Eat, drink and be married - with your wedding day done and dusted, you may find yourself thinking "what's next". Transiting into life as a married couple, it is perhaps time to start planning for your finances as a couple. Has this been discussed pre-marriage or have the finance talk been swept under the carpet, leaving it to be dealt with after the wedding? To avoid landing yourself in a disastrous financial situation, it is important to lay out your finances and plan for your future together. In this article, we highlight the four mistakes to avoid making with your finances as a couple.
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#1 Not planning for your financial future
To secure your financial future, it is important to start planning for it now. For starters, determine your financial goals as a couple. This could comprise of short term goals such as the upgrading of your house in 5 years or long term goals like your desired retirement age and lifestyle. After ensuring that your financial goals are in line, set a budget/plan to work towards. This will allow your goals to be in sync thus making them achievable according to your timeline.
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#2 Not having a financial consensus
To ensure that you are on track to achieving your shared financial goals, it is also important to have a financial consensus on how much to spend and/or save. To do so, start by creating a budget for your household expenses and/or any big expenditure. This will help you to track your spending so as to avoid overspending and landing yourself in debt.
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#3 Not having an emergency fund
Next, it is important to set up an emergency fund to ensure that you would be financially able should there be any unforeseen expenses. While a general rule of thumb is to have 3 to 6 months' worth of your monthly expenses in an emergency fund, differing financial obligations may result in different amounts needed. Therefore to determine how much you would need in your emergency fund, you may wish to refer to our previous article "How Much Should You Have In Your Emergency Stash?" where we explained how you can build an emergency fund.
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#4 Not getting coverage
Lastly, it is important to obtain coverage to ensure that you will be able to protect your loved ones. For example, if you were to unfortunately be diagnosed with a critical illness, you would then require a large sum of money to facilitate your treatment. Additionally, it is unlikely that you would be able to work during your recovery period which could then further add to the financial burden that you may face as a couple. To avoid such a situation from occurring, a critical illness policy could help. By providing a lump sum pay-out, this serves as income replacement in the event that you are unable to work due to a critical illness. This pay-out could then also be used to pay for any long term treatment costs or for the daily expenses of your family. Alternatively, to protect your family and ensure financial security in the event that you are no longer around, consider life insurance.
(See "Can You Really Afford To Not Have Critical Illness Coverage?")
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