Here's how newlyweds should plan their finances

Shraddha and Pratap have just returned from their honeymoon. The two have just bought a new car with a loan. Both are in their early 30s and working. They are moving from a phase of earning and spending, to a phase where there would be more demands on their individual incomes. They also have to provide for children in the near future, and maybe support their respective parents as they get older. How should they reorganise their finances?



The newlyweds should first work out what their combined income and expenses would be like. With two earning members, household income increases. However, expenses in a new household can also be high what with buying furniture and appliances, travelling, catering to visitors, eating out and buying gifts.

Pratap and Shraddha should open an expense account into which they should put in money for household expenses and have a plan in place to save a substantial portion of their income. Else they may find themselves spending too much.

It is a good idea to define the outgo as a percentage of income. A saving ratio of at least 25% is a good start. They must set aside money for emergencies—about 6-months of expenses—so that they do not dip into savings or take loans. If expenses are high, they should step back and ask if they should be spending so much. A monthly review of the bank statement is a good habit.



It is also important for a young couple, who have dependents, to get insurance cover. There are advantages to buying life insurance early, as they can ‘lock-in’ at low premium rates. Term insurance is an efficient way to get maximum coverage at an affordable cost.

Young people do not ideally have much accumulated wealth. Therefore, they should buy a large cover and then focus on accumulating wealth. A cover of 10 times the annual income is a good estimate to begin with.

to get maximum coverage at an affordable cost. Young people do not ideally have much accumulated wealth. Therefore, they should buy a large cover and then focus on accumulating wealth. A cover of 10 times the annual income is a good estimate to begin with.


(Content is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta)