance plans, to protect themselves against rising cost of healthcare. Do not rely on group health covers provided through your employment as they are mostly inadequate and would also expire immediately after you retire or leave the organization,” she suggested.

Start investing early for long term goals

“Young couples in their 20s or early 30s, often brush off the idea of ​​investing early in long-term goals such as retirement savings and child's higher education. What they fail to understand is that the more they delay, the higher will be their chances of accumulating inadequate corpus or straining their finances in the later stages of their life to accumulate the corpus within a shorter period. On the other hand, the sooner you start investing towards your long-term goals, your investments would get a longer investment horizon to benefit from the power of compounding. Invest in equity mutual funds for achieving your long term financial goals as equity as an asset class beats fixed income asset class and inflation by a wide margin over the long term. Those having taxable income should also invest in the Equity Link Saving Scheme (ELSS) for achieving their long term financial goals. Investments in ELSS of up to Rs 1.5 lakh qualify for tax deduction under Section 80C of the Income Tax Act,” she added.

Apply for a joint home loan to save separately on taxes

“Most couples planning to own a house are familiar with home loan tax benefits, but they often fail to make the most of it. In cases where both spouses earn, applying for a joint home loan will allow them to avail separate tax benefits on both interest and principal repayment, under sections 24b and 80C of the Income Tax Act, respectively. However, to enjoy separate tax benefits, the couple must ensure that besides being co-borrowers they are also co-owners of the concerned property. As most lenders offer an interest concession of 0.05% to female borrowers, it is wise to get a home loan with your wife as primary applicant/first loan holder. Another benefit of opting for a joint home loan is that it improves a couple’s eligibility for a higher loan amount as in such cases; the lender would consider the repayment capacity of both the co-applicants,” she concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)