Newlyweds and finances

UncleL1228 · May 2015

Hey all,

Recently married and looking to put together a financial plan for my wife and myself. Would love to hear from the community about what kind of financial struggles they faced and what they wished they would have done early on. Also, anybody who has had success communicating about financial successes with their spouse please share!

noffgurl · May 2015

Welcome! I wish we had actually gotten smart about our individual finances before getting together. Neither of us had good financial role models growing up and we put ourselves into a really bad hole for a couple of years.

AprilZ81 · May 2015

Welcome!

I'm also a newlywed (married since January 2014) and it really helped that we had frank discussions about our finances before we got engaged to make sure we had similar priorities and money handling skills.

The biggest thing is to have open and non-judgmental discussions about your individual finances and how you are going to handle your finances as a couple. Do you want to keep individual accounts or merge everything? There is no right or wrong answer as long as you both agree and it works for you guys.

Next, I would recommend creating a budget that works for you and focus on getting used to the budget before you go making a large purchase (new house, large tv, etc.).

We decided to fully merge finances and we created a joint budget that includes different savings accounts for ROTH contributions, Christmas/gifts, vacations, car repairs and general savings along with our normal monthly spending.

We use a smart phone app (Good Budget) to track all of our purchases to make sure we stay on track.

Together we decide what to do with any extra money that comes in (3rd paycheck in a month, tax refund, bonus, etc.). We bought a house a year ago and so far extra money has been going into upgrading/replacing items in the house.

short+sassy · May 2015

Great advice already from the other PPs. You and your wife need to both guard your credit like it is gold. Paying bills on time and keeping your CC utilization under 25% of your credit lines are two of the biggest positives right there. Become knowledgeable about what constitutes a good credit score. You might be surprised.

brij2006 · May 2015

I wished we had read Dave Ramsey's, Total Money Makeover right after we got married. It would have helped us get on a better financial plan from the start, and not make some financial mistakes that we later paid for.

UncleL1228 · May 2015

Do you guys follow Dave Ramsey now? Has that worked for you?

UncleL1228 · May 2015

What kept you guys from coming together financially? What other financial obstacles have you faced? Are you doing anything now to make things better?

als1982 · May 2015

I would suggest talking about your financial behaviors (are you a saver or a spender, are you ir/responsible with a credit card, etc.), current financial situation (any debt, retirement or other savings, etc.) and future goals (do you want to retire early or plan to work late into life, have kids, and if so, if one spouse will stay home, etc.).

From there, I'd suggest you talk about budgeting. Some budget big picture, while others account for ever dollar. Buget can be for the month or by the paycheck. Just find a system that you both agree on and will work for you.

ETA: Sorry to not answer a big chunk of your question, but we have yet to have any issues with money or communication. Primarily because we did all of the above.

dragonstarjk · May 2015

My advice is to figure out what is already working and stick to it; don't feel like you have to change everything financially because you got married.

Example--H and I lived together for several years before getting married, had separate accounts, had already gotten our finances and budgets in order, and were trucking along quite nicely. We decided not to merge accounts or anything like that because we felt it could possibly create unnecessary stress.

I know several people who get joint accounts just because they got married and that is what they are 'supposed' to do. I have nothing against joint accounts-just make sure you are doing what works the best for you guys instead of doing something just because it's what everybody else does.

abrewer5 · May 2015

My advice is to be patient. Before my H & I got married we bought a house together, I wish we would have waited longer until we had at least 20% down and we were able to buy a longer term home. We also had a lot of updates we wanted to do on the house and now that we're about done after 2 years of living there I think about all the money we've spent so quickly. I wish we would have slowed down. We are holding off the last few projects for a couple years until we build our savings back up.

Also communicate openly and be patient with each other! Going into it you may not have the same views on money or how you spend it/save it but you have to work together on a plan that works for you. H and I don't combine finances and that works for us. We have a joint account that our mortgage comes out of, but other than that everything is paid individually.

If you are already in debt, especially consumer debt, I agree with @brij2006 check out Dave Ramsey TMM you don't have to follow it completely (thou some will disagree with me on that) but it really helped open my eyes on how to save money and pay off debt quickly.

Congrats on your marriage!

UncleL1228 · May 2015

Do you guys have access to each others accounts or are they completely separate? I.e. you can see what he spends and he can see what you spend etc...

UncleL1228 · May 2015

In your experience what has been most effective and why?

short+sassy · May 2015

I personally don't. He is too harsh for my own comfort level. But a lot of the other posters on here do and there is definitely something to be said for his methods.

