7 financial tips for young couples to achieve their long-term goals

The wedding season beginning the first week of October is set to be the biggest and the busiest one in India. Marriage is one of the most cherished moments of life that brings families and friends together. However, marriage is also the beginning of a lifelong responsibility for the couple. The first step to fulfilling that responsibility is to make a long-term financial plan soon after you tie the knot.

Marital life requires recurring and big financial commitments from renting or buying a home to a new vehicle for personal transport, vacations, kids and educational expenses. All this will require savings and investment plans to ensure that you don’t miss or compromise on any of these life goals. The best couples will start fighting if the household finances are not in order and they disagree on important financial decisions.

Also Read: 7 golden rules to save and invest for your child’s education

That’s why it’s important for couples to jointly devise a financial plan that suits their income, lifestyle and long-term goals. This will ensure that money is the last thing that leads to friction in the relationship. Here are five tips to help kick-start a robust financial planning journey:

1. Set up a budget 

Creating a monthly budget or expense plan is the beginning and essential part of financial planning. This is especially crucial for newly married couples who have just moved in together and are not sure about the nature and quantum of their monthly expenses as couples. 

A clearly defined budget with maximum allowable expenses on key items such as rent, living expenses, eating out, holidays and shopping will help you and your spouse compare and contrast the monthly income with the  likely expense.

Budgeting can also help both of you to plan and save for longer-term life goals such as foreign holidays, buying a car, jewellery and a house a few years down the line.

Also Read: Buying vs renting a house in India

2. Agree on some common financial goals 

While it’s never possible to agree on every financial decision, you can agree on mutual financial goals that you can work together to achieve. These common goals could include moving into own house within a certain timeframe, buying a family car, creating a savings and investment pool for children’s education and marriage, creating an emergency fund or saving for a foreign holiday. 

This way, you won’t risk depleting your savings or overspending on current expenses. This will also create the financial headroom for both partners to pursue their individual goals and pursuits such as travel, photography, gadgets and other expensive hobbies.

3. Savings and Investments

Planning for savings and investment is as important as budgeting for essential monthly expenses. 

After accounting for monthly expenses, every couple must save a minimum amount every month to fund their long-term financial goals. 

Some financial planners suggest setting aside this amount before accounting for mandatory spending. However, this can be decided mutually by the couple based on their financial situation. For example, savings can take priority if you don’t have a large inheritance to fall back on in case of emergency or otherwise.

4. Building a portfolio to grow your savings

Once you have decided about the quantum of monthly savings, the next step would be investing your money in the right financial instruments and assets so they grow with time and beat inflation. This will require building a diversified investment portfolio with the ‘right amount’ of exposure to various assets such as banks, fixed deposits, gold, equity and real estate. 

Also Read: Five ways to maximize gains while investing in gold jewellery

The portfolio should reflect the spending priorities, time horizon and risk appetite of both partners.  

It could be the case that the husband wants potentially high-return but risky assets such as equities and mutual funds while the wife prefers traditional assets such as bank fixed deposits, life insurance and gold. 

Both of you must sit together and decide on a common portfolio that meets both your short-term as well as long-term goals. Both partners need to ensure that they have access to the information and review the portfolio regularly. Please also ensure nominations are in place for all financial investments in your portfolio.

5. Health insurance 

The COVID-19 pandemic was a rude reminder for many families that having an adequate health insurance policy is of utmost importance. In India, healthcare costs are the primary reason for families slipping below the poverty line. Cashless health insurance is a good way of dealing with any unforeseen health emergencies without causing fatal damage to savings. While shopping for a suitable health plan, balance your ambition with the cost of premium. Health insurance has become expensive post the pandemic.

6. Build an emergency fund

The pandemic job losses and salary cuts during the lockdown also reminded families about the need to have an ‘emergency fund’ that they can tap into in emergencies. The need for an emergency fund is even more acute when you have a family. So, sit with your partner and start building a corpus that you tap into when life throws a rude surprise. 

As a thumb rule, an emergency fund should be able to cover at least six months of your family's living or essential expenses in case of unexpected shocks such as job loss. 

This will insulate your family from a financial crisis.

Also Read: How to create your own medical emergency fund 

7. Decide on a suitable life insurance plan

Agreeing upon a life insurance plan is crucial to ensure the long-term financial health of your partner and your family. A right life insurance plan will ensure that the untimely demise of one of the partners doesn’t put the other partner and their dependents as children and parents in a financial soup. 

Term life insurance is one of the best and the most cost-effective ways to secure the financial future of your family. 

In your absence, this would also help your children achieve their long-term goals such as higher education or pay for the home loan. Decisions related to a term plan include whether you and your partner prefer separate term covers or a joint cover. 

A joint cover is also known as spouse term insurance—both partners are covered under one policy, making it easier to keep tabs on the policy. Compared to separate term plans, a joint cover is less pricey. You and your partner can also choose additional riders (a kind of add-on cover) for permanent disability, accidental death, critical illnesses, etc., with mutual agreement.

Happy financial planning!

(Karan Deo Sharma is a Mumbai-based finance and equity markets specialist). 

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