You, Him, and Money

[Marilyn. 340]

Learn how to avoid couples' most common financial problems -- with these insider tips from our Redbook Marriage Institute expert.

The number-one conflict in most marriages? Money. And newlyweds Matt Boyle, 29, a writer, and Louise Boyle, 33, a production director, are not surprised. Though these New Yorkers' combined salary is $150,000, "we barely break even. It's paycheck to paycheck," says Matt. Making matters worse, the couple has $30,000 in credit card debt. Plus, they borrowed $12,000 from their 401(k)s - their only savings - to help pay for their wedding last January.

As you can imagine, this couple's cash woes could eventually add a lot of stress to their marriage. However, Louise and Matt don't fight over money. Rather, some would say they're in denial about their finances and are avoiding serious discussions about where they are - as well as where they'd like to be - financially. "We talk about who is paying for groceries this week," admits Matt, "but not our long-term plans." Adds Louise: "We get frustrated at the end of every month. We should be saving for a house down payment." She has long wanted to do big-picture talking, but "I kept putting it off. Now I realize that delaying discussions only makes it worse."

These problems are common among newly marrieds, says David Bach, the best-selling author of Smart Couples Finish Rich and a Redbook Marriage Institute expert. "It's said that you should marry until death do you part; actually, it often turns out to be until debt do you part, because incurring huge bills breaks up more marriages than infidelity," he explains. So address money trouble before it gets major. To help the Boyles do just that, we teamed them up with Bach to learn the financial tips every couple should know.

How did they get such big credit card tabs? "I charged all kinds of everyday expenses while starting my career, living in London and then New York - two expensive cities," explains Louise, who currently has $10,000 in credit card debt. Matt says his $20,000 debt ballooned out of control because he didn't take his cards' high interest rates seriously, paying only the monthly minimum balances. "When I realized how big a hole I'd dug, it was a quite a hole," he says.

When they got engaged, the couple needed help to pay for their wedding. "We felt we couldn't not invite someone to cut costs," says Matt. But they also didn't want to accumulate more debt, so that's when they made the risky decision to each withdraw $6,000 from their 401(k)s. "Turns out that was the last place they should have tapped to pay the bill," says Bach.

Another factor that made money management a challenge: Louise and Matt still keep separate checking accounts and divide household bills. "Since we were used to keeping our savings and checking accounts separate when we lived together before our wedding, we didn't give a lot of thought to merging them once we married," says Louise. They now have only one joint account to pay monthly bills like rent and utilities, which they split in half. Beyond that, they each pay for their own clothes, entertainment and the debt on their individual credit cards. (Even when they dine out, the couple takes turns paying the bill.)

"We're independent. It's a control thing," she says. Matt explains that it's because they respect each other's privacy: "I don't know how much she pays for shoes. She doesn't know how much I spend on fantasy football." The mix of keeping separate accounts and not communicating about finances is a tricky one. They may not be stressing over it daily together, but when the money problem does rear its head, it's a huge stumbling block.

The last factor complicating their finances? They have subtle differences in their spending habits. "Matt is more open to spend money on going out," says Louise. "He feels that since we're young we should be having fun. I agree, but it's always on my mind: Given our goals of owning a home, should we go out so often?"

While Louise and Matt's combined salary of $150,000 seems like it could keep them out of financial trouble, Bach warns they are making typical newlywed errors. Fortunately, says Bach, they're easy to fix. Here's how:

Invest in a 401(k) account, then leave it there. "Taking money out of a 401(k) savings plan before you're 59 1/2 [the age set by the government for withdrawal in order not to incur penalties] is one of the biggest financial mistakes you can make," says Bach. "It's not just the present value of the money that you're losing, but the value of the future money that it would grow into if left alone." For example, the $12,000 that the Boyles withdrew from their 401(k) accounts would have grown to $391,664 in 35 years (assuming a 10 percent rate of return), according to Bach. A payback plan works only if you'll be continuously employed during the time it takes to make good on the loan. If you lose your job, you usually have 90 days (depending on your employer's policy) to make full payment; otherwise you can incur a 10 percent penalty and taxes. (The government allows withdrawal for hardship cases; check with your employer.) The positive news: When Matt and Louise made the withdrawals, they signed up to get automatic deductions from their paychecks to pay the total back over five years.

