As Valentine’s Day reminds us to celebrate love, it’s also the perfect time to strengthen the foundation of your relationship through financial planning. Couples often face challenges in merging their financial lives, aligning their goals, and effectively managing their finances. A study conducted by ET Wealth in India revealed that 30% of individuals completely trust their partners on money matters, indicating a significant gap in financial communication. Thus, by merging finances and openly discussing your financial situation, you build trust and reduce the risk of disputes. However, good financial planning necessarily has life planning at its center.
Here are a few tips couples should use to build wealth together:
1. Set Financial Goals Together
Open communication about money, expectations, and contributions is crucial to set goals for couples. A shared vision helps structure succession plans, investment strategies, and liquidity management, ensuring both partners are on the same page about risk tolerance, major purchases, and long-term financial security. Recognizing each partner’s roles, whether financial or non-financial, fosters mutual respect and transparency. Have uncomfortable conversations at the start and include your partner while making an important financial decision. If you are focusing on philanthropy, align your goals through a charitable strategy that supports both of your causes.
2. Insurance
Life is uncertain, and one way to safeguard your family from unexpected financial setbacks is by having the right insurance coverage. Carefully selecting an insurance policy is a crucial task for couples. When choosing a plan, it is essential to evaluate whether it includes maternity benefits, family floater options, an adequate coverage amount, and coverage for critical illnesses and pre-existing conditions. Having an appropriate term life cover, with loan coverage, is also critical. Evaluate the needs of both partners scientifically and not just for one partner, as the needs may vary by person.
3. Save for Your Children
In addition to insurance, financial planning for children’s education should begin early. Parents should list down anticipated expenses and create a structured investment plan. For example, if you wish to send your child to the US for a post-graduation program, you can think about investing in international stock or Index Mutual Funds. Do not forget to factor in both inflation and currency depreciation when you plan for an overseas education. Look out for government schemes like NPS Vatsalya which is a contributory pension system under the National Pension System (NPS), where parents can contribute Rs 1000 per annum, with no upper limit on the maximum contribution towards their children’s future. Contributions under this scheme qualify for an additional tax deduction of up to ₹50,000 per financial year under Section 80CCD under the old tax regime. Remember your retirement plans should take priority over planning for your children’s retirement.
4. Pay Your Debt First
If either or both partners have existing debts, create a plan to tackle them. Prioritize paying off high-interest debts to free up funds for savings and investments. Ensure that the tax saved through debt is meaningful enough to keep the debt. Do not finance luxury purchases through EMIs unless necessary.
5. Create an Emergency Fund
An emergency fund is a financial safety net that protects couples from unexpected expenses, ensuring that temporary setbacks don’t derail long-term financial goals. Whether it’s a medical emergency or job loss, having liquid reserves prevents the need to dip into investments or take on high-interest debt. Ideally, one should set aside 6-12 months of expenses as emergency funds before making any long-term investments.
6. Plan for a Happy Retirement
It is easy to focus on short-term goals, but securing your future is equally important. Have a discussion of your “values, attitudes, expectations, goals, and priorities” with your partner before planning for retirement. Consider investing in retirement funds and seeking professional advice to maximize your savings. Tax-efficient government schemes like NPS (National Pension Scheme) allows deductions of up to ₹1.5 lakh under Section 80C and an additional ₹50,000 tax deduction over and above 80C for those opting for the old tax regime. With a lock-in period till 60 years, 60% of the corpus from the scheme after maturity will be tax-free. Contributions by the employer towards NPS can be very tax efficient and should be considered.
Finally, money should serve as an enabler, not the end goal. Building wealth as a couple isn’t just about making smart financial decisions, it’s about aligning your financial journey with your shared life goals. This cooperative approach not only enhances financial stability but also strengthens the partnership, paving the way for shared achievements such as funding children’s education, enjoying global travel, or securing an early and comfortable retirement. Embracing these strategies ensures that wealth-building efforts are purposeful and mutually beneficial, reinforcing both the financial and emotional bonds of the relationship.
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