Mumbai: One of the most important aspects of a good life is financial security. And when you get married and then have a family, the financial factor becomes more and more critical. With steep rises in living costs, it is critical that couples today play as a team to build a strong financial life together. Here are a few key pointers that will help couples have a happy financial life:
To set collective goals and manage expenses: Discuss your finances and make a budget
A couple, to start off, needs to have honest conversations about their financial position and their plans for the future. This would help in making better decisions together. The objective of the financial plan should be to secure their financial goals without compromising on each other’s lifestyle or aspirations. Make sure you and your spouse discuss each other’s spending habits, assets and liabilities, savings, current investments and future goals. Budgeting is the basic requirement for every couple to put their finances in order. Couples should make monthly budgets on their spends and follow it diligently, so that each has enough room to make investments for their future goals.
Get yourself insured-Avail term insurance and health insurance
Marriage brings additional responsibility of taking care of your spouse, not just emotionally but also financially. With rising costs of living and medical expenses, it becomes critical to have protection through insurance. All working couples should invest in term and health policies for both partners.
Term insurance would provide an assured sum to your family in case of your untimely demise. Your life cover should ideally be at least 10-15 times your annual income. Additionally, a suitable health insurance should also be bought by the couple which would assist them in bearing the high costs of medical expenses. Even if both of them are covered under their employer’s health cover, the couple should opt for a health cover of their own, to eliminate their dependency on employer’s cover.
Moreover, term and health insurance both provide tax benefits respectively. Under section 80D, premium paid towards health insurance for yourself and your parents can be claimed for tax deduction up to Rs.25000. Also, term insurance premium qualifies for tax deduction under section 80C. Term insurance provides a large cover at very low premiums.
To tackle financial exigencies-Maintain an emergency fund
Financial exigencies can come up anytime and every couple should take steps to be prepared for such situations. To tackle these, married couples should create an emergency fund and maintain in it efficiently. Ideally, if only one of the spouses is earning, your emergency fund should amount to at least 3-6 months’ living expenses. And in case both are earners, they can either maintain a joint emergency fund with their respective contributions per month. Couples should ideally have individual emergency funds. Maintenance of emergency fund helps the couple to survive emergency situations such as job loss, severe illness, accidents etc.
For child’s education and marriage, retirement etc.-Start investing early
Couples should start investing as early as they can to accumulate enough funds for their short, medium and long term goals to achieve various life goals. The earlier you start investing, the bigger corpus you will be able to accumulate, since your money would have longer time to grow.
These goals may include a family vacation every year, buying a car, child’s education plus marriage, and building a retirement corpus. Each goal involves a substantial cost and without proper financial planning and right investments, these cannot be achieved. For short term goals such as a vacation or buying a high ticket price iteam, couples can invest in instruments such as Recurring deposits, debt mutual funds and Fixed deposits, whereas for medium and long term goals such as child’s education and marriage, buying a car, creating your retirement corpus, the best option is to invest in ELSS.
ELSS provides highest returns in the long term category despite the recently imposed LTCG tax of 10% on earnings above Rs.1 lakh, as compared to alternatives such as PPF and NSC. It offers the lowest lock-in period of just 3 years and also serves as a tax saving investment under section 80C.
To save taxes while buying a home loan- Opt for a joint loan
Home loans offer tax benefits for both the interest and principal repaid by the borrower, under section 24 and 80C respectively. The interest paid every year can be claimed for tax deduction under section 24, up to a maximum of Rs.2 lakhs each by both the spouses. For the principal repaid, each spouse can avail tax deduction up to Rs.1.5 lakhs under section 80C.
However, for married couples, it is better to opt for a joint home loan. Moreover, if the joint home loan has the wife as first loan holder, a lower interest rate is offered by many lenders. Make sure that while taking a joint home loan, your spouse must be a co-owner as well as co-borrower (co-applicant) of the home loan to avail tax benefits. Only becoming a co-borrower and not a co-owner wouldn’t make you eligible for tax deductions. Therefore, a couple should always opt for a joint home loan in case both of them are earning, as this enhances their loan eligibility for a higher loan amount, along with tax benefits for both, thereby reducing their total taxable income as well.
— by Radhika Binani, Chief Products Officer, Paisabazaar.com