Pay off your credit and pay into your future. The key to erasing credit card debt and building a strong financial future, says Bach, is to use his trademark "half-hour rule." Here's how it works: Divide your weekly take-home pay by 40 (the number of hours in a workweek) to get your "hourly rate." Then, allocate a half-hour's worth of salary per day to a retirement fund, a half-hour's worth per day to pay off debt and a half-hour's worth per day to an emergency reserve (you need a six-month cushion in case of unemployment or other unexpected crisis) each paycheck. (This adds up to seven-and-a-half hours per week.) "No matter what you earn, this equation will work for you," notes Bach. "With this plan, your savings will grow and your debt will decrease." Then pay your fixed monthly costs, such as rent, phone, insurance, and groceries. Only then, if there is leftover cash, should you indulge in splurges.

Merge your financial future. While it's increasingly common for married couples to keep some finances separate, says Bach, it's not a good idea - and can slow couples down from reaching shared monetary goals. "Couples need to work as a team, developing a 'we' attitude, building up 'we' portfolios." Once they've pooled at least 80 percent of their money into joint accounts, according to Bach, the couple must then decide which financial roles they'll play. "Louise and Matt need to negotiate who is going to take on the role of the family's chief executive officer (CEO) and the chief financial officer (CFO)," says Bach. "In the short term, the CEO will pay the bills monthly from joint funds; it's a better system than splitting bills." Tick off payments online through a bill presentment company, such as paytrust.com and quickenbillpay.com, advises Bach. "In the long term, the CFO will monitor where the money goes, making sure financial goals are on track." These jobs could be switched every six months or so if they'd feel more comfortable trying both roles.

Talk about your money background. "Most couples fight about finances because one person wants to discuss it while the other doesn't," says Bach. This communication friction gets in the way of finding answers. Since people are often emotional, rather than strategic, about money, Bach suggests easing into the conversation by exploring how your parents handled money. How did their financial styles impact your outlook? Once you have a take on the past, then ask how comfortable you both are following your parents' leads or doing the opposite. "Patterns in our upbringing can be hard to shake. Get your feelings on the table," says Bach. "This will help you both see the directions you're coming from and where you need to head."

http://lifestyle.msn.com/relationships/cou...p;wa=wsignin1.0

[KarenCee 3]

Though these New Yorkers' combined salary is $150,000, "we barely break even. It's paycheck to paycheck," says Matt. Making matters worse, the couple has $30,000 in credit card debt. Plus, they borrowed $12,000 from their 401(k)s - their only savings - to help pay for their wedding last January.

I guess I just don't see how a couple with no kids who make this kind of money can have money issues unless they are living waaaay beyond their means. I mean, having to borrow 12K from their 401(k) to *help* pay for their wedding...wow. If you can afford a wedding with that kind of price tag, fine. But if you have to borrow...I suppose I'll get flamed for this line of thinking, but I just don't get it.

[Marilyn. 340]

it looks like they pay for everything using credit cards and then only pay the minimum balance every month...

they also live in New York where renting an apartment etc.. is very expensive.... and the living expenses are higher...

Edited February 2, 2007 by MarilynP

[Robor007 0]

Though these New Yorkers' combined salary is $150,000, "we barely break even. It's paycheck to paycheck," says Matt. Making matters worse, the couple has $30,000 in credit card debt. Plus, they borrowed $12,000 from their 401(k)s - their only savings - to help pay for their wedding last January.

I guess I just don't see how a couple with no kids who make this kind of money can have money issues unless they are living waaaay beyond their means. I mean, having to borrow 12K from their 401(k) to *help* pay for their wedding...wow. If you can afford a wedding with that kind of price tag, fine. But if you have to borrow...I suppose I'll get flamed for this line of thinking, but I just don't get it.

I sure wouldn't flame you for that line of thinking. It's a perfect example of the source of their problem (living beyond their means). My wife and I would've liked to have a nice traditional wedding (ceremony, white dress, tux, reception, etc) but given the situation and finances it just wasn't possible.

[Marilyn. 340]

my hubby and I started a 401K awhile back.... We have a nice little sum growing there now....

4% comes off of his check before taxes.... and his company matches 100% of that 4%.....

[almaty 19]

good information and i have had several clients in my life who make more than adequate salaries and are close to filling for a chapter 13

[Marilyn. 340]

good information and i have had several clients in my life who make more than adequate salaries and are close to filling for a chapter 13

the more money you have the more you spend...

I once heard somewhere that if you start making more money you shouldn't spend the extra but instead save it up... and still spend what you would normally spend....

[rob&ana 0]

good information and i have had several clients in my life who make more than adequate salaries and are close to filling for a chapter 13

the more money you have the more you spend...

