Inform partner about a large liability before tying the knot

After the wedding, take an advisor’s help on budgeting, goal-setting, and choosing right investments

When Mumbai-based technical writer Priya Ghosh decided to tie the knot with Ashwin Tripathi (names changed on request), the couple had a candid conversation about their finances. Tripathi revealed that his MBA from the US had left him with a whopping education loan of ~87 lakh. Ghosh made it clear she would maintain her own separate bank and investment accounts. Their families agreed to split the wedding expenses equally. With the wedding season in full swing, more couples need to emulate their example and have finance-related conversations before taking the plunge.

Before the wedding

Before getting married, acquaint yourself with your partner’s financial life. Discuss each other’s financial views and habits. Kiran Telang, a Mumbaibased certified financial planner (CFP), says, “A mismatch in temperament could lead to disagreements later. Get to know how the other half handles money. For all you know, one partner could be a big saver, while the other could be a big spender.” Disputes over money matters are among the biggest causes of divorce.

Start on the right foot

Budgeting for pre-wedding, wedding day, and honeymoon expenses is important. Pankaj Mathpal, founder and managing director, Optima Money Managers, says, “One way you can avoid going overboard is by holding several ceremonies on the same day.” Avoid prewedding shoots at expensive, rented locations. “Do so at a much lower cost on a scenic local beach or park.”

Nowadays, many couples set up a wedding gift registry, where they list the gifts they would like to receive from friends and relatives. You may consider doing this since it helps avoid issues like receiving unwanted gifts, or their duplication.

Wedding loans

These are unsecured loans that can be used to meet wedding expenses. Pankaj Bansal, chief business officer, Bankbazaar, says, “A plain vanilla personal loan may come at a lower interest rate, compared to a wedding loan for the same amount and tenure. Compare options across banks and nonbanking financial companies before choosing.”

Most expert advise against taking loans for a wedding. Pankaaj Maalde, Mumbai-based CFP, says, “Even when parents are funding the wedding, people take personal loans to throw lavish bachelor parties and other events. Avoid this. Why get into debt when you are starting a new life?”

Instead of taking a loan, withdraw money from Public Provident Fund, or take an overdraft against a fixed deposit. Even selling your investments is preferable. If these options are not available, try taking an interest-free loan from family and friends.

Wedding insurance

With the threat of another lockdown due to the new Covid variant looming, consider purchasing wedding insurance. Naval Goel, founder and chief executive officer, Policyx.com, says, “Since a wedding involves huge expenses, risks are inevitable. Think of buying wedding insurance for protection against monetary losses that may arise due to any uncertainty.” Premiums range between 0.5 per cent and 2 per cent of the sum assured.

Wedding insurance provides liability coverage against thirdparty claims during the wedding due to theft, fire, burglary, and accident. The cancellation cover includes postponement due to a sudden or unexplained reason. Damage to property due to fire, earthquake, burglary or theft is covered. Personal accident leading to death, permanent total or partial disability is included. However, if the groom or the bride’s family calls off the wedding permanently, the insurer is not liable to pay.

Goel says, “File an authentic claim, along with bills and the first information report. If the insurer discovers any flaw in the claim, it will deny it.”

Those planning a destination wedding, a multiday ceremony, or an otherwise expensive event should buy this cover. Those contemplating a small private affair on a modest budget may skip this cover.

After-wedding paperwork

Once you have tied the knot, update all necessary paperwork. Addresses and names (if any of the partners has changed it) may have to be updated in bank and investment accounts, permanent account number card and passport.

Since money is a sensitive topic, any changes to the way finances are handled should be made gradually after both the partners have settled down in the marriage. Telang says, “Until now, your partner would not have shown his/her finances to anyone. Many find it hard to open up their finances for the spouse to view.”

The newlywed couple should also purchase adequate health and life cover.

Money management

After marriage, especially if both spouses are earning, they may prefer to maintain their separate financial identities instead of merging them. If you decide to maintain separate accounts, name your spouse as the nominee in them. Telang says, “However, some financial aspects will have to be handled as a team.”

Partners that don’t merge their finances must both contribute towards household expenses and vacations. Maalde says, “The contribution could be equal or in proportion to earnings.”

There have been cases where the woman’s earnings went into meeting expenses, while the husband’s earnings were invested. Telang says, “The problem with this arrangement is that if the marriage fails, the woman is left with nothing.”

Right after marriage, start building a nest egg for your child’s arrival. When that happens, your family’s status could change from double- to single-income.

If both partners feel comfortable, they may also merge their finances. Finally, young couples should consider approaching a professional advisor who can help them with budgeting, financial goal setting, and making the right investments, so that they begin their journey on a sound footing.