For example, I do really like his "snowball" method. The idea being to pick a debt to tackle first, throw any extra money toward that debt until it is paid off, then move on to the next debt in line and do the same thing...except now you also have whatever the first debt's payment was to add to your extra money, since now the first debt is paid off.

UncleL1228 · May 2015

Thanks @abrewer5! What were some words/actions you used to communicate effectively? How did you guys come together with a plan for a down payment?

dragonstarjk · May 2015

UncleL1228 said:

Do you guys have access to each others accounts or are they completely separate? I.e. you can see what he spends and he can see what you spend etc...

We do not have access to each other's accounts. We have worked out who is responsible for paying which bill, and we trust each other to pay those that we are responsible for. Anything either of us has left over after paying all the bills we are responsible for is considered our own 'fun money' and we don't monitor how each other spends that. As long as H is paying his bills, funding retirement, and contributing to savings, I don't care what he spends his leftover money on. And vice versa.

The savings accounts are in my name only; however, we refer to them as 'our' accounts. I don't spend anything out of savings w/out discussing it with H.

We usually revisit bills about once a year around the time we are both up for raises, to make sure we still feel that what we have worked out is fair to both of us. We have had zero issues.

UncleL1228 · May 2015

@short+sassy what aspects of DR do you think are too harsh? What are some approaches you would prefer to finances and money as compared to DR?

UncleL1228 · May 2015

Also, do any newlyweds on here do any investing in the stock market other than retirement accounts? Why or why not? Any suggestions?

hoffse · May 2015

Off-hand, here are some things we dealt with - we just passed the two year mark for marriage:

1) Creating a joint budget. Harder than it sounds. Part of this is recognizing that things you care about may be meaningless or worthless to your spouse and vice versa. Example: H likes paying for cable. I don't care at all about cable. I like paying for things like curtains, throw pillows, decor. H doesn't care about this. We have created a budget to take both of our priorities into account, and we have had to work hard not to judge a "wasted" expense by the other person - cable might be a waste to me, but it's not to my H.

2) Lopsided debt. H and I are both lawyers. We both have law loans. His are twice as much as mine. After getting married we decided that his debt would be my debt and vice versa. Many times couple who face this grow resentful, but H and I are determined not to do that. Eventually all the debt will be paid off, and my H's earning potential is actually a lot higher than mine anyway. He has rainmaker qualities, and I do not (nor do I care to try).

3) Lopsided incomes. H took two years off between law school and college, so I'm two years ahead of him in practice. That means that for a year of our engagement and the first year of marriage, I was the one actually earning "our" money. I struggled with that a little bit at the beginning, but I did manage to get comfortable with that notion before he started working. I still make more than he does (since I'm two years ahead), but that's not going to last for very long. Eventually, the tables are likely to turn and H will be the one making a lot more than me. This is one of those things that evolves through a marriage and a career.

4) Planning. We have made sure that we are each other's beneficiaries and that both of us can access the accounts of the other. We have decided to go as far as you can legally go in sharing ownership - all of the accounts that can be joint are joint. Our retirement accounts can't be joint, but we both have trading privileges on the other's account. If one of us needs to get in and start liquidating in an emergency, we can both access everything.

5) Risk tolerance & Debt aversion - Thankfully, H and I tend to be similar to one another on both of these, but these two issues are biggies that can cause a lot of trouble if you don't get on the same page and/or respect the wishes of your spouse. If you stick around, you will see that very rational people on this board disagree with each other on how aggressively you should invest and also how much debt you should carry. There's not a right or wrong answer - it has to do with your emotional relationship with money. You guys need to figure out your feelings on this together to make sure you can come up with a plan that is emotionally comfortable for both of you. If you find that you two are very different, respect the feelings of the other person.

Whatever you guys do, make sure to be on the same page with your goals and priorities. I think the hardest thing about finance in general is figuring out the best way to allocate your money to things you should do (retirement), things you have to do to not go bankrupt (pay debt), and things you really want to do (vacation to the Maldives). The pie can only be split so many ways, and figuring that the best way to do that for you as a couple is probably the hardest step.

UncleL1228 · May 2015

@hoffse thank you!!!! very helpful

abrewer5 · May 2015

@unclel1228- We actually got a loan program for our area that did not require a down payment and did not have PMI insurance either, so we didn't put anything down. Because we keep finances separate I paid for all the inspections/apprasials when buying and he paid for the remaining closing costs that the seller did not cover. It ended up being about even for us.

