A Financial Planning Checklist for Newlyweds
Your marriage represents a pivotal moment in your life – you are now responsible for the life and wellbeing of another individual, and that surely isn’t a thing to be taken lightly! Here is a 6 point checklist for newlyweds, to ensure that they start their journey together on a sound financial footing.
Checkpoint# 1: Talk the Talk
First things first – make sure you don’t sweep money issues under the carpet. It’s vital that you sit down with your partner and discuss money – be transparent not just about the present state of your finances, but about your money values as well. Try and find middle ground. The most important first step a married couple needs to take is to have a financial plan prepared by a qualified Financial Advisor – even if it’s a very basic, unembellished, goal-based plan. Avoid going through Robo Advisors and have a joint discussion with a real-life Human advisor instead!
Checkpoint #2: SIP Away for Your Retirement!
Start long-term Mutual Fund SIP’s towards your retirement. Agreed, your retirement is probably over thirty years away at this point, but starting off early will give you a head start like you wouldn’t believe. There’s a popular financial planning concept called ‘cost of delay’ which is worth knowing – in a nutshell, this concept states that the cost of delaying long term goals by seemingly small lengths of time can be monumental. Remember, once you’re married, Mutual Funds Sahi Hai – for both of you!
Checkpoint #3: Up Your Term Coverage
One or both of you may need to re-look your life cover. Look no further than a simple term insurance policy to this end. Buy enough term insurance to cover for the income proportion that is dependent upon you, plus the value of outstanding liabilities that you may have, plus the present value of the goals that you’re saving for. Buying a term plan early on will ensure that you need to shell out a lower premium amount. Avoid taking out ULIP’s and traditional policies with low returns and prohibitive exit clauses.
Checkpoint #4: Buy a Family Floater Plan
Don’t think twice - go on and buy a great health insurance plan. Spend a significant amount of time researching things like pre-existing conditions, waiting periods, maternity clauses and wellness benefits, among others. Take out a floater plan if you’re a young family – exclude aging parents from the floater and take out individual health plans for them if required. Although the amount of cover required is subjective, Rs. 10 Lacs is a minimum prerequisite for a family of three.
Checkpoint #5: Emergency-Readiness
As boring as it may sound, you now need to start putting together an emergency fund. This money needs to be in liquid, low risk assets with minimum exit barriers (such as cash funds). ‘Hide’ this money from yourself or you may end up splurging it on material acquisitions instead!
Checkpoint #6: Don’t Rush into Real Estate
Carefully consider your decision to buy real estate; don’t do so in a hurry. Over the years, we’ve seen hundreds of newlyweds dive into a real estate purchase with both feet – only to regret it later. Loans are an expensive and long term commitment – you’ll likely end up paying around 1.35 Crores of interest on a 1 Crore real estate purchase! Be clear on why you’re buying the real estate – are you going to be an end user, or are you planning to sell it in a few years? Taking out a loan to buy real estate that you’re going to sell in say, five years’ time, is foolhardy. Consult your financial planner on your decision to buy real estate to get a clearer perspective on it. The last thing you want is for your home loan EMI to sap your liquidity to a choking point.