Relationships and Money, Couple 4: Patricio and Carmelita

Today’s Relationships and Money spotlight is a guest post from my good old friend Patricio and my wonderful new friend, Carmelita. Because being a priest comes with unusual benefits (housing) this management strategy might resonate with some of you whose jobs have perks outside of typical paychecks and benefits. Patricio and Carmelita also are adjusting to future parenthood, which means changes in money priorities. Enjoy!

 

Subjects: Patricio, 30 a priest in the Episcopal Church and Carmelita, 26 a barista at a local bakery & coffee shop.

We have been married for a year and a half, are expecting our first kid in October and have a puppy just a little bit older than our marriage.  My work provides us with a nice two-bedroom house and covers all of our utilities except for cable (they keep 1/3 of what my salary on my paper is in exchange for this).

I make about three times as much as Carmelita.  Since my work provides housing our main financial concern right now is the baby on the way.  I drive a small convertible, not even close to a family friendly car, so replacing this is a baby-related cost we’ll have soon.  Getting our own place is a long-term goal, just one we fortunately don’t have to think about any time soon.

Since I graduated from seminary I have meticulously kept track of my of all my income and expenses on a nifty excel chart I found online and adapted to my needs.  After we were married we added Carmelita to the bank accounts I already had but she kept hers since she already had direct deposit set up and her parents would monthly deposit money to her account as their way of paying for a car they bought her before we were married.  This made keeping track of our expenses overly complicated, every month she would cut me a check to cover our credit card bill* and my nifty excel chart was off because money was all over the place.

 

At the beginning of this year her work changed over their payroll so we took advantage of this and streamlined our stuff.  Her old account is now basically an emergency fund, nothing is going in to it (the car was paid off at the beginning of this year) and very little comes out of it.  Our income tracking is now accurate and as long as I spend a little time each week or so at it so is our expense tracking.  We don’t really work with a budget instead I know the trends of what we spend and what we earn and we’re able to make that work.  We easily can see if we’ve been dining out too much, or if we’ve been spending too much money on stuff for the house, or whatever, and lay off whatever that is, or on the flipside if we haven’t gone out to eat in a while we can treat ourselves to something particularly nice.

 

By doing this, we have been able to donate ten percent of our income to our church, and a little bit more on top of that to various charities we care about.  Most months we have been able to put aside $500 into savings.  Carmelita has no student loan debt and I am down to about $5-6 k owed.  We overpay the amount on this by $50 each month, so I think my next payment is technically due sometime in 2016 and it will be paid off within the next two years, about five years ahead of schedule.  Another great part about my job, speaking financially, is the Episcopal Pension Fund.  As a priest, whatever parish I work for is required to contribute 18% of my salary to my pension.  I am able to contribute more, and have in years previous and plan to again but stopped this year since I began serving at a new parish and haven’t set it up yet.

 

A strict budget wouldn’t work for either us, we wouldn’t be good at constantly keeping track of what we’ve spent so far and how much we have left to spend.  But using our system and paying attention to trends in our spending we’re able to do most things we want to and still put aside a good amount.  Of course having a kid is probably going to change all this, but we’ll figure that out when it’s time.

 

*We charge almost everything, which I know can be dangerous.  We pay off the bill completely at the beginning of each month though.  So we have no interest on it and get points like woah!

 

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Money and Relationships: My Squeeze and Me

As my loyal readers will know, I moved in with my main squeeze two months ago. It has been just lovely, but it did bring up some new areas of discussion. We are not just roommates, but we are also not married and do not have legal rights to each other’s property. We aren’t ready for joint accounts yet, but we do have a lot of joint expenses. The bills at his/our place are a little higher than what I was paying before, but it is also a much better location and has a number of perks (like I get to live with my dreamy boyfriend).

Figuring out how we wanted to handle money together is not always easy, but we have had some good compromises and hopefully have figured out a system. It has been pretty pain free. (Ok, let’s be honest…it has been pain free for me because I love personal finance, but D does not love talking about money with me and I can see him squirming every time in bring up the subject with my excessive enthusiasm.)

