A useful guide on managing money as a couple.
When two people with different perspectives about handling their financial situation come together, establishing common ground can seem tricky. Most couples face this challenge while making financial decisions together. Hence, whether you are newlywed or have been married for a long time, having clear financial goals goes a long way in securing your future.
A proactive approach always pays off in the long run, while allowing you to maintain marital and financial harmony. If you want to figure out how, this article guides you with simple but effective tips and strategies that help you understand how to manage finances in a marriage.
Here are some tips to help you in the journey of managing money as a couple:
Trust and transparency are the two cornerstones of a successful marriage, irrespective of what you are planning together, including creating a financial plan as a couple. You can establish the same by discussing your financial goals, income, expenses, debts, investments, and concerns you may have about your finances. Openly communicating your financial prospects and challenges helps establish clarity and avoid misunderstandings in the future.
As a couple, you have the choice to combine your finances or keep them separate to enjoy your financial freedom. Alternatively, you can merge a portion of your finances and maintain the rest separately. Whatever your preference, it is best to discuss the approach you are going to adopt. That way, you can establish a path to manage your finances together.
Creating a budget jointly is another simple tip on how couples should split finances. Whether you choose to combine or manage your finances separately, moving together as a team is important. You should both know how to budget your living and non-living expenses. You can decide how to divide the cost of essential living expenses like rent, utilities, and groceries. The same goes for non-living expenses like occasional spends on dining, entertainment, and outings, among other things.
It is easy to get carried away with day-to-day expenditures, especially with online shopping being available at your fingertips. You may make a lot of impulse purchases. To avoid losing track of finances, you can keep a tab on your spending habits together. For assistance, you can use financial tracking tools like apps or create Excel spreadsheets. Doing so allows you to check where you may be overspending and make adjustments accordingly.
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An integral part of managing money as a couple is being prepared for emergencies. You never know when you may need substantial funds at your disposal. An unexpected event like a medical contingency, accident, or a sudden expense may put a huge dent in your savings. Setting aside funds specifically to deal with such emergencies ensures you protect your saved-up capital.
Different life stages will lead to new financial aspirations as you plan your future together. Some examples include building your own home, investing in a vehicle, securing the future of your children, planning your retirement, etc. Besides these long-term goals, you may also have some short-term goals. Setting realistic goals together enables you to create a solid plan as a couple.
Making calculated decisions while choosing where you deploy your income is another vital aspect of couple finance management. No matter what you choose to spend money on, it helps to rationalise your expenses and purchases. Hefty spending from either of you affects your financial stability as a unit. Hence, it is crucial to discuss your spending limits before making any aspirational purchases.
While managing funds as a couple is a joint effort, dividing responsibilities helps avoid confusion. You can decide the role each of you should play while handling tasks like paying bills, managing savings, making investment decisions, etc. By establishing individual responsibilities, you can also count on your strengths to manage your finances efficiently.
Banks and financial institutions offer several financial benefits to couples. Some of them include higher credit limits on joint Credit Cards, ease of money management with joint bank accounts, favourable interest rates on Home and Vehicle Loans, etc. You also get tax concessions on certain investments made together as a couple. You can leverage such benefits to increase your savings.
Your credit score majorly impacts the way lenders analyse your creditworthiness. It affects your chances of obtaining loans. As you may need to apply for different types of loans such as Home Loan, Vehicle Loan, Debt Consolidation Loan, etc., it is best to maintain a healthy credit score individually. You must clear your credit card bills and other outstanding dues on time for the same.
The tips mentioned above answer the most common question partners seek – how should couples split finances to plan for the future? Getting clarity on this aspect early on in a marriage helps avoid conflicts later. Hence, even if the process requires answering some tough questions, it is best to face them head on and early. After establishing a financial plan, you should also review and modify your financial strategies based on your changing needs and circumstances. With such collaborative effort and communication, you can ensure excellent financial stability as a couple.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.