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The Double Income Edge

These days, it is a rarity in the metros and, to a great extent, in the smaller towns in India, to find young couples or families with a single breadwinner. In these times of rising inflation, a family with both partners working always has a greater economic edge than one with a single earner. The fact that working partners also share household responsibilities only adds to the comfort level.

HOLDING BACK

True, couples with dual income are financially better placed than those with a single income, but financial planning is equally important for them. If things are not planned, they could lose the advantage over single income families. So, before going on that long vacation, or buying that rock-sized solitaire, plan your savings.

SPEED BREAKERS

Attitudes and perceptions towards money, savings and investments differ across individuals. Thus, one partner may prefer to live life king size, while the other may want to save first and then spend. Besides, sociological developments could make some yearn for financial independence more than the other. Spouses need to have better understanding of each other to overcome these differences. The essence is to work towards common goals.

THE UNDERSTANDING

Financial responsibilities should be distributed in such a manner so that individual expenses, such as those on clothes and accessories, as well as on common goals, such as children’s education and their retirement, are well taken care of. That said, both spouses should try to maintain individual financial independence at all costs.

THE FIRST STEP

Having an emergency fund always helps. This could either be in the form of a savings account, or short-term or liquid mutual funds (MFs) which can be accessed at short notice. Both spouses can maintain separate bank accounts. However, they should have separate savings accounts earmarked for emergency needs.

PROTECTION

Even before one starts saving, it’s important to be adequately covered for health insurance. For younger families, a family floater health plan works well. Where both partners are working, individual life covers are even better. This ensures that in the event of premature demise of one partner, the surviving spouse is able to maintain the lifestyle. The person with higher income should always buy insurance so that the family can survive even when the higher income is no longer available. Both working spouses should plan things in such a manner that if either of them dies, the surviving partner receives proceeds which can generate at least 70 per cent of the current total living expenses.

INVESTMENTS

The basic rule to follow is income minus savings. What’s left is to be used for non-discretionary household expenses. That said, both partners should identify their short- and medium-term goals and save accordingly. Long-term savings, especially in tax savings investments, should be linked to long-term goals. Each spouse can earmark his or her savings to a specific goal. Buying a house jointly will help both of them in claiming tax benefits. Other things, such as keeping proper nominations in investments, holding deposits in ‘either or survivor’ mode, and planning retirement savings keeping in mind the higher life expectancy of women, is common for both singleincome and doubleincome families.

CONCLUSION

Keeping the money management transparent will avoid frictions at a later date. All said and done, both partners should strive to balance their worklife with family liabilities.

Next To Come: Don’t mix Finances