Ten steps for young
couples to help them lead a financially stable life
With high disposable
incomes, fewer liabilities and time on their side, young working couples have a
great opportunity to build wealth. Here are a few tips for young couples to
help them make wise choices
Discuss finances
jointly
It's important for
both partners to be on the same page when it comes to money matters. One needs
to keep the other informed about insurance policies, mutual funds and other
investments. Ensure you assign your spouse as nominee in all investments.
Avoid splurging
With two incomes and
enough disposable money, one might be tempted to buy the latest gadget or
upgrade to a bigger car, but do not be impulsive. Buy only what you actually
need and can afford. Buy a car that fits your budget. Your car loan EMI should
not exceed 10% of your monthly net take home pay. Ensure that you have made
your savings before you spend your salary
Don't ignore
retirement
It's easy to lose
track of retirement planning when you are young. Put
away at least 10% of your income for retirement savings. Go for equity funds
because you have time on your side. The ultra cautious can go for the PPF,
though the returns will not be spectacular
Set up an emergency fund
Set up an emergency fund
Always be financially
prepared for emergencies. Have at least 3-6 months' expenses kept aside as an
emergency fund. This should include your living expenses, lifestyle expenses
and EMIs. It's a good idea to open a joint account, so that both can have
access to the funds in case of an emergency
Buy sufficient life
cover
Buy a life insurance
cover big enough to replace your income as well as repay outstanding loans. The
cover should be at least 8-10 times your annual income plus debt obligations. A
term insurance policy is the best form of life cover. Buy online to save on
costs.
Get the right health
plan
Medical insurance is a
must. Get a family floater cover of at least Rs 5 lakh for medical needs over
and above the medical insurance provided by your employer. Buy a top-up plan to
save on costs.
Get your investment
mix right
Choose a good mix of
debt and equity products. If you are too risk-averse when you are young, you
might miss the opportunity to create wealth. Invest in equity funds because you
are young. Age-based asset allocation is a good strategy. To arrive at the
equity exposure in your portfolio, subtract your age from 100.
Don't take debt
Don't take debt
One of the biggest
temptations for young couples is to buy things on credit. Do not take a loan to
spend recklessly on exotic vacations, expensive health clubs and latest gizmos.
If you use a credit card, ensure you don't roll over the credit or pay only the
minimum amount due. In no time, the debt may become too big to handle.
Buy a house if emi
below 40% of income
Don't rush into
buying. Choose the property after due diligence and if it's within your budget.
If your home loan EMI is more than 40% of your net take home pay it is beyond
your budget. Buy the home jointly so that both partners can avail of the tax
benefits on the home loan.
Start saving for child
Ideally, you should
start planning your finances for your little bundle of joy a year or two in
advance. Most employers offer maternity benefits as part of their group
insurance policy. But, it's good to build a small corpus over a period of one
or two years especially for post-delivery expenses
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