So to give him a break from squirmily discussing our money, I will tell you all about the system we came up with:

-We set up a private googledocs spreadsheet (a la Lionel and Wilhemina) to track all of our mutual expenses. We put the receipts in a clip on the fridge and/or check our credit card statements, and fill in the spreadsheet each month. Whoever ends up having paid less writes a check to the other and then we start a fresh page of the spreadsheet.

-D is responsible for paying rent and utilities on time, because he lived here first so he already has the accounts set up in his name. We enter it in the spreadsheet and it goes into the overall expenses for the month.

-We pay the bills according to our take home pay. D makes a bit more than I do (but I negotiated my salary very successfully, I’m sure I’ll catch up soon!) so he pays a little more of the bills each month than I do.

We had a big discussion about whether we should divide the bills based on our take home pay or our pre-tax salary (aka, the number they tell you you are making when you get the job, not the amount you get on your actual paycheck). I contribute to my retirement accounts and my flexible spending healthcare account before I get my paycheck, but D is one of the lucky few who will get a pension when he retires, so he doesn’t contribute to a retirement account or a healthcare account.

I thought that I should be contributing based on our pre-tax amounts, because only I am benefiting from my healthcare account but (depending on our future together) either we both will benefit from my retirement savings, or just I will. D wanted to split bills based on our take home pay because he wanted to make sure I had enough to live on without feeling pinched.

It might seem a little ridiculous to be worried about this type of question because it doesn’t actually come down to very much money, but it it is important in our relationship that no one feels they are taken advantage of. This means that neither of us feels like we are paying more than we should, and neither of us feels like we always take out the trash.

Because we don’t know for sure where our futures will end up, it is hard to make decisions that deal with long term financial planning (like will D benefit from my retirement savings in 35 years? Hard to say.) It is difficult to be exactly fair with planning finances now, so we are doing the best we can and making sure we talk about it and we both agree.

-We have also started talking about long term savings goals together. We discussed the amount we are each putting aside (in separate savings accounts) for our savings goals, and we are in agreement on our savings priorities.

-I recently read that you should divide up tasks based on who is better at what in a relationship. In our case, that means I do most of the household shopping because I am a coupon rock star ($38 for $106 worth of home goods today, what what). He is an AMAZING planner, and he is great at taking advantage of Groupon deals and planning sweet dates and activities.

 

Our joint financial planning has just started, but I suspect it won’t be difficult to keep openly compromising. We created a system together, and if it doesn’t work, we will scrap it and create another system together. What is really important is communication, common goals, and that we care about each other more than we care about money. (Vomiting yet? Sorry not sorry!)

 

Paying for a wedding

Not in love? Not engaged? Not even dating right now? Living on a desert island with no hope of meeting someone you want to marry?

This post is for you.

The average age that women marry is 27, the average age that men marry is 29. The median cost of a wedding is $18k. (The average cost is $28k, but the VERY expensive weddings out there skew the numbers for the rest of us).

The number two reason for divorce is trouble with finances.

If you start your marriage off with $18k of debt, you are starting your marriage off on rocky ground.

Now, I am not a wedding planning expert. I have never been engaged and I have never planned a wedding (but I do watch a lot of Bridezillas, guilty pleasure). From what I understand, weddings very quickly escalate to being out-of-control expensive, even if you are still keeping things simple and aren’t a bridezilla. So while there are some things you can do to save money, I am not the person to lecture future married people on how to do it. (Except for my sister’s wedding we bought 12 vases from Goodwill for $4 total for centerpieces! Goodwill is an amazing place to buy vases. That is my only trick. And also if you are a bridesmaid, you should look at this website to see if you can buy/sell your bridesmaid dress, because really….you won’t wear it again and someone else can.)

There are a few ways to pay for a wedding:

1. Her parents pay

2. His parents pay

3. Marry rich and your squeeze pays (word of warning: my mom always says it is cheaper (in many ways) to borrow money than to marry for it)

4. Win the lottery

5. Start your married life off with lots of debt

6. Plan for it

I hope you know me well enough that I am going to encourage strategy 6.