We do not have access to each other's accounts. We have a general idea of what each other spends money on and how much we each make, but for the most part we don't talk about it unless it's a joint financial decision (ex: when we got new carpet in the basement). We do have a joint account that we put tax refunds, wedding money, or joint money in, and we discuss anything comes out of it. Otherwise we have our own savings and we split when we go out, so he'll pay one time and I'll pay the next. I'm not saying this works for everyone but it works for us.

I think a big part of coming together on finances is track everything you spend for a month or two to get a baseline, including coffee stops, lunches at work, gas, etc, and then catagorize everything. You need to know where your money is going and then formulate a plan.

dragonstarjk · May 2015

If you decide to maintain separate bank accounts, it is critical that you list each other as beneficiaries on your accounts. Also, I would recommend knowing the rules of your banking institution in case anything happens to either one of you.

In our case, H and I are each other's beneficiaries on all accounts. If one of us was to pass away, we would just need to provide identification and a death certificate in order to claim the funds in the account. A death certificate in our state only takes a couple of weeks to receive so it's not a big deal to us. If it would be a huge problem to either of you to not have access while you wait, that is something to consider as well.

brij2006 · May 2015

We live by Dave Ramsey's TMM methods now. It has made our marriage 500% stronger, honestly. Now we have a plan and dream together. Not that our marriage was bad before or anything, but it was just different. There was a lot of tension because of finances. We both make good money, and wanted to spend to match it.

Personally, we combined finances a week after we got married. Everything is open to each other, and we discuss financials constantly. Anything over $100 (besides groceries), was discussed before purchasing. Now we have a very strict budget, and we both discuss and decide on it at the beginning of the month. If a category is getting close to being gone, then we discuss where we can cut from in order to make up for it. Or if we're willing to put a little less toward our other goals in order to add more to that portion of the budget.

short+sassy · May 2015

UncleL1228 said:

@short+sassy what aspects of DR do you think are too harsh? What are some approaches you would prefer to finances and money as compared to DR?
I'll be honest, my info about DR comes from this board and articles I've read about his methods...but I've never read his books. But the impression I've gotten is he is very debt-adverse. That the only debt one should take on is for a home. He also advocates living pretty strictly for a period of time in order to become debt-free.
While I agree it is very important that people live below their means and set money aside for emergencies and retirement, life is also woefully too short.
It's sometimes a fine line between preparing for the future and enjoying the present and that "line" will be different for everyone. I definitely fall heavily on enjoying the present, but I'm also in a place in my life where my bills/debts are much less than my income...pathetic though it is, lol.
For example, my car was totaled a little over a year ago. I could have taken my insurance settlement and bought a used 5-10 year old car with cash. That is what DR would have told me to do. But, instead, I bought my dream car...a convertible MINI Cooper. I still bought it a few years old to save money, but needed a loan to buy it. Yes, I have car payments, but the car payments fit comfortably in my budget and I'm driving a car I absolutely love.
Depending on a person's situation, I also think investing money instead of throwing it at debt is sometimes the better play. For example, if I magically had an extra $6,000. Would it make more sense to pay off the (above) car that has a loan with a 3.9% interest rate or does it make more sense to open a mutual fund that has been averaging 12.7% returns over the last 10 years?
I do think mutual funds and/or stocks are wonderful vehicles for increasing one's wealth...especially if you are young and have the time to let your money grow over the years. I'd suggest, if you haven't already, learning some of the basics of stock market analysis. And initially sticking with mutual funds...which are typically a group of many stocks...because they are usually less volatile than buying a single or a few stocks.
Balance is the key, though. And you and your wife need to sit down and work out what the right balance is for the two of you between bills, income, retirement, savings, debt, etc. It also should not be a one-time conversation. Review where you are as time progresses and/or as life changes.

hoffse · May 2015

UncleL1228 said:

@short+sassy what aspects of DR do you think are too harsh? What are some approaches you would prefer to finances and money as compared to DR?

I don't follow DR for the following reasons:

1) The $1,000 emergency fund is way too low for my comfort level. I think you need enough - at minimum - to cover all of your insurance deductibles at once. Example: a few years ago a friend of mine was in the Tuscaloosa tornadoes. Her house and car literally blew away. She and her two children had to go to the emergency room. Thankfully everybody was ok. She had an emergency fund large enough to cover the deductibles on her house, car, and health all at once.

I think you also need to be able to cover a major home repair once you become home owners. When the A/C dies in the middle of summer, your insurance will not replace it, and it will likely cost upwards of $5K to have it replaced.

2) He puts retirement too far down the totem pole for me. I think retirement comes after credit card debt but before anything that's relatively low interest (for me, probably 10% or less). When you are young, the most valuable thing you have is time. Funding retirement when you are young - and yes, probably in debt - is crucial if you don't want to be making up for it the rest of your working life.

