10 Tips for Managing Household Finances for Young Couples

Financial problems are one of the problems that often arise in domestic life. When you decide to live as a couple, of course, it requires adjustments in various ways. One of them is the financial aspect that becomes important to think about and work on together. This is often a question for young couples: do you think they can become a smart couple to manage household finances later? For this reason, young couples who decide to settle down must know how to manage household finances to remain harmonious.

The Importance of Managing Household Finances

Why is managing finances important? When talking about money, you and your partner must be open and transparent. By managing household finances together, you are trained to be disciplined by making a household budget, and of course this requires smooth communication. Not only that, by being smart in managing household finances with your partner will guarantee future financial plans. Because to have a decent life and a future, knowledge of the allocation of funds must be set aside from income every month.

And the most important thing is that managing household finances will keep you out of debt. Because you and your partner already have an allocation of funds that will later be used for main needs, to as healing needs!

How to Manage Household Finances

Many factors affect household financial cash flow. Therefore, it is important for you and your partner to get to know in advance the current financial condition in the following ways:

1. Calculate all your and your partner's income

To manage household finances effectively, you and your partner must calculate all incoming income for one month. The income in question is monthly salary income and includes incentives obtained when receiving overtime pay or profits from investments.

2. Analyze your needs and lifestyle with your partner

At this stage, you should be able to understand what your needs and wants are. When you are married, there are certain needs that must be met, such as the need to eat, the need for electricity, water, and transportation. MAGI suggests that to be able to manage household finances, the first thing that needs to be done is to understand the differences between needs and wants. First, fulfill the needs of the new household, then allocate money for personal desires.

3. Open communication regarding financial allocation to each other

After knowing all the income for one month and understanding the needs and lifestyle of your partner, you and your partner should make a list of priority expenses and how they are allocated. Not only that, if you or your partner are included in the sandwich generation, which helps the family with daily expenses, then this must be informed to your partner. Especially if there are costs that must be met, such as self-care costs, you should tell your partner openly to manage household finances better.

4. Set goals for the future

If you already know your financial condition, then you and your partner will find it easier to manage household finances. Tell your partner about your dreams and vice versa, then share your hopes for the future. With this dream and hope, it will make the allocation of funds easier when managing household finances.

Also read: Becoming Financial Freedom at a Young Age, Here are Some Tips!

Tips for Managing Household Finances

Check out the following tips to succeed in managing household finances for young couples.

1. Communicate and be open with your partner

If you have a family, it's no longer the time to open a conversation about household finances with your partner. If you didn't have time to do it before, take the time this year to be able to chat about finances regularly with your partner. If necessary, make a budget together at the beginning of the month. Review together at the end of the month. Each must be honest and open about the existing financial condition. If there is a problem, sit down together and find the best solution.

2. Designing a Monthly Budget

Make sure you have a monthly financial plan. Where should you and your partner's money be allocated, and what are the needs that must be purchased every month? Many experts suggest considering the ideal ratio when determining overall household costs. Therefore, experts recommend that you adopt the 50/30/20 rule to budget for after-tax income. The focus is on 3 areas of spending: living or household needs, flexible spending, and long-term financial goals.

Allocate 50 percent of income for living or household needs including utilities, food, transportation, and gasoline
Allocate 30 percent for flexible spending. This category of expenses includes things that are wanted even though they are not needed, such as birthday gifts, movie tickets, gym memberships, morning coffee, and so on.
Allocate 20 percent for long-term financial goals such as emergency funds, pension funds, education funds for children, and to pay off all debts

3. Record All Household Expenses

You must have a record of all household financial expenses. Record regularly to ensure expenses are not greater than income. You can record expenses on financial statements simply by recording them in detail and grouping them into various categories.

4. Determine Priority Spending

After you and your partner know household expenses in detail, you can analyze the most frequently incurred expenditure categories and track whether these categories are priority spending categories or not. To manage household finances, you and your partner can sort priority needs / expenses and prioritize these needs compared to others.