Strategies 1,2 and 3 are all things that may reasonably happen….but as a full-fledged adult, it isn’t smart to expect your parents to foot the bill, and I have already shared my mom’s wisdom about marrying rich.

So as an independent, financially savvy adult, you must PLAN for how to pay for your wedding!

Now, this may be less than appealing. Why would you start saving for your wedding when you are still in the OKCupid-induced “I wasn’t sure whether to laugh, cry or run” phase of your dating life? Because you are smart. And you know $18k doesn’t grow on trees. And one day you want to have a wedding with an open bar. 80% of people get married by the age of 40, so statistically speaking, you will probably be one of those people. (No pressure, I’m just reporting facts here).

Here is a hypothetical timeline:

Age 23: Go on date with man who tells you he used to have pet rabbits but he accidentally drowned them.* Swear off of dating forever.

Age 25: Meet man who makes you laugh.

Age 25.5: Begin to suspect that the man who makes you laugh might be the man you want to make you laugh forever.

Age 26: Get engaged.

Age 27: Get married. Have open bar at wedding.

So when should you have started saving for this awesome wedding? Well, it depends on the other factors in your life. If you are having trouble making rent, you need to focus on taking care of the basics. If you are taking care of paying your bills, paying off debt, building an emergency fund and saving for retirement and you still have some disposable income- you can add saving for your wedding into your budget.

If you recall from my amazing post about Billy and Lilly, they saved as though they were still saving for their emergency funds. This is actually the most painless way to save for a wedding- after you have your emergency fund set up, keep saving at that rate until you have set up a wedding fund. You won’t even miss the cashola, because you weren’t used to spending it anyway!

If you feel like one day you are going to get married it is wise to start planning for that financially. You might want to save on your own, if you aren’t sure about who exactly you are going to want to marry (this is very smart but it is not very smart to mention your wedding savings plan on a first date…I would keep it under wraps, if I were you!) or you might want to start saving as a couple. (If you save as a couple you can each save $9k and take some of the pressure off!) One benefit of a long engagement is that you can use the time to adjust your spending for a year or two to save up for your wedding.

The point is- you can take some steps now (regardless of your dating status) to give yourself a financial leg up in the happy marriage department. Starting married life without wedding debt is a wonderful gift to give to your partner and to your future self.

 

 

 

*True story. Them=plural rabbits. I ran away in the middle of the date.

Relationships and Money, Couple 3: Billy and Lilly

Subjects:

Billy, 28 and Lilly, 25. Billy and Lilly are newlyweds who married last May. They rent a house, share one car and have a good looking cat.

photo-2
Meow!

Billy makes about twice what Lilly makes. Billy and Lilly have a few financial goals that they are working towards. They want to buy a house. In a few years they want to have kids. They want to have enough so that one of them can stay home with the kids. To meet these goals, they live off of Billy’s salary and save Lilly’s.

Billy and Lilly have all of their finances in joint accounts. They put everything in Mint so that they can stick to their joint budget. Billy is responsible for paying the bills (and by “paying the bills” I mean licking stamps and addressing envelopes (or setting up automatic payments), not being the sole breadwinner). Both Billy and Lilly have the passwords and access to all of their accounts.

They have a generous “Newlywed fund” that they set aside for themselves each month for date nights, vacations, new furniture- basically anything that they will both be involved in that is outside of their normal budget. They also have separate personal budgets (which totals about 1/3 of the newlywed fund for each) that they can spend on whatever they want- clothes, movies, books, games. They don’t have separate accounts for these funds, but they have the money factored into their budgets in Mint and they just tag the purchases appropriately.

They both had savings (emergency funds) all set up before they got engaged, so when they got engaged they reverted back to their old ways of aggressively saving. They were able to save enough to maintain their emergency funds and also save enough for a lovely wedding. Because of that (and with some family help) they were able to get married debt-free (which is a feat!)

