Is the lockdown a perfect opportunity to talk about family finances?
With the lockdown extending into again, you have more time to spend with your spouse or partner than you imagined. How are you utilizing it? Do you cook together, clean your homes, play or indulge in your hobbies? Worry about the income uncertainties of the future?
One way to put the worries to rest is to know the realities and be prepared in the best way possible. Consider doing a family financial audit – an important task that often gets ignored. Don’t be bogged down by the heavy-sounding term. It simply means having the critical money conversations with your spouse.
If for some reason, it hasn’t happened before, the lockdown is a perfect opportunity to get started with the most critical task for your financial health. So, how should you go about it? Here are some pointers to make it easy for you.
Task #1 – Land on the same page about your finances
When both you and your spouse are bringing an income, you may tend to handle your finances independently. Though both of you want to create financial security for your family, your approaches might be different. So, the first task to do is to get on the same page with regards to finances. When both of you have the same financial outlook, the financial decisions can be unanimous.
Task #2 – Make a financial plan
Once you both are on the same page, the next step is to create a financial plan for your family. This plan should have the following action points:
Make a list of your short term and long term financial goals
Assess the amount of money that would be needed to meet each goal
Shortlist investment avenues into which you can save for creating a corpus for the listed goals
Assess the disposable savings each of you has which can invest to achieve the listed financial goals
Task #3 – Assess your current financial situation
Now that you made your financial to-do list, you need to, first, assess your current financial situation. Check the level of your disposable income, sources of income, investments, expenses, expected expenses in the next couple of months, and bank balance.
Check whether you have a joint bank account or not. If not, ensure that your you are the nominee in your bank accounts and investment accounts.
Opt for the 'Either or Survivor' (E/S) mode in your investments so that either of you can operate your accounts. Update each other on your individual investments and responsibilities so that both of you know where the other stands financially. Complete transparency in financial matters helps you each knows the other’s assets and liabilities.
Task #4 – Plan your taxes
Tax planning is essential to increase disposable income and reduce tax liability. So, when planning new investments or reviewing old ones, understand their tax implications. Collect tax-related information, Form 16, Form 26AS and keep them handy. If you file your taxes yourself, start the calculations.
Don’t wait for the eleventh hour, here’s why planning your taxes early helps. Once you get your taxes done, keep your salary slips and relevant forms handy so that you can submit them to your tax professional at the earliest.
Task #5 –Make a budget
While the above tasks have a long-term perspective, you need to have a short-term outlook as well. In the short-term, you need to make a budget and stick to it. Given the lockdown and the falling economy, your incomes might take a hit. You might also face a salary cut. So, try and minimize unnecessary spending. Try and pool your resources while cutting down on expenses so that you are prepared or any loss in income. Here are some simple ways of doing it.
While you may not be able to solve your problems in one conversation with your spouse, it is a significant start. The sense of togetherness it can give you to face difficult times and enjoy the good ones is a bonus!