Tips for Financial planning for New-age Couples
For a long-term relationship, financial chemistry may be just as crucial as personal chemistry. It is critical to have a common basis for financial planning in today’s world when both members in a relationship are earning and financially independent. Money is a touchy subject that demands a thorough grasp and a holistic approach.
Have that money talk
Money conversations can be awkward for both partners at times, so it’s crucial to start the conversation and hear each other out. Your children’s behaviour will be influenced by the way you both manage your finances. The following are some of the issues that need to be addressed:
- The expenses and share in it of each partner.
- Approach to discretionary spending, especially teaching youngsters fiscal responsibility.
- Savings in various accounts (single, joint) considering taxation aspects
- Account access and information availability.
- Financial planning and regular reviews of the plan.
What to consider for financial planning
Financial planning should be done by you and your partner, and the plan should be reviewed regularly. To discuss your financial outlook, goals, and how to attain them, it is important to seek the advice of a skilled financial consultant. The consultant can also assist you in reconciling your differing perspectives and achieving your individual goals while not jeopardising your long-term mutual goals, such as your children’s schooling or retirement.
For instance, one couple may prioritise short-term trip aspirations while the other prioritises long-term retirement savings. Maintaining a good balance is essential for financial harmony and staying on track.
Priorities also shift with different life stages, such as having children, arranging for their education, and transitioning from one job to another. As you and your partner become older, your lifestyles change, and your financial strategy should adjust to suit your current situation.
Savings should be put into investments to form one or more portfolios based on risk tolerance. Portfolio construction should take into account short-term cash needs and provide enough liquidity.
Individual preferences, risk profiles, and tax considerations can all influence whether or not to invest in single or joint portfolios, as well as asset allocation and asset class selection.
Your partner is likely hesitant to engage extensively in the stock market, although you both agree that fixed-income instruments such as fixed deposits, savings accounts, and bonds should be included in the portfolio. The creation of a diversified portfolio with the asset allocation that suits you and your partner is a positive effect of this difference in opinions.
Both partners must ensure that they have access to the information and that their portfolios are reviewed regularly. It’s a good idea to match your objectives to your portfolios. Ensure that nominations are in place for single portfolios.
Agreeing upon insurance
Investing in your life and your health are also important topics on which you and your partner should agree. It corresponds to all of the other financial objectives listed above. Whether it’s a term plan or health insurance, you and your partner should think about what your family needs now and in the future.
Debt management including mortgage or other loans
You and your partner should agree on what kind of debt you should take on and how much of it you should take on. Before taking on any debt, repayment plans should be negotiated and set in place. Mortgage debt is advantageous since it allows you to purchase an appreciating asset while also providing a tax benefit. Car loans, personal loans, and credit card loans should all be avoided to the greatest extent possible.
While some debt is unavoidable, saving is preferable to borrowing for goods that are more comparable to “lifestyle enhancements” than “non-negotiables.” A mortgage loan often carries a rate of 7-8% interest; however, investing the same amount might give higher returns — equity investments, for example, typically yield 11-12%.
Will and estate planning
You and your partner should talk about your estate transfer strategy and write separate wills. Contributions to your favourite charitable causes may also be included. Even if you have a single account, will ensure that the transfer of assets is clearly defined in the terrible event of a partner’s death. The partners should make the financial data available to each other and make it simple to obtain.
Different points of view are prevalent, and adjusting to each other’s preferences takes time. The process of budgeting finances together can be frustrating at first, but as you and your partner become closer, it gets simpler to discover common ground. Keep in mind that you and your partner are on the same team and want the best for your financial security.