The only problem they have encountered is that it is very difficult to buy surprise gifts for each other because there is total transparency in their financial system. In Lilly’s words: “Our method of keeping gifts secret is to say ‘Hey, don’t look at the Amazon order history for a few days.’ ”

Billy’s and Lilly’s system works for them because they are both savers and have agreed to the same financial and life goals. They were able to start off their marriage debt free, which laid the groundwork for a solid financial future. Now if only they could stop spoiling the cat…

Relationships and Money, Couple 2: Lionel and Wilhemina

Subjects: Lionel (31) and Wilhemina (29)

Lionel is in graduate school and Wilhemina is working as a short term contractor. Lionel is living off of loans and Wilhemina is living off of her salary (which is variable depending on whether or not she can get a contract extension, but it is generally renewed every three-six months). They are not married but have lived together for almost three years.

Lionel and Wilhemina have separate finances. They track their joint expenses in a google spreadsheet, with a column for what Lionel owes Wilhemina, a column for what Wilhemina owes Lionel, what the difference is and who owes whom. This way, they only have to pay each other back when the expenses get unbalanced. Lionel is responsible for paying rent so Wilhemina usually owes him each month. This works for them because Lionel has more flexible expenses because his student loans are disbursed in two large chunks each year.

If they go out to eat and intend to split the meal, one of them can just pay for it and the amount owed goes into the spreadsheet. This way they don’t have to worry about cash or writing checks to each other all the time. They have an easy online money transfer system set up so they actually never write each other checks at all.

When they first moved in together, they tried to keep track of groceries and other household expenses on the spreadsheet. They discovered that the expenses usually came out about even each month, so they decided to just take turns grocery shopping and not worry about tracking household costs.

The exception is if one of them has a big grocery trip (stocking up on booze, trip to Costco)- then it will go in the spreadsheet.

If they are having a date night and one person is treating the other, that does not go into the spreadsheet. They can always spot each other cash without worrying about one person being taken advantage of. Neither person feels like they always pay- they already have an easy system set up so that it is very easy to split the bill. This system has been working for them for a few years.

This system works for Lionel and Wilhemina because they have similarly tight budgets, similar spending habits, they don’t worry about counting every penny, they can each spend their own money on what they choose, and neither partner is taking advantage of the other.

Relationships and Money, Couple 1: Juan y Catalina

Subjects:

Juan (37) and Catalina (29)

Juan has two children from a previous marriage and makes twice what Catalina makes.

Juan pays child support and alimony directly from his paycheck. After that, Juan and Catalina put all of their money into a joint checking account. From that account, they pay their bills, save for mid-term goals and they save for retirement. They have a  budget that they have planned out together. They are aggressive savers and they are both on the same page about their long term goals of early retirement.

To deal with buying things they each want but don’t want to have to discuss, Juan and Catalina give themselves equal “allowances” each month from the joint checking account to their own private checking accounts. The amount is enough for both Juan and Catalina to feel like they can take care of their personal purchases. If Juan wants to buy one of these for every day of the week, he totally can without even talking to Catalina about it. But Catalina might pretend she doesn’t know him anymore. Such is life, Juan.

This system seems to work for them because:

  1. Juan and Catalina have agreed upon long term savings goals and both spend their money according to their shared goals. Neither of them have run out to buy a new road bike or a pair of Jimmy Choos just because they felt like it. They are committed to their goals and follow the rules they have made for themselves.
  2. Juan and Catalina have mutually decided on their “allowance” amount, and they both agree it is sufficient for their personal needs. Neither of them are forced to buy work clothes at Goodwill to stick to their allowance (although they can if they want).
  3. Juan and Catalina never have to have arguments over whether they spend too much on clothes, or haircuts, or stupid crap*
  4. Juan and Catalina pay their bills before they pay themselves their allowance. If they stray from their budget on a joint purchase or want to go on a joint vacation- they just lower their allowance and they are still on track for their savings targets.
  5. Mainly, Juan and Catalina are an example of a successful financial couple because they have taken the time to figure out a system that works for them. They have agreed on goals, budgets, and how to deal with personal purchases- but they had to sit down and have discussions about it before they could get to la felicidad financiera (financial happiness, it sounds nicer in Spanish, eh?)

* Is it worrisome that I actually own one of the items on this list of stupid crap? Maybe. But I also happen to think item #10 (baby mop outfit) and item #1 (send poop anonymously in the mail) are brilliant ideas.

