Gone are the days when male members were the financial lifeline of the family. It is quite rare today to find a family with a single breadwinner. Besides, with fluctuating inflation rates, households with just one earning member find it really difficult to make ends meet.
As a dual-income household, you might have an advantage over a single-income family. But you’ll still have to plan your finances well to keep that advantage. Without proper financial planning, you might not make the most of your income. If you’re not careful you might even find yourself struggling with debt in spite of both of you earning! So, the first thing to do is to hold back on your expenditure. Think twice before you book that flight to Mauritius or buy the latest SUV! You may want to create your budget and plan your savings before satiating your desires.
Though we can’t guarantee your “happily ever after,” here are a few financial planning tips for your postnuptial years:
Plan your finances together
As individuals, each of us has a different attitude and perception of money and savings. While some of us may prefer to spend lavishly, there are others who may prefer to follow in Uncle Scrooge’s footsteps.
It would be difficult for both spouses to create a budget and plan their finances until they get on the same page financially. Being earning members, both of you will be pining for financial independence. Yes, being financially independent is a good thing! But, you’ll have to work out a part (at least!) of your finances together if you want to live a comfortable life with each other. The trick is to work towards common goals.
As partners, you need to identify each other’s short-term, mid-term and long-term financial plans. Then, you can discuss them with each other and work out a solution to reach those goals.
Clear those debts, please!
Trust us when we say that debts are a menace. Don’t let mental anxiety ruin your married life. Clear all your debts (Credit Card, Car Loan, Personal Loan, etc.) as soon as possible, before it creeps into your blissful life. This should be your first priority. Doing so not only saves you from mental anxiety, but it also helps you save on the high interest charged by lending institutions.
Experts suggest that you approach your debt repayment strategy using the “ladder” method. According to this method, you must first pay off those loans which have a high-interest rate. Another way to approach your debt repayment is by using the “snowball” method wherein you start by paying off the smaller debts. The ideology behind this method is that you’ll have more money at your disposal to clear off the bigger debts once you’re done with the smaller ones.
Gear up for doomsday
Both of you need to prepare well in advance for rainy days. They hardly come announced! The easiest way to be prepared is by having an emergency fund—actually two emergency funds. Both of you should have individual emergency funds. Stock up your emergency cash in short-term debt funds, liquid funds, sweep-in accounts, or a Fixed Deposit account.
Invest in insurance
Both earning spouses should invest in individual insurance policies, and preferably both Life and Health Insurance. In case something bad happens to either or both of you, these policies can provide the much-needed financial aid for the rest of your family.
Don’t forget to invest in various instruments
Follow the golden rule here: Pay yourself first. In simpler terms, you ought to put aside savings first. The remaining amount can be used for your monthly needs, according to your budget. In the case of a dual-income family, this should be practised by both spouses.
The next step is to invest your savings in different financial instruments. We hope you haven’t stashed it under your mattress or in a piggy bank. Well, if you have, then it’s time to put in a more fruitful place—somewhere you can allow it to grow rather than be stagnant.
Spend some money on buying happiness
Contradicting the saying that money can’t buy happiness, we believe that it actually can. For instance, you have always dreamt of buying a sports car or going on a long vacation to Switzerland. These are monetary dreams and you can easily achieve them if you save enough. Don’t you think that it’s equivalent to buying happiness? Besides, there is no issue with prioritising these dreams if they make you happy (even if it is for a short period of time).
Compared to single-income families, it is easier for dual-income families to achieve these dreams if they plan together. Married couples should align their financial goals to ensure proper financial planning. Doing so will give both of you a clear picture of your finances, so you can achieve your goals (even the long-term ones) easily.
How about some real estate in your portfolio?
Does buying a house make sense? Well, if you want to save on rent and create an asset for your future, then it makes complete sense to buy a house.
Don’t forget about your children’s future
It is essential for every parent to financially plan for their kids, at least for their education and marriage. Saving and investing for your kids’ education are long-term goals. And you need to start planning for these events as early as possible. Only then will you be able to accumulate a considerable amount of wealth. After all, you would want your children to get the best education, wouldn’t you?
Plan for your retirement
You need to start saving for your retirement at the earliest. Otherwise, you will not be able to enjoy your current lifestyle after you retire. If you and your spouse put away an adequate sum every month for your retirement years, you can save a bigger corpus than if only one of you save. How much should you save for your retirement? Well, that depends on the kind of lifestyle you’d want to have after you retire. Oh! Don’t forget to take inflation into consideration while estimating the corpus.
When it comes to finances, it is important to strategise together. As a couple, both of you must chart out your short-term, medium-term and long-term plans based on your needs and wants. In conclusion, we would advise that you take advantage of the double-income flow and invest wisely.
This article was originally published on bankbazaar.com and re-published with permission.