MANAGING FINANCIAL MISTAKES IN A MARRIAGE

MANAGING FINANCIAL MISTAKES IN A MARRIAGE

1. Financial secrets

·         Talk about your attitude towards money, your values and your future plans with your spouse.

·         Do not hide crucial information from your spouse, such as a large debt, loans, poor credit history, a secret bank account, habits, cravings or splurging tendencies.

·         Lay your financial secrets on the table and find a solution through discussions or a consultant.

·         It removes misunderstandings and differences, and helps in managing finances in each other’s absence.

2. Large debt

·         Try not to enter a marriage with a large debt.

·         If you have a debt, discuss with your spouse about repaying it, or do it jointly by pooling in resources.

·         Try not to convert your own debt into a joint loan officially, as it can affect the credit history of both the spouses, making it difficult to approach a lender in the future.

·         Do not take loans for needless purchases after the wedding.

3. No budget

·         Make a budget immediately after marriage by consulting your spouse.

·         If you don’t have one, it will be impossible to keep tabs on your spending.

·         A budget encourages financial discipline and regulates your cash flow, making it easy to meet your financial goals, especially if both of you are spendthrifts.

·         Start with bigger expenses like loan installments, house rent or insurance premiums.

·         Proceed to smaller expenses like utility, grocery or credit card bills.

·         Then move to discretionary expenses like those on clothes, cosmetics or outings.

·         Discuss the financial implications of vacations, having a child and its education/marriage, and retirement.

·         Start saving for such goals to benefit from the compounding effect of early investments.

4. Inadequate insurance

·         You can afford a smaller insurance before marriage and without dependents.

·         After marriage, if you are the sole earning member, upgrade your insurance, more so when you have kids.

·         You should have adequate life insurance to cover the risk of dying young and leaving dependents.

·         Your life cover should ideally be10 times your annual income, besides being enough to pay your outstanding loans and other liabilities.

·         You should also upgrade your health and disability insurance by buying a separate adequate policy, even if you are insured by your employer.

5. No emergency fund

·         A daily life comes with no guarantees, even if both of you are working and have bright prospects.

·         Be prepared for unforeseen eventualities, such as an accident or an illness or a job loss, and start saving for an emergency fund of at least 5-6 months of your expenses.

6. Single-handed documentation

·         If you have opted for a name change after marriage, ensure that you change your name ad address in crucial documents like PAN card, passport, KYC details, bank account, etc.

·         Modify the nomination details suitably in your investments, saving accounts, insurance policies and assets.

·         Even if one spouse is financially savvy, the other should not remain in the dark.

·         Both spouses should be aware of each other’s investment avenues, savings and expenses, mode of transaction, passwords, due dates for premiums and bills, etc.

·         This ensures that in case of an eventuality, you are not clueless about your finances.

7. Ignorance about taxation benefits

·         Wedding is one of the few occasions when cash gifts from anybody are not taxed, but the recipient will have to prove it was a gift, which can be done by accepting cheques or demand draft gifts.

·         While the money that a woman receives from her husband and parents-in-law is not taxed, but any income earned from investing this money is clubbed with the income of the giver.

·         Similarly, the income from the money received from the wife will be clubbed with her income.

8. Unprepared for a split

·         Although you are not expected to, but with the increasing divorce rate, it is a possibility.

·         Even if you marry with noble thoughts of merging your resources and joint ownership of assets, make sure you have some independent accounts, saving avenues and assets.

·         While marriage works on trust, be prudent while making joint investments to avoid financial implications later in claiming your contribution.

·         Maintain records of intra-family transactions as evidence of contribution in assets.

·         This will ensure you are not left high and dry after any ugly break-up.