5. Set aside for an emergency fund

When household finances can be analyzed and managed properly, it is advisable for you to set aside an emergency fund. Since the pandemic, an emergency fund has become something that really must be prepared for and cannot be underestimated because it will help household finances if there are unplanned events in the future.

Reporting from the Bibit page, for those who are married and have children, prepare at least 12 months’ worth of monthly expenses. The list of expenses to calculate the amount of emergency funds that must be prepared includes basic needs such as daily consumption, monthly routine bills (electricity, internet, and water), transportation, house rental payments and costs (if any), and debt expenses such as mortgage installment loans. This expense does not include entertainment, such as holidays, because it is not a mandatory expenditure.

The best way to collect an emergency fund is to allocate 10% of your monthly income (salary) until your emergency fund is collected. However, it also doesn't matter if you can only collect under 10% of your salary every month. Because the most important thing is to be consistent and have clear targets so that you are ready if there is an emergency.

6. Family Protection with Health Insurance

Health insurance is one of the products that guarantees your family's current and future health needs. Did you know, based on research from a report titled MMB Health Trends, the increase in the cost of hospital care estimates an increase of up to 10% in 2022—four times compared to the forecast of the general inflation rate for the Asian region. Health insurance will help households finance the unexpected leakage of hospital care costs. More conveniently, many health insurance plans offer a variety of benefits that you can choose according to your needs and financial capabilities.

Also read: Important, Health Insurance benefits that must be known

7. Start Investing

If you are smart in managing household finances, let's start planning for the future by investing. Reporting from the CIMB Niaga page, investment is the process of developing money owned to get more profits. Because it has more benefits, the risk is also greater. Therefore, you and your partner must first understand the concept of investment and the risk profile you have.

Starting from compiling long-term plans and rules for funds needed for investment, you and your partner can choose investment products according to financial goals. There are 2 types of investments for beginners for millennial couples:

First: Investment in real assets or tangible assets outside the financial sector such as gold, land, to property such as apartments for rent back.
Second: Financial assets in the financial sector where there is a commitment to increase assets in securities issued by the issuer. Examples such as stocks, deposits, and bonds.

8. Maintain Debt Ratio

Avoiding debt is one way to live calmly. However, if there are several factors that make you and your partner must go into debt, do the following tips:

Make sure to owe money for basic needs, such as mortgages or house installments, vehicle installments and others
Keep the debt ratio no higher than 30% of your income so that your financial plan is not disrupted

9. Find Additional Income

As living beings who think about the future, of course you and your partner must develop each other. If you feel less and want to live more comfortably, then start looking for additional income. Extra income can be a lifesaver if you can no longer rely on the main income. There are many ways you can do to get extra income, you know! Like by expanding your network of friends, that way you will connect with wider people and can open opportunities for cooperation. Or you could be pursuing a hobby that you like to make money.

10. Consistent and Disciplined

If you have made a budget and determined goals and priorities, the next step is to be disciplined to achieve them. Invite your partner to commit to what has been planned. Thus, priorities can remain while other needs are also met.

Manage Household Finances with MAGI Health Insurance

In order for you to manage your cash flow so that it remains stable, you must have stable income and expenses. Well, to ensure you and your partner can achieve financial goals together, you must still maintain good health. Not only by preventing you and your partner from getting sick, but you also must ensure the cost of treatment at hospitals and clinics if there are emergencies so as not to interfere with household financial arrangements.

One of them is to have health insurance for the family. With SmartCare Executive Health Insurance from Mandiri AXA General Insurance (MAGI), you can manage household finances more comfortably and be free from leakage—leakage of emergency costs caused by health costs. Not only that, SmartCare Executive offers a variety of benefits, including extensive protection, at affordable premium costs. You will get a health insurance card from SmartCare Executive that can be used at all MAGI partner hospitals and clinics easily and conveniently.

*Promo code is only valid for direct purchases on AXA Mandiri myPage until December 31, 2023

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