Make The Best Use Of A Dual Income
Families should begin preparing for their income, spending, savings, and investments as soon as they marry, because finances tend to become more complicated as the family grows larger. 1. Debt-Free Living: Debt is the primary concern that most young couples face. The first objective should be to pay off any debt, whether it is a credit card, a personal loan, a home loan, or a car loan. Paying off your debt ahead of schedule relieves you of mental anguish, saves you money in interest payments, and makes you cash rich. Banks do not charge a pre-payment penalty on floating rate Home Loans, as per RBI directives. The borrower now has more flexibility in repaying their loans. Consider the case where you have various lines of credit, such as a home loan, a car loan, and a credit card. In this case, we recommend that you devise a strategy for repaying your debt: a) Create a budget: Your budget must be sensible and, above all, realistic. The surplus must be preserved or invested in order to achieve your objectives. Try to be a little more strict with yourself in the future. You must be prepared to make viable changes to your spending that you can stick to in order to improve the overall status of your finances. b) Determine which debts to pay first: Debt management specialists recommend beginning with the loans with the highest interest rates. This is referred to as the debt ladder or debt payback ladder. The alternative option allows you to pay off debt by starting with the lesser principal balances, which will quickly free up money to go toward greater principal balances on subsequent loans. Because you gain momentum and confidence as you pay down debt, this strategy is known as the reverse ladder or snowball method. Examine your money carefully, calculate the numbers, and choose which technique is most appropriate for your case. The general rule is that you should prepay something each month to get out of debt as quickly as possible. Please keep in mind that the strategy described above is particularly effective if there are no prepayment penalties. Please check with your lender ahead of time to see what fees and penalties are involved. Once you've checked for charges, you may need to do some math to appreciate the benefit of early repayment. 2. Purchase or invest in real estate: If you don't currently own a home, you should consider purchasing one. Buying your own ideal home can save you money on rent while also allowing you to build a long-term asset. A shared Home Loan not only helps you share your financial burden, but it also allows you to acquire a larger loan because the income of the co-borrower is taken into account when determining your loan eligibility. If you currently own a home, you might consider purchasing a second home to supplement your rental income. Over the last ten years, experts say that real estate in India has provided good returns. Before you do so, we propose evaluating the cost-benefit ratio rather than the amount to be borrowed, and taking into account other aspects such as future selling prices, rental income, and so on. 3. Money-based dreams: While money cannot purchase happiness, there is a strong link between happiness and the degree to which our financial and behavioural actions are in line with our deepest beliefs. There are a few things that money can buy that will make you happy, such as your dream car, an exotic vacation, luxury jewellery, and so on. Purchasing these items can make you happy for a short time, and there is nothing wrong with prioritising accomplishing these goals first. To manage money and marriage together, partners must first understand each other's financial perspectives and then work together to align and fulfil their financial goals. It is significantly easier to reach your financial goals with a dual income home and adequate financial planning. It is critical for both spouses in a marriage to be on the same financial page. If they aren't, they must come to an agreement that is acceptable to both of them. The easiest method to determine this is to honestly discuss your dreams, desires, goals, and spending habits, among other things. The points we addressed above pertain to a couple's medium to long-term planning. Comprehensive financial planning, on the other hand, entails much more than simply examining your investments. Insurance, taxes, educational funding, employee perks, retirement, and estate planning are all things to consider. You develop a thorough picture of your financial status through planning, as well as a documented strategy to assist you achieve your goals, dreams, and financial stability. 4. A short-term contingency fund is intended to pay expenses in the event of a sudden loss of income or other financial difficulties. Most experts recommend that a household have three to six months' worth of costs on hand in case of an emergency. So, if your monthly obligations are Rs.50,000, your emergency fund should be between Rs.1,50,000 and Rs.3,00,000. These money should be accessible in the same way as a Fixed Deposit or other short-term investment that can be easily withdrawn in the event of an emergency is. 5. Insurance: You've worked hard to establish a strong financial foundation for yourself and your family, and you want to be sure that everything is safe. Accidents and disasters may and do happen, and if you aren't properly covered, they can bankrupt you. You'll need insurance to protect your life, your capacity to earn a living, and your home. It provides security, peace of mind, and a safety net. It is critical for every relationship to have insurance coverage in place. Here are a few you should think about investing in: a) Life Insurance - Because both parties live with their respective families prior to marriage, a Life Insurance policy may not be necessary because there is no dependency. After marriage, however, the reliance issue comes into play, necessitating the purchase of a Life Insurance policy. We recommend a pure life protection policy or a term policy because it is the cheapest type of insurance and offers a large risk cover for a low price. You should ideally strive for a coverage amount that equals the present value of all your earnings until retirement. b) Medical Insurance - If you and your spouse both work, you will most likely be protected by Medical Insurance provided by your respective employers. However, if necessary, you can still check for more riders. 6. Retirement Planning: Saving and planning for retirement is, without a doubt, a real and pressing need. People are living longer, which necessitates careful planning if they wish to maintain their current lifestyle after retirement. If your workplace has a provident fund, you must save at least an equivalent amount to take benefit of it when it comes to how much you should save for retirement. These matching schemes might range from 3% to 5% of your gross income, but you shouldn't stop there with your retirement investments. Younger people with more time to save should aim for a minimum of 10%, though depending on your existing savings, you may want to aim for 20%-30% as you get closer to retirement. 7. Children’s Education and their marriage: Financial planning for children is essential to make their future secure and help them achieve more in life. As a parent, you want your child to have not only a good school but also a lavish wedding. The earlier parents begin making plans for their children's education and marriage, the better. This is because starting to save and invest early will allow you to create a greater corpus over a longer period of time. Setting goals and accomplishing them as a couple is an excellent approach to push your relationship to new heights. Even if they are aware of the efforts that must be made to ensure their future, it is critical for couples to establish strategies on a daily basis. If both partners are working, they should put money aside for long- and short-term goals. They must strategically plan their current income and invest intelligently in the areas that provide the best returns.