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How to plan your finance post wedding

Last updated on: January 15, 2013 12:57 IST

How to plan your finance post wedding

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The wedding season brings with it mild weather, large family gatherings and carefully planned events.

The decision to get married is so life changing; it can take your breath away.

But while the emotional and physical comfort might be top of mind, let's not forget the financial support a marriage can give you. 

It is important that as a newly married couple you take time to focus on your combined finances.

Talk about your money

Have a conversation about your money.

Sit down together and charting out your spending habits.

Decide at the onset which of you is going to pay the bills and which of you is going to save for the future.

You must understand your spouse's attitude towards money -- in terms of what you are comfortable spending on and how much of your combined income you would like to save.

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Do an audit

Make a list of the loans both parties have brought into the marriage and the EMI obligations that come with them.

Then begin prioritizing loans, paying off the expensive debt first.

Credit card is the most expensive loan so pay that off first, personal loans are the second, and then comes auto loans and home loans which are the cheapest.

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Image: NCAER says that 3.8 million families were earning over Rs 10 lakh in 2009-10. If that's broadly accurate, more than half of India's rich are evading taxes.
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Emergency fund

Create an emergency fund that will cover 3 months of your combined expenses in a separate bank account.

This money will come in handing in case one of you loses your job or you go through a period of low liquidity.

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Make sure you have enough health insurance.

The biggest treat to your savings is an unforeseen health emergency.

A couple living in one of India's big cities should have at least Rs 500,000 as health insurance to begin with.

Make sure you buy a policy over and above the cover your employer gives you so that your cover is not discontinued with you switch jobs.

Some health policies cover pregnancy-related expenses.

Make sure the policy you chose includes this cover, chances are your going to need it.

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Life Insurance

You need to make sure your spouse is secure if something were to happen to you.

Both of you should buy life insurance to cover at least 10 times your annual income.

Your life insurance pay-out should cover all your outstanding loans and then support your spouse's life style if something where to happen to you.

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Short term goals

List out your short term responsibilities.

Decide when you want to start a family, what kind of financial support do you want to offer either set of parents, what kind of education you want to offer you children and how often you would like to go on holiday.

Once you know what your targets are work backwards and figure out the savings you will need to set aside every month to meet those targets.

If your target is five years away then investing your savings in a large cap equity diversified fund will help you be better prepared against inflation.

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Buying a home

Plan out your biggest financial goal -- buying a HOME.

You need to decide when you want to buy your first home and begin saving for your down payment. Here's a formula you could work with.

Use the current going rate of the home you might be looking at, work in a 15 per cent annual growth rate for that price.

You now need to start saving you have at least 20 per cent of the value of the house so you have enough to make a down payment when you are ready to buy your home.

As a couple you are allowed to take combined home loan, this will entitle you to a higher loan value and a better interest rate.

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Save tax

One of the biggest advantages of being married is the combined tax plan.

You can use both your salaries to maximize you tax deductions especially for a home loan.

You can each get tax deductions on the principal repayment of your home loan of up to Rs 100,000 and the interest repayment of up to Rs 50,000 if you take joint home loan.

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