3) I disagree with the notion that all debt is bad debt. I'm into debt leveraging - I borrow low so I can invest higher. For instance, we borrowed the entirety of H's car last year even though we could have paid cash for nearly the entire thing. Our interest rate on that loan is 1%. Not only did it save us from cashing in $20K of savings all at once to buy a depreciating asset, but we've been able to start investments with some of the savings we didn't spend. We have since earned way more in the market than what we are spending on interest for that car.

4) People forget that Dave Ramsey went bankrupt. That's formative and has had a major influence on how he approaches money. There's nothing wrong with having an experience like that shape your approach, but it's important to keep it in mind when reading his stuff. Money is an emotional thing, and he's not immune to it.

5) Total Money Makeover was published in 2003 - that was before the financial collapse and well before the financial recovery. It needs some serious updating.

hoffse · May 2015

I will second making sure you are beneficiaries on each other's accounts if you keep things separate. I also think it's important to either have a joint emergency fund or keep enough in each separate account to cover expenses for awhile if you stay separate. It can take banks awhile to process death certificates and transfer accounts to beneficiaries. Having to worry about making ends meet while grieving is probably the worst thing I can think of.

A scenario that could be even worse - if you can imagine such a thing - is your spouse being incapacitated. The beneficiary won't be able to get a death certificate, and it will take a court order for you to become a guardian and unlock the accounts. That could be months.

Joint accounts don't have those restrictions as long as one owner is still alive and able to make decisions.

Not trying to scare you, but make sure you are both prepared to handle a situation like that if you keep everything separate.

hoffse · May 2015

I should add: I think DR is great for people who have credit card debt or who are drowning financially and need a life raft.

I just think that for those of us who aren't in that situation, it's too harsh. He takes debt payoff to its logical extreme, and not everybody needs that.

formerlyGDaisy09 · May 2015

We got married in July 2012, we built a joint financial plan slowly, before we got married, we lived together for 2 years before our wedding and started slowly by sharing things like rent and grocery shopping then 5 months before our wedding we purchased our house, so at that time we implemented our joint budget that we continue to operate and make small improvements on now.

Get on the same page about priorities, what are you saving for (definitely prioritize both your retirements), what debts are you working to pay off, what is important to you in your everyday living? build your budget around those priorities, being practical about what you spend on things like groceries.

We still struggle with the whole my money/our money thing. We work really hard to keep resentment out of things, our debts are shared, our income is shared and we strive to continue to look at things that way. In reality H's debts make up about 60% of our total debts, and his income accounts for 40% of our income (that ratio is improved, when we were first living together his debt made up about 80% of our debts and his income was still about 40% of our income...obviously paying down his debts has been our priority). Sometimes I still have a hard time with those ratios, however he contributes to the household in other ways like arranging all those house-related appointments (filling the propane tank, being there for repair people, maintaining the yard, keeping all our files in order, paying household bills...)

I basically agree with Hoffse about Dave Ramsey, we used some of his techniques to get on top of H's credit card debt (we did not read TMM). however I think his methods were too intense for us to use on our lower interest debts (student loans and a car loan). We are using "Dave Ramsey light" to accelerate our student loan pay off a little bit.

I think the key is to talk about your money and how you're spending it regularly, be willing to compromise, and make sure you're both on the same page.

UncleL1228 · May 2015

brij2006 said:

We live by Dave Ramsey's TMM methods now. It has made our marriage 500% stronger, honestly. Now we have a plan and dream together. Not that our marriage was bad before or anything, but it was just different. There was a lot of tension because of finances. We both make good money, and wanted to spend to match it.

Personally, we combined finances a week after we got married. Everything is open to each other, and we discuss financials constantly. Anything over $100 (besides groceries), was discussed before purchasing. Now we have a very strict budget, and we both discuss and decide on it at the beginning of the month. If a category is getting close to being gone, then we discuss where we can cut from in order to make up for it. Or if we're willing to put a little less toward our other goals in order to add more to that portion of the budget.

What were some of the hardest parts of following TMM?

simplyelise · May 2015

We got married October 2014 and we didn't live together until after the wedding. During the engagement we both agreed on how we wanted to handle our finances. We are currently following DR while we pay off student loans (only 37k left!). We'll be done with debt next July and then we will probably only follow the DR plan in spirit (still won't go into debt except the mortgage, but will definitely look at some different investment ideas).

