Financially secure marriage

Marriage season is round the corner and most of those whose marriage date has been fixed and eagerly making arrangements. All these arrangements do not come free, there is a cost involved for every action you take. When I speak to newlyweds, most of the time they are happy because they have gone into a new life or relationship from being single to being responsible for each other. On speaking on finances, most of them are starting their lives with zero or negative balance. Would you like to be one of those? I’m sure you would not, so it is better to make a positive beginning in your married life. First is be open on where each of you stand financially and how your expenses would be after marriage. This will give you an idea on what money you would have to spend for your marriage. This will set expectations right and you can keep any extravagant expenses at bay. Elders are important, but do not let them dictate your expenditure plans. Any major expenditure decision should be taken jointly, there will be a lot of emotions involved, in such cases, involve a sound elder who can give an impartial judgement.

Once married, keep your accounts separate, but add the other ones name, this is beneficial from tax point of view. For household expenses, keep a joint account where each would put in their contribution for joint household expenses. For all other personal expenses, savings and investments use your separate accounts. Even on account of credit card, try to keep them separate and one have one from household expenses, this will help in making payment to credit card companies as well. After marriage in most of the cases, there will be a change of address, ensure that this change of address is informed to all financial entities. In case of female, there is a possibility of name change, so keep your paperwork in order.

Get insurance into place, one is health, take a family floater and other is house. If you have taken a home loan then a term policy to cover the home loan. Marriage is a long term relationship so start thinking long term and start planning long term immediately. Though your responsibilities have increased, they will start increasing more and years pass, but on home front as well as job, so start your financial planning immediately. This will ease your financial burden in the years to come. Have a happy married life.

The need for insurance

When I talk to anyone about insurance, most of the time I get a question is what I will get back. This question really gets me thinking, because even after literacy increasing, people still do not understand the meaning of Insurance. Insurance is an indemnity is the event of something happening or not happening. So when you look at insurance, you should not look at return but look at what is the eventuality or outcome you are trying to cover. The following are some major insurance covers available:

Life – This cover kicks in only on the death of the policy holder. So while taking a life cover ensure that you cover only death and do not ask for a return of premium in case you survive the period. This cover is to be taken only if people are dependent on you for their living. So if there is nobody dependent on you, you do not need this insurance. How much cover is needed, depends on the assets and liabilities you will leave behind, so preferably contact your financial advisor to calculate the amount of cover you would require.

Personal Accident – As the name suggests, this cover comes into picture only in case of death or disability in case of an accident. You could take this as a separate policy or as an add on to the life policy.

Home – This policy covers the damage caused to your home and its contents.. Most of us are not even aware of this policy.

Health – With increased awareness, many of us have started taking this policy, but still I know of many people who avoid it, saying my employer has got me covered, but what if you fall ill in between jobs or you lose your job. Think, your whole life savings would go in a flash.

Travel – Most of us take this policy only when we are on official travel, but ignore it when we go on personal trips. We should never ignore this policy.

There are many other types of policies, some of which you buy, just because it has been mandated by the government or your loan provider. Most of these policies do not cover terror attacks, as you know the world has become a very dangerous place, so my suggestion is as the insurance company if terror attacks are covered, if not then ask them to add it. A little extra money, but you would have peace of mind.

The Entrepreneurship bug

Had enough of working or have a great idea and want to start out on your own? Man, the entrepreneurship bug has bitten you. Now that the virus is there, start treating it and allow it to grow for your benefit. If you do not work on it you will regret it throughout your life. I keep hearing many persons saying, I too had the same idea, but…. But what? Why did you not work on it, some felt people would laugh, some felt, they did not have the money, while others, just kept giving excuses or reasons to cover their failure to nurture their idea or dream. You do not know when an idea would come to your mind, but if you definitely have a dream to start off on your own, start preparing for it now. As it is always, finance plays a very big role in such decisions.  

Start by planning your contingency funds i.e.health insurance, term plan and expenses for around 2 years. Ensure that you do not have any outstanding loans or have provided for them. Once this is ready, next would be funding for your idea or business. You would need some money ready to rent a place, phone and other expenses. Once money is there, half your battle is won. An entrepreneur needs to work with a clear mind and money should not the first and only tension. Entrepreneurship is a very rewarding, as you are your own boss and you can keep the benefits of all you hard work. Also remember that 90% of all businesses started fail in the first 2 to 3 years of starting, so you would really need to have researched your business idea and worked out a through business plan. From those which have failed, 50% have failed because of lack of financial resources. So as you can see, finance plays a very important role. Don’t assume that funding is easy, that is the most difficult part.

Give yourself atleast 2 years planning both from business as well as finance point of view, before you start on your entrepreneurship journey. It would be best if you could start your business on a part time basis along with your job, this way, finances would not come in your way. The reason is simple, income will take time to come when you are on your own. So why not start planning your finances now and start planning for your entrepreneur journey now, don’t wait till the bug bites you.

I want to buy a car

These days everyone wants a car with no parking space. But the question to ask is do you need a car or do you want a car. A car is convenient and useful, but if you do not have frequent travel then car is just a want. Car is both an asset as well as a liability. Asset if you need to travel frequently, liability from the point of loss of value from the date of taking possession itself. What does it mean? The value of the car goes down the moment it is on the road, add to that maintenance and fuel cost. Whether you run the vehicle or not, maintenance cost will always be there. Car is convenient, but with so many car hailing apps, do you really want a car, just for convenience and because all your friends and relatives have one?

It is good to have aspirations, but these aspirations should not come at the cost of your other goals. So check, if the car is really as important as your other goals. After taking everything into account, if you feel it is a need, then check if you have at least 25% of the cost for down payment and enough surplus to pay monthly EMI. These EMI’s are not tax deductible, so try to keep the repayment period as short as possible, as the interest would be eating into your other goals. Check if a new car is really necessary, these days you get good second hand cars, you can upgrade when your finances are comfortable. If you want to upgrade, do not do so, unless the maintenance cost have really gone up and the car is giving frequent trouble.

Planning to start a family

Just married, what next? Start a family. Starting a family is not just an event but a life changing event. Though there is excitement, there would be a lot of pressures. The pressures would not only be psychological, but also financial. We need to be ready to take care of both, the physical and psychological part would be taken care with guidance from your medical practitioner, but what about financial, and you need to take care of that. Are you ready? Have saved enough for this event and after that. Remember your expenses will start mounting. Now you will have to take care of 3 persons and the third person will need a lots more care both in terms of time and money. Have you take a health insurance policy? If yes, or you have one provided by your office find out if it covers maternity expenses.

On the contingency front, you would have to recalculate your life insurance requirement, as now you would have many more aspects to take care of in your absence. This life changing event can become less stressful, if you have planned properly as the event is just not one time but it will change the rest of your life. If your wife is working, you would also have to consider the possibility of her quitting her job. This means lower income. Though we usually recommend 3 to 6 months of contingency expenses, during this time we recommend to increase it to at least a year’s expenses, that too the increased expenses. Plan early and enjoy the joys of starting your family.