Crucial Financial moves to make before you get married.

"Getting married is one of the biggest financial decisions you'll ever make. It's important to be open and honest with your partner about your financial situation and goals, and to work together to create a plan that will set you up for success." - Erin Lowry

Crucial Financial moves to make before you get married!

Finding a partner for life is a challenge, but basic money management is perhaps a bigger challenge. Learn about financial things you should do before you get married.

Marriages are made in heaven, goes the saying. The expenses, however, have to be borne here on earth. A decent wedding today can cost upwards of Rs 15-20 lakh, with the sky being the limit! Nothing appears to have changed, especially when it comes to who will bear the wedding expenses. Parents continue to do so with the help of their savings made over the years. The trend doesn't appear to be changing anytime soon as the children still seem reluctant to even partially meet the cost of their own wedding.

In our experience, the overall propensity to save for one's own marriage remains very low. Perhaps, one in 50 individuals in the relevant age bracket and those usually driven by financial weakness on the family front consider it a significant goal. They, instead, prefer to diverting their savings towards lifestyle enhancement goals or a house planning goal. The age-old system of parents in India saving for and funding their children's marriages continues unabated.

So if you have been working for a while and are planning to get married shortly, how about using a part of your savings, if not all, to partially fund your own wedding, rather than depending entirely on your parents money?

When marriage is a few years away

If you have recently started earning and want to save for your marriage, which is more than five years away, you can still prepare a plan and save towards your goal. You may not be that familiar with investments such as mutual funds (MFs) at your (young) age, but can still look at less volatile funds. 

With marriage less than 5 years away, one can invest in a Monthly Income Plan (MIP) kind of mutual funds where equity exposure is around 25 per cent. They can't take much risk. And those who have a time horizon of more than 5 years can go for conservative balanced funds. 

One may start a Systematic Investment Plan (SIP) in 1-3 such MF schemes. Give the mandate to your banker to automatically deduct a certain amount from your salary/bank account each month. But if you have evaluated your risk profile and are ready to take a bit more risk. For a marriage goal that's less than five years away, one could opt for a SIP in balanced funds, while if it's more than five years away, one can explore more aggressive options such as blue-chip or even mid-cap equity funds. 

See if there are investments such as equity MFs, Unit-linked Investment Plans (ULIPs) made by your parents in your name or for your marriage. If they're market-linked, then do not continue the equity exposure at this stage as the goal is nearing. Track them and start moving equity-linked funds into less volatile debt assets. If there's a Public Provident Fund (PPF) account opened in your name by your parents, continue it and use it as a last resort.

Before tying the knot

Ensure that you don't have any kind of debt, especially personal loans or credit card outstanding when you get married. And taking a personal loan for your marriage should be a strict NO-NO, especially when you have enough time to arrange for the resources and save towards it. Make a savings plan in advance to avoid last-minute scuffle for funds by taking personal loans. If you have an educational loan, then prepare a plan to repay it early.

The Paperwork

For women, marriage often entails a change in the surname and also the first name in some cases. Update your KYC details in banks and other investment avenues. Get your address changed. Existing nominations will also require immediate attention. 

 For a smooth transition, it's essential to keep a record of all the original documents in one place. Get hold of a marriage certificate at the earliest. Investments made by your parents with you as the nominee may not require any change. But remember nominations in case of investments of those who are getting married need to be modified in their spouse's name after marriage.

Managing bank accounts

Post-marriage, you need to take a call on whether to continue with your individual bank account or get a joint account. It's better for women to continue with the existing account well into the first few years of marriage as certain cheques in their maiden name would not be subject to name-change formalities. 

Holding two separate accounts is, however, catching up. Indeed, working youngsters who are getting married nowadays have a disinclination towards an absolute merger of their personal finances. There's a distinct preference for holding separate bank and/or investment accounts. 

Working professionals could have separate joint accounts, but they must ensure that there are a proper nomination and the account is operated jointly with the spouse on 'either or survivor' basis.

Money talks

If possible, have a word with your would-be spouse on the total amount which is going to be spent on marriage. When it comes to money matters, transparency holds the key. Make sure your partner knows exactly how much is in your account. It's foolish to keep money secrets from your spouse. Talk to each other to establish your individual risk-taking capacity. Not all youngsters are risk-takers whereas some may be prone to putting their savings into the equity asset class, which, studies have shown, has the potential to generate a high inflation-adjusted return. 

When it comes to crafting a long-term financial plan, try to communicate to bring in more clarity. Make sure you don't sweep money issues under the carpet. Be frank about your money values and aspirations. Try to reach a middle ground and don't try to adapt your spouse to your money values or vice-versa. 

Just married!

The first few years of marriage may well be all about spending and travelling. But such days may also be used to discuss financial matters and lay down the foundation for future financial goals. First things first, get a health insurance plan for self, spouse and parents even before you start saving. If there is an existing health insurance plan bought before marriage, do not drop it. Apply for a name change (in case of the woman who changes her surname after marriage) or addition of your spouse's name to it. 

Along with health covers, buy a term insurance plan for at least 10 times of your annual income. Remember to review the coverage every five years. If both you and your spouse are working, the one earning more may buy life cover to meet at least 75 per cent of the household income needs.

Conclusion

Meeting the monthly household needs could be the starting point of talk about money. Use this opportunity to consider putting a financial plan in place. As time goes by, put a plan in place for buying a house, car and other long-term goals such as retirement. Avoid shortcuts and any ad-hoc savings programme, and instead, carve out a proper financial roadmap. Importantly, let your would-be partner or spouse know where you stand in terms of finances so that they don't get a nasty surprise later. Don't let money matters spoil the party even before it has begun.