Financial Planning For Working Couples

Marriage, as they say in India, is not only a bond of two individuals but also their families, cultures, and lifestyles. Moreover, the watchful eyes of financial experts believe that marriages are a merger of the couple’s money and financial goals. Gone are the times when the husband stepped out to work while the wife stayed back, taking care of the household. Nowadays, due to increasing millennial aspirations, disposable income, and lifestyle, it is imperative that both spouses work and get the money home to facilitate a smooth sailing life.

Daily operational costs like rent and groceries are divided among couples, leaving them with more money to splurge on their indulgences.

While it may sound smooth sailing, a situation where couples are pooling in their finances may often be more complicated than one can expect. It is always advisable for couples to talk about their finances and make full and honest disclosures to each other about their expenses and liabilities to avoid any future discord. 

Below are some tips that couples can apply to their routines to plan their combined finances in a more structured manner:

Prioritise expenses: The first and foremost step before beginning any kind of financial planning is to prioritise expenses and draw out a roadmap. Spouses should disclose their financial responsibilities, outstanding loans, and impending overheads to each other, based on which they can apportion their income and expenses in different buckets and plan accordingly. 

Insurance: Working couples have a dual-income hence to save costs; they should invest in joint insurance policies (health and life) that cover both the partners in a single policy. The joint cover policy is often cheaper and more convenient since it involves a single premium payment and single payout. The cost of insurance, however, depends on age, occupation, lifestyle and overall health of the beneficiaries.

Contingency fund: Both the spouses should earmark a certain percentage of their income to contribute to a joint contingency fund. Ideally, an amount of 5 to 10 per cent of each person’s salary should be contributed to the couple’s contingency fund, which they use in times of financial distress or emergencies. 

Family planning: Experts say, daily expenses go up by almost 10 to 15 per cent once a couple has children and continue to increase exponentially as the child grows up. Couples should ensure that they save a considerable part of their joint income to create a provision for family planning and expenses that come with it. They should invest their money in stable instruments that offer regular returns or can be redeemed at maturity for a lump sum – mutual funds, fixed deposits, stocks of high performing companies or even precious metals like gold can be good investments. 

Joint loans: Tax laws of India offer various concessions and deductions on loans – principal and interest payments. For instance, while computing total income, deductions can be claimed under Section 24 and Section 80C for interest and principal repaid on home loans each year respectively for taxation purposes. It is prudent for married couples aspiring to buy a home to take a joint home loan. This way, both the partners, in their respective income statements can obtain the benefits of Section 24 and Section 80C on interest and principal repayments. Additionally, many lenders also provide lower interest rates to women borrowers. Hence, couples can gain an added benefit by making the wife the first or primary borrower.   

Savings and investments: Last but not the least, spouses have to account for their annual savings and investments for taxation as well as personal purposes. Nowadays millennial couples often postpone family planning till they achieve more immediate life goals like traveling or fulfilling their hobbies. In such a case, couples should create their goals and invest and apportion for those specific activities. For example, a travel fund can be created where the partners can pool in a part of their salary to spend specifically on their yearly vacations.  

Estate planning: To conclude, though not a priority, another thing that a married couple should consider is estate planning. In the absence of immediate legal heirs, it is vital for the spouses to decide how their wealth is distributed in the event of any mishap. 

Working couples have the benefit of combining their total income and then appropriating for expenses, unlike individuals who have to do the same expenses in a single person’s salary. This way, if planned properly, they can save more, spend more and even have a healthy corpus for retirement and future exigencies.  

The author is the Head of Wealth Management, Tata Capital