Marriage is a lot about sharing. The most important thing you are sharing with your better half is your life. Your finances are a part of that life. How you manage your finances together can have a significant impact on how your marriage will survive the test of time.
Here is a 6 step guide to get you started with a plan to manage your finances together.
Step 1: Talk about your incomes and your spending habits
Openness is critical in relationships when it comes to managing your finances. Knowing about each other’s income and expenses can help you decide how much you can afford to spend, save, and push towards mutual as well as personal financial goals.
You can plan around what you know, not around what you don’t. If you are planning to switch jobs, it makes sense to talk to your partner about it.
Step 2: Divide your money into what you will spend jointly on and what belongs to each of you separately. Decide on accounts, joint or separate? If you go for a joint fund then decide what it will cater towards (Rent, EMIs, Food and Grocery Bills)
It’s a decision that is personal; however, your money should be yours as well as for your family. Some prefer to pool their incomes into a joint account from which all expenses and savings are catered to.
On the other hand, others prefer to create separate accounts. One for each partner along with a joint account into which both of you will pool money to cater for joint expenses. This approach allows you to cater to your needs as well as to your family.
In case you have a joint account, ensure that you both agree on where the money will be spent. Not being on the same page on this issue can lead to conflict.
Step 3: Save first. Set aside 20%-30% of your joint incomes, at least, to cater to your savings.
Saving first should always be your priority after catering for non-negotiable expenses like rents and EMIs. You should save at least 20%-30% of your joint take home incomes. This then needs to be invested appropriately based on your financial goals, such as retirement.
Step 4: Decide on your short term and long term financial goals.
Be clear about your short term and long term goals and prioritize them. You should both maximise your investments towards these goals. The benefit of dual income is that you can meet goals quicker, even if they are now bigger.
Step 5: Get Insurance – Health as well as Life
Even if you have health insurance from your respective employers, it makes sense to get health insurance for the both of you as a family. It is also now critical for both of you to have term plan insurance. The insurance amount should be an appropriate multiple of your annual expenses.
Step 6: Set mutual budgets so you can help each other if either of you start spending recklessly from your personal budgets.
Budget first to ensure you are saving enough. As long as you meet your savings and investment goals, you don’t have to be obsessive about your budget. One thing you both should keep an eye on is each other’s spending habits.
If either of you becomes too much of a spendthrift, you should help that person get back on track.