I once heard somewhere that if you start making more money you shouldn't spend the extra but instead save it up... and still spend what you would normally spend....

That is the smartest advice one can receive.

I recently receive a raise (not a huge one, but hey... cant complain).

And the excess between my old salary and my new one, is being deposited either in the 401K plan (which isnt as good as your hubby's Marilyn), and my Company's Stock Option PLan... Surely by next year, I'll have a decent sum added there.

[Marilyn. 340]

good information and i have had several clients in my life who make more than adequate salaries and are close to filling for a chapter 13

the more money you have the more you spend...

I once heard somewhere that if you start making more money you shouldn't spend the extra but instead save it up... and still spend what you would normally spend....

That is the smartest advice one can receive.

I recently receive a raise (not a huge one, but hey... cant complain).

And the excess between my old salary and my new one, is being deposited either in the 401K plan (which isnt as good as your hubby's Marilyn), and my Company's Stock Option PLan... Surely by next year, I'll have a decent sum added there.

yeah, hubby and I should take that advice at least we are doing the 401K ....

Edited February 2, 2007 by MarilynP

[rob&ana 0]

good information and i have had several clients in my life who make more than adequate salaries and are close to filling for a chapter 13

the more money you have the more you spend...

I once heard somewhere that if you start making more money you shouldn't spend the extra but instead save it up... and still spend what you would normally spend....

That is the smartest advice one can receive.

I recently receive a raise (not a huge one, but hey... cant complain).

And the excess between my old salary and my new one, is being deposited either in the 401K plan (which isnt as good as your hubby's Marilyn), and my Company's Stock Option PLan... Surely by next year, I'll have a decent sum added there.

yeah, hubby and I should take that advice at least we are doing the 401K ....

Spending is a lil bit like dieting. Once you get on track, is easy to follow....

But man... is it easy to get off track... (after xmas sales spree for example!)...

[Marilyn. 340]

good information and i have had several clients in my life who make more than adequate salaries and are close to filling for a chapter 13

the more money you have the more you spend...

I once heard somewhere that if you start making more money you shouldn't spend the extra but instead save it up... and still spend what you would normally spend....

That is the smartest advice one can receive.

I recently receive a raise (not a huge one, but hey... cant complain).

And the excess between my old salary and my new one, is being deposited either in the 401K plan (which isnt as good as your hubby's Marilyn), and my Company's Stock Option PLan... Surely by next year, I'll have a decent sum added there.

yeah, hubby and I should take that advice at least we are doing the 401K ....

Spending is a lil bit like dieting. Once you get on track, is easy to follow....

But man... is it easy to get off track... (after xmas sales spree for example!)...

it is not like hubby and I are extravagant in our spending but 5 bucks here and 10 bucks here adds up after awhile....

Edited February 2, 2007 by MarilynP

[rob&ana 0]

I didnt imply you were...

I am just saying that it is hard to keep an iron fist on money.

In our case, we've had ... I dunno... bad luck streak with cars? First tires, then brakes, then smoke coming from underneath the hood and scaring the hell out of me. Not to mention, some unexpected home expenses that keep veering us away from our fantasy savings fund... LOL

[Marilyn. 340]

I didnt imply you were...

I am just saying that it is hard to keep an iron fist on money.

In our case, we've had ... I dunno... bad luck streak with cars? First tires, then brakes, then smoke coming from underneath the hood and scaring the hell out of me. Not to mention, some unexpected home expenses that keep veering us away from our fantasy savings fund... LOL

oh sorry I wasn't implying that you were implying

was just stating a fact....

Edited February 2, 2007 by MarilynP

[Jenn! 918]

I don't think $150,000 combined is all that much for New York, really.

On the local news last night they did a piece about how much a single mother needs to make in Boston just to make ends meet. They said bare minimum $58,000.

Sounds about right to me.

[rob&ana 0]

I didnt imply you were...

I am just saying that it is hard to keep an iron fist on money.

In our case, we've had ... I dunno... bad luck streak with cars? First tires, then brakes, then smoke coming from underneath the hood and scaring the hell out of me. Not to mention, some unexpected home expenses that keep veering us away from our fantasy savings fund... LOL

oh sorry I wasn't implying that you were implying

Then can we imply that all is good? (except the horrible finances?) ...

I like the saving I do thru payroll, money that I dont see, is money that I dont spend!!

So credit unions, stock plans, 401Ks, retirement plans... all is good for me... (specially if they are all pre-tax).