As you begin to plan your life together after marriage, your ideas about finances and financial planning must be discussed in detail with your partner, right at the beginning to avoid any conflict later. If this is not done in the initial stage, chances are that this matter can call for serious clashes of opinions.
You both must have a complete understanding of your individual financial situations, to empower yourselves to take the best possible decisions for you and your family. This will also help build a clear understanding between the two of you, right from the start of your new life together. Here is what you need to do before you begin planning your finances together:
1. Discuss your financial situation in detail
Share your attitude towards money, whether you are a spendthrift or a saver, discuss everything related to money, and encourage your partner to do the same. Do not keep any information hidden from your spouse. Let them know about your income, debts and assets. There might be differences in the way both of you perceive and handle your finances. A candid discussion will help to create a structure that will work for both.
2. Be practical while discussing your goals
While setting goals, have a realistic and frank discussion with your spouse about what you aspire to achieve in your life together, and how much you can afford to spend. Ideally, you should set three different goals:
Long term goals (planning for your child’s education, retirement, etc.)
One to five year goals (planning to buy an asset, going for a vacation, etc.)
Emergency funds (for paying bills, medical emergencies, etc.)
Depending on the funds available, you can allocate the money. You might even consider talking to a financial advisor to guide you about the best ways to divide your money for the best results.
3. Consolidate finances
Get all your assets together- real estate, savings, retirement accounts, mutual funds, etc., and your debts- credit card debts, loans, etc. Evaluate your net worth by subtracting your debts from the assets. This will let you and your partner know where you stand, and what steps you should take. The clarity that comes from a thorough examination of your current financial scenario can help you take steps to reach your goals quickly.
4. Have a clear budget
Note down the various kinds of expenses you incur, and track down the amount of money you spend on each. Do this for a month to know about your spending habits. It is recommended that you save 20 per cent of your income- 10 per cent to build your current savings and 10 per cent towards your retirement. If you are spending more than 80 per cent of your income, you can do with some restriction on your spending habits. If you have debts, you should live on 70 per cent and use the 10 per cent towards your debts.
Plan your accounts
Both of you can opt to have separate or a joint account, or a combination of separate and joint accounts. While most couples go for the first two options, people who are in debt generally go for the last option, so that the overall finances remain unaffected. You can consider discussing with your advisor about the best option for the both of you.
Talking in depth about your plans regarding your finances as a couple and as a family, is extremely important, not just for a secured future, but also to build trust and make the relationship stronger.