I think pride is a big issue that you have to work through before you can communicate well about finances. I didn't have any debt, made about 38k, had 8k in the bank and was saving for retirement before the wedding. DH had 54k in student loans, no money in the bank and was making about 42. Then a couple months into marriage he was unemployed for 2 months. We both quickly had to get to the point where we saw ourselves as one team, not two competing teams. Sometimes one of you has to pull more weight, but keeping score of that is only going to end badly.

Even if you don't end up doing the Dave Ramsey plan, I do really recommend the class because it gives you a mechanism for conversing about some of your long term planning decisions and also your day to day spending. Knowing what your general long-term goals are for kids, property, education, and retirement is absolutely necessary for you to decide what your short-term budgeting needs to look like. Too many people just spend their money how they feel and then once they get pregnant they realize they want/need a house and they are not financially prepared for that. Or one wants to stay at home with a new baby but they bought a house assuming two incomes.

My personal advice is to combine all (or almost all) of your money. Some people say that having some money separate helps them because then they or their spouse can spend that money how they want without a fight. I just think it turns the fight into quiet, bitter resentment. If DH and I had separate finances and I saw him blowing $50/week on eating out and drinks while he had 54k in debt sitting around, I'd be pissed. Separate finances may work for some people, but my anecdotal experience is that most of the time people keep finances separate, one of them is unhappy but quiet about it.

In general, I think it's good to start out with some basic questions: where do we want to be in 5/10/20/30 years? What kind of careers do we want to have (ie life-work balance is priority OR achieving career goals OR advancing with education)? Then you plan backwards to see what you need to do financially to get there.

Above all, you need to be planning your spending together.

Sisugal · May 2015

Two good books to read
Good for getting out of debt: Dave Ramsey's Total Money Makeover
Good for getting on the same page financially with your partner: David Bach's Smart Couples Finish Rich

My basic financial advice
TALK about finances and review them together monthly
No financial secrets
Know how much is coming in and how much is going out (track )
Do NOT spend more than you take in!!!! Save for items rather than putting them on a credit card.
ALWAYS save SOMETHING from EVERY paycheck.
Fund retirement and NEVER borrow from it.
Get out of debt.
Pay off your credit cards monthly
You can buy just about everything for less than the selling price.
Borrow, rent or buy used to save additional $.
Learn to cook and eat home - limit eating out.

brij2006 · May 2015

@hoffse Just so you know, the latest version of TMM was published in 2013.

@uncleL1228 There are seriously so many hard parts of following TMM. It isn't easy. Not by any means. But really, the only way to get out of debt is to attack it with a vengeance and put every bit of money possible toward it. However, we understand that money is all about your behavior with it.

So really, I can narrow it down to 1 of the hardest parts that is still a struggle after 15 months of doing this; The push back from others when they find out what you're doing. I can't tell you how many times we've had to defend what we're doing. So many people are quick to give you every reason possible as to why it's good to have debt, and justify it. Or why the TMM is financial suicide. Seriously, we used to be these people too. We used to justify our debt and say that our money in savings made more interest, so we would buy something on 0% interest with a payment than use the cash we had.
Now, we're those people who say no to friends and family when they want to go out to eat. We aren't shy at all about it either. We flat out say, "sorry, we would love to go out to dinner but we don't have enough in our eating out budget to go."
We also aren't shy and have it posted on our fridge how much debt we started with, and we have shaded in on the chart, how much is paid off. It is great to talk with friends about financials and say that we have a $8,000 and a $5,000 car paid for. They think we're crazy and think that in the end we'll have debt again, but we will never ever have a car payment again. That's the whole purpose of his plan. Instead we'll have cash. Lots of cash in our monthly budget to tell what to do. Whether it's using it toward saving for newer vehicles, a vacation, a home remodel, or whatever. It isn't money that HAS to go toward yet another payment. Which is hard to get through to people, and I would say that 90% of people are against what we're doing.

So yeah, that's the hardest part of this.

Granted we had a struggle before we chose to do this. We began trying for a child and found out just a few months in that I had a medical condition that wouldn't allow us to conceive without assistance. We went in for testing and to start treatment and learned I did not have health insurance coverage for infertility. So we were 100% out of pocket. We did all of the testing and 1 round of treatment and got pregnant. Unfortunately we lost that baby, and were still 100% out of pocket to help take care of our miscarriage. After all was said and done, we depleted $10,000 of our savings within 5 months. When the doctor asked us if we wanted to go ahead and start another round we had to say no because we financially could not do so. Then we sat down and figured up how long it would take for us to save up to pay for another chance, and it would be over 1 year. We just kept thinking of how we would have that amount of money in just 3 months if we didn't have our car and student loan payments.
In the end, we wanted a child more than we wanted payments.

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