Love and Money

Firstly, I want the world to know that when I was googling “How do couples manage their finances” to do a little background research, one of the suggested searches was “How do couples hold hands”. That is sad. Let’s stop googling it, people, and just give it a whirl. The worst that can happen is a little clamminess.

In my life, I hope to have a happy, functional relationship with clear communication and expectations. I am sure you all hope for the same. However, a major reason for divorce is trouble with money….and no wonder! Money is complicated, it comes with a lot of feelings attached, and people have differing values and strategies and goals for dealing with money. Dealing with finances as individuals is tricky enough, let alone letting someone else into the mix.

Here is an example from just yesterday when my boyfriend and I were in the car and had this conversation:

BF: My free subscription to XM radio should have ended yesterday [but the car still is playing XM]

Me: Make sure you aren’t being autobilled for it. How much is it?

BF: About $6 a month.

Me: That is $72 a year! Are you going to cancel it?

BF: No.

Me: Seriously? You would pay $72 a year for XM radio? We don’t even like any of the stations.

[Silence]

Me: Ok, I don’t like any of the stations.

BF: Plus, there are no commercials. I think that is worth $72 a year.

(Later in the day the XM radio actually did get cancelled and we learned that XM also provides live traffic updates to the navigation system. In our traffic-jam-filled city, that is well worth $72 a year to me, too!)

See what happened there? We have different values and opinions when it comes to money and music and radio commercials. This was a tiny conversation, but every time we buy something out of the ordinary we are going to have to have a similar conversation (provided, of course, we are consulting our partners on our purchases). That is a lot of navigation to do! $72 a year really isn’t a big deal, but one day bigger purchases will come into the picture.

Since I started writing this blog, I have been asking many of the couples I know how they manage their finances. The answers I have been getting back have varied quite a bit- as have the structures of their relationships. As I am only in one relationship, I can’t address how other relationships deal with finances. After my initial worrisome google search, I discovered that the internet also thinks this is a complicated topic (I read quite a few depressing stories, which is why I am even more convinced that writing about this is important!) I am interested to hear (as are my readers, hopefully!) how some of you deal with your finances as couples. Do you think your system works? Are there any tips or pitfalls? Would you be interested in writing a guest post (or just telling me the deets and I’ll write it up for you)? Comment below or email me at twentiesinyourpocket(at)gmail.com if you want to share.

Here are some of the things that can add complexity to financial planning as a couple (mind boggling, really):

  • One or both of you have kids. Maybe you have kids separately, maybe you have kids together. Maybe one of you has a kid from a former marriage. Who pays for what? Does your new spouse pay for the stepkids? Even if it’s the simplest situation (you each made half of each kid) it’s still complicated.
  • You might be committed but not married. How do you deal with buying property when you don’t have the legal protection of marriage?
  • One of you might make significantly more than the other.
  • One of you might feel like it is your role to “provide,” while the other partner may or may not agree.
  • One of you might have huge amounts of debt. Is your partner expected to pay for the debt left over from your shoe splurge? Is that what partners do for each other when they love each other? Or is that your responsibility?
  • One of you might stay home with the kids instead of working.
  • You might think your partner buys stupid crap.
  • One of you might come from money (please send me information on how you got that trust fund).
  • One of you might want to go to school instead of continuing to work. Along those lines, one of you might want to switch careers to a more fulfilling but lower paying job.
  • You might be a saver, your squeeze might be a spender.
  • One of you might be much closer to retirement than the other (this could be particularly contentious in May-December romances).

You get the idea. Lots of pitfalls. But my general philosophy regarding finances is “Make a plan and try to stick to it.” The only thing that makes couples finances different is that it should be “Agree to a plan and try to stick to it and then communicate with each other.”

My boyfriend and I are moving in together next month and we began the conversation about how we want to handle joint expenses. We are dealing with a few of the complications I listed above (sadly, no trust funds) and we are going to have to work out a system that works for us. As soon as we come up with a system we feel awesome about, I will let you know! Until then, I look forward to hearing from you about how you deal with love and money.

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