Every year, 14th February is special to celebrate love and express the feelings because it’s “Valentine Day.” Couples usually exchange the valuable gift, watch a romantic movie, plan for dinner, go out on a holiday at romantic destination, etc. However, it’s recommended you understand financial facts and behavior of each other before rushing to say “I Love You” and tie a knot. There are instances in which couples part away on account of financial infidelity. There is a prominent quote, “Finances may not be the most romantic thing to discuss, but ignoring them can create huge problems later in the relationship.”
Today, most youngsters are financially independent, have own source of incomes, assets and debts to repay. So, full disclosure of 7 financial facts would help you to understand your valentine in a better way and will keep the bitter surprises away in your relationship.
7 financial facts you need to know about your valentine are as follows:
Risk quotient measures person’s risk taking capability. Each of us has different traits when it comes to taking decisions related to money while investing, spending and saving. It’s considered that people with high risk quotient tend to gamble in stock markets with the belief, “high risks and high returns.” However, if your risk quotient is low, then you would be investing in bonds, fixed deposits, post office savings, and such. So, ideally it’s necessary to identify risk quotient of each other by consulting financial experts, online services or taking quizzes. Then, plan for something in between considering risk quotient, compromising in monthly budget (if required) and take investment decisions together to stay happy.
Net worth for an individual is the value of a person’s assets, including cash, minus all the liabilities (debt). So, the amount by which the individual’s assets exceed their liabilities is considered the net worth of that person. In case your valentine’s net worth is positive then it’s good news for you. But if it’s negative, then you could have a difficult journey together after marriage. In such situation, you both need to get income from other sources by working hard, budget your monthly expenses and improve your net worth by repaying debt on time.
Savings play a vital role to manage the debt and build the corpus for retirement. So, if your valentine’s net worth is negative but has good savings rate then, you need not worry about him to pay off debts in future. Your spouse would be in control of finances to build up long term corpus and simultaneously achieve set goals in future while paying off debts taken for higher education, setting up business, etc.
However, if your spouse is spending much quicker than the savings, then you would invite a big trouble post the marriage. Such persons would hide certain amounts from regular income and unnecessary purchases, so that you won’t get annoyed on them. Also, it would be difficult to manage the debts in future if spouse is not supportive and keeps secret accounts to spend. So, it’s necessary to identify savings rate and behavior of your valentine before you propose for marriage.
Emergency (Contingency) funds
Contingency fund is a fund used in emergencies or unexpected cash outflows in future due to uncertain events such as severe medical expenses on parent illness, unemployment during economic crises, etc. The contingency fund saved would ideally take care of four to six months living expenses and invested in liquid funds to use in uncertainty. If your valentine has maintained such funds for future uncertain events, then it’s an ideal sign that he/she has sound knowledge to look after finance management. Consider this as positive trait and you can manage your savings, expenses and investments in safe way.
Your valentine’s credit score plays a critical role in the loan approval process in future i.e. when you apply to buy a house or automobile through bank loan together. The credit score gives loan providers an indication of your capability to pay back a loan, based on your Credit Information Report (CIR). Ideally, high scores mean you’ve good credit history and likely to get best deals while borrowing from bank. You can apply for credit scores to CIBIL, Equifax and Experian credit bureaus. You can also apply for credit scores online at CIBIL. As per CIBIL, 80% of all new loans sanctioned are above 750 score. However, it is important to note that some young people have low scores because they have no credit, rather than bad credit history.
Insurance coverage for uncertainty
Nowadays, the rising inflation impact medical costs. So, it’s a must to have adequate medical insurance coverage and life insurance cover for uncertainty in future. There is easy-to-use insurance calculator on InvestmentYogi website. Here, you can compute the sum assurance required and match the figure with policy taken by your valentine. If there is a short fall in sum assurance, then plan to increase the sum assurance in this policy while renewing to secure family expenses and pay-off of debts in any unfortunate event post marriage.
Sync investments with life goals
Discuss individual goals and prioritize them in your life before marriage. Analyze financial realities and start investing towards it. Each goal would require different planning and sacrifice that both partners need to take mutually. So, learn to complement eachother for commitment and sacrifices while achieving common goals set together for future.
Believe your spouse as, “Friend in need is a Friend indeed” to stay wedded happily forever.
Leaving you with a few romantic lines from a song “Nothing’s Gonna Change My Love For You” by George Benson:
If I had to live my life without you near me
The days would all be empty
The nights would seem so long
With you I see forever oh, so clearly
I might have been in love before
But it never felt this strong
Our dreams are young and we both know
They’ll take us where we want to go
Hold me now, touch me now
I don’t want to live without you.
Nothing's gonna change my love for you
You oughta know by now how much I love you
One thing you can be sure of
I’ll never ask for more than your love.
The author is Certified Financial Planner and can be reached at firstname.lastname@example.org