7 Tips for Effectively Managing Money as a Couple

In sickness and in health, to love and to cherish and to file taxes together!

Effectively managing money as a couple is the key to a happy relationship.

Imagine going on a vacation you always dreamt about. Having your own place and sharing a life together.

A financial bond is as important as an emotional bond for a healthy and sustainable life.

So...here are some tips to help you and your partner combine your finances while maintaining financial freedom.

How to Manage Money as Couples?

1. Talk about Money

Communication can win the battle. Yet, the majority of couples avoid talking about money.?

Understandable. It’s a stressful topic that may spark arguments. But it doesn’t have to.?

Talking about money with your partner gives a sense of certainty.?

You don’t have to jump straight at debt and EMIs. Understand each other’s money mindset first. Embrace your partner’s view on money without any judgments or opinions.?

That way, you can create a safe space to talk about finances.?

2. Discuss Assets and Liabilities

Be transparent with your partner about your investments and debts. Get to know each other’s expenses and budgeting.?

Discuss your regular expenses such as existing EMIs, bills, and your spending habits.?

Also, share your investment plan including your SIP, FDs, and tax-saving investments. This will help you align your investments together.?

3. Splitting Expenses: Open a Joint Bank Account

Now that you are sharing a life together, expenses can also be planned accordingly.

Consider opening a joint bank account to set some money aside. That money can be used for groceries, bills, rent, and regular household expenses.

Though the biggest struggle arises while deciding how much money each one of you should contribute to the joint account. Most couples like to contribute 50-50. However, that may not be ideal if your incomes have a significant gap.?

The easiest way is to split expenses proportionally.?

Instead of deciding a fixed amount, decide a percentage of your income to set aside.

4. Create an Investment Plan Together

You and your partner must already have a personal investment portfolio. While that can cater to your personal goals, you can also consider investing together.?

Take into account the following factors to invest together:

• Create joint financial goals such as buying a home, or planning for a child’s education.?
• Have a rough idea of the corpus you want to generate.?
• Invest across various asset classes: Equity schemes, Debt schemes, and Hybrid funds, based on your risk appetite.
• Open at least one PPF account if you haven’t already.
• Start a SIP together.

Tip- While your personal portfolio must have diversification, you can also consider cross-profile diversification with your partner. Balance your investments across both of your portfolios to avoid redundant investments. It will help you achieve your goals faster.?

5. Get a Health Insurance?

Health insurance should be your topmost priority.?

Even if both of your jobs might come with a health insurance perk, you might wanna have your own insurance.

Medical emergencies can arise anytime. You could be in between jobs with no insurance to manage the bills. Or, you may not be able to get health insurance at a reasonable value after you retire.

So, don’t rely on the company’s insurance. Get your own plan to avoid stressful situations.

Choose a health insurance plan as per your requirements. You might want to consider add-ons such as maternity cover, dental cover, or eyecare cover.?

Tip- Health Insurance for you and your family also has tax benefits under section 80C of the IT Act.?

6. Create an Emergency Fund

Emergencies are uncertain. You cannot predict when an emergency may arise. But, you can certainly plan for it.

Health insurance can be a part of your emergency plan. It will take care of your medical bills.

However, you cannot have insurance for everything. In that case, you must have 6 to 12 months of funds to carry on with your life.?

Now, what is the amount your emergency fund should have? There’s an easy way to calculate.

Note down all your monthly expenses including grocery, rent, bills, EMIs, etc. Multiply that sum by 6 to have a 6-month safety or by 12 for a comfortable year. You can invest that money in debt instruments with high liquidity, such as short-term debt funds or FDs.?

So in case you lose a job, you can still keep paying bills.

However, you must also consider emergencies that may wipe out the entire emergency fund. In that case, you can keep adding more funds whenever you can.

7. Periodically Review Your Financial Plan

Your financial goals can expand with the years. You may start earning more. You may want to move to a bigger house.?

Frequently reviewing your financial plan can help you incorporate your newer goals. It will also help you stay on track of your financial journey together.??

Final Thoughts

Money conversations are often straightforward. When you and your partner have clear goals, it’s easy to follow the financial plan.

Today, sit with your partner over a cup of coffee and make a financial plan together. Follow the above tips to ensure all angles are covered.?

And remember, it’s not a competition. You are doing it together to have a comfortable life ahead.?

If you have any questions, feel free to reach out. Check out @vnnwealth on Instagram for more personal finance and investment tips.?