If you are thinking of starting a family, there are considerations to make when evaluating how financially ready you are to enter the world of parenting.
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9 Effective Financial Tips for Young Couples
28 October 2016
Weddings are a once-in-a-lifetime event. Yet, many young couples are inadvertently making financial mistakes that are compromising their long-term security.
Set yourself up for marital and financial bliss, by following these 9 financial tips for young couples:
1. Understand how your partner views (and spends) money
Money can be a touchy subject, and no one wants to feel judged on their spending habits. As such, couples need to better understand their partner's relationship with money before jumping into joint financial commitments.
From spending habits to sensitive topics and trigger words; the terms, phrases, or subjects that your partner finds uncomfortable discussing. By better understanding how to approach your partner in a supportive manner, you will find planning that much more efficient.
You can do this by jotting down the financial topics and luxuries that most often result in arguments. Don’t make these topics forbidden ground, but do brainstorm new ways in which you can tackle them. From budget agreements, to allowing certain luxuries within that budget that your partner cherishes. Be it shoes, handbags, or a luxury whiskey collection.
2. Discuss money before the wedding
Your wedding day is the most important day of your lives together. However, reality sets in after the ceremony is over. As such, you should discuss your long-term financial commitments with each other long before you get married.
Are you looking to be equal financial partners, or is that not feasible? The key is to maintain constant and honest communication. Discuss everything from your financial history and financial goals, through to the dreaded topic of joint debt. The earlier you get on the same page about your finances, the easier it will be as your relationship progresses.
3. Communicate Long-Term Financial Goals
Financial goals change over time. It’s not something you can set in stone after just one discussion. Instead, make time each month to go on a ‘money date’, during which you can assess your finances and realign your financial goals together.
This monthly ‘money date’ is a good time to discuss purchasing a new car or planning an expensive holiday abroad. If you are both clear on what you want to achieve, it will be that much easier to make your goals a reality.
4. Create a Realistic Budget (And Sticking to it)
Creating an on-going maintainable budget can help you in the long run. The first step in this process is to look at each other's monthly income and expenditure. Combine these figures to get your total household financial earnings and expenses.
If you’re planning a wedding, figure out how much you can afford to spend, and decide where you can afford to save. The key to budgeting is to underestimate income, overestimate costs, and always save towards your rainy day fund.
Equally important is the need to stick to this budget over the long term to help you reap the financial benefits.
Sticking to a budget regularly requires loving support and encouragement. From those sale items you just 'need' to that new designer phone that 'everyone has.' In these times you will need to support your significant other, and be supported in return, to make the correct long-term financial decisions.
The ongoing support of a loving partner will help you make those short-term sacrifices necessary for longer-term gain.
5. Align Your Retirement Savings Plan
Set yourself up for a more comfortable retirement by planning early. Look at each other's company retirement plans to ensure that you are taking advantage of all perks available. For example, matching employer contributions to maximise the amount available to you in retirement.
6. Maintain Open, Honest Communication
In love as in life, it’s important to maintain open, honest communication. Any lingering hidden debt or expenses are bound to cause issues somewhere down the line, compromising the financial planning you have put in place.
Instead, opt for open dialogue during your ‘money dates.’ This is your opportunity to re-evaluate the joint financial plan continuously to ensure it still fits your needs and lifestyles.
7. Start Family Planning Early
You may not feel ready for children just yet. However, the estimated cost of raising a child in Malaysia is considerable. From RM 1.1 million to raise a child to university education level, if schooling abroad. Or RM 400,000 for local education up to University level. [1]
As such, it’s best to plan and save even if you’re not planning on having children anytime soon. This allows you the time to build your wealth before you need it most.
8. Be Prepared For Life’s Little Accidents
In a similar vein, it’s important to plan for those financial commitments that come out of seemingly nowhere. Be it a broken washing machine, property damage caused by a natural disaster, or health issues. It’s vital to keep a little backup money every month for life’s little accidents.
When planning for married life and starting a family, mortality also becomes all the more real. As such life protection insurance becomes a necessity for securing you and your partner’s future no matter what life throws at you.
9. Investing Wisely
Investing money doesn’t require millions in the bank. It does, however, require a long-term focus on building your joint assets to achieve maximum returns.
Your investment can be as little as RM 5,000, but make sure only to invest money you feel comfortable investing each month. This includes holding off on creating an investment portfolio until after you have first created a nest egg of 6, or more, months’ salary as a safety net.
With this added safety rope, you will be better equipped to maximize the return on your money with a savings and investment plan like our A-EnrichGold plan.
In Conclusion
By exploring these 9 financial tips, you will be well on your way to a brighter, more financially secure future.
References
[1] Teh Boon Sung, Christopher (Aug 18, 2013). “Why only one child? RM1.1 million to raise a child in Malaysia.” Retrieved September 27, 2016.
The above articles are intended for informational purposes only. AIA accepts no responsibility for loss which may arise from reliance on information contained in the articles.
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