My wife and I got married last July in what turned out to be an amazing day. She looked beautiful, I looked stunning and we had a great time. The last thing on our mind that day was opening up a joint checking account or consolidating our auto insurance. However, as soon as we returned from the honeymoon, the focus shifted to getting things done. We moved into a new apartment and the week after that, I was heading off for five weeks of training. We had little time and a lot to do. So, for all of you newlyweds out there, I will make it easy for you and let you know what you should get done financially.

Talk to Human Resources

One of the first things we did was to add me to my wife’s benefits at work. When you have a life changing event such as marriage or having a child, you are allowed to change your benefits. This can save your a good chunk of change. I estimate that it saved us approximately $100 per month since I was on individual health insurance.

You should also change the beneficiaries on your benefits. Change the beneficiary of your life insurance and retirement plans to your new spouse.

Change Your Auto/Homeowners/Renters Insurance

Changing your auto insurance (or any insurance) and putting both of you names on one policy can save you a substantial amount of money. When my wife and I did this, I estimate that we saved about $1,000 over a year. My wife had a couple dents on her driving record and if she were to get insured by herself, it would have cost about $1,200 a year. Add that with my $1,000 policy and you are up to $2,200. When we went to purchase a policy together and they said our premium would be $1,200, I was shocked. I guess being married shows some responsibility!

Combine the Cash

People have different opinions on this, but I recommend getting a joint checking account. It forces you to keep each other accountable for the money that’s being spent.

Marriage is a team effort and your finances should be no different.

Have a Financial Meeting

Hopefully, you did this BEFORE getting married. Either way, you should sit down again and come up with a game plan. I recommend creating a financial mission statement. In it, you can set your financial goals, determine how you are going to achieve them and find ways to stay on track.

If you are bring debt into the marriage, the new living arrangements and two incomes can help free up a good amount of cash. Use that extra cash to pay off debt fast!

Update Your Wills

If you have a will or are bringing children into the marriage, make sure you update your will to document your new wishes. Obviously, as things change, so does your need for proper estate planning.

Well, there you have it. Those are the things that I came up with (and did). Can you think of other things that may need to get done or should be change with a new marriage?

Post by Frugal Dad

I love Socrates.  The genius of Socrates was his ability to ask questions.  He made a reputation as being a person who taught simply by asking well focused questions.

So taking a cue from this Socrates we’re going to try and help you improve your money relationship with your spouse simply by asking questions.  At times a well framed question can be more effective than a perfect statement.  Financial togetherness cannot occur in marriage until you open your heart, open your ears, and listen to your spouse.

First, a note about setting.  Try asking these questions in a non-threatening environment.  Consider talking about them across the table at a restaurant, while holding hands on a relaxing walk, or during a quiet moment on the couch.  Don’t try and ask these questions at the end of a hectic day or in the office with so many papers that are demanding your attention.

Second, a note about your disposition.  It is quite possible that when you ask these questions you will be surprised or shocked at the answers.  Don’t take things personally.  Let your spouse feel free to express their opinions.

Questions To Consider Asking Your Spouse

1. Did your parents talk to you or teach you about money?  Did they have a similar approach to money or did they often disagree?  Are your money management habits more like your mom or your dad? Why?
2. How much money did your family have?  Do you remember an occasion where you felt like you were rich/poor?
3. Is there anything you would like me to learn to do better or differently with money?  Would you say I’m frugal/cheap or a flagrant spender?  Do you wish I’d learn to loosen up with money or spend it more freely?
4. Are your comfortable (emotionally) with our current debt level?  Do you think we’re on the right track as far as debt repayment?  How much debt are you comfortable with?
5. What is a “major purchase”? How much would I need to spend, without consulting you, to make you upset?  What kinds of purchases do you think we should both consult each other regarding?
6. How do you feel about wives earning more than their husbands? Why?  Do you have any issues or concerns regarding how much we each make?  Do you think I make enough money?
7. Is there one thing that you dread when it comes to money?  What is your greatest financial fear?  What do you think can be done to help minimize the possibility of that fear becoming a reality?
8. Have you ever thought about starting your own business?  How would you fund it?  What would you do if you could do anything in the world?
9. Imagine that you’ve won or saved a million dollars.  What would you do with it? Why?
10. What would you like retirement to look like?  Where would you live, in what kind of house?  What work, if any, would you be doing?

It is quite possible that you will be surprised and shocked by some of the answers you hear.  So what do you do now with these responses.  After asking some of the questions above, you’ll have a good idea about the level of financial oneness you and your spouse enjoy.  You should have been able to identify some areas of marital strength and even some places that have room for improvement.

Now you have a hard job.  Start to humbly and patiently address these sensitive money issues.  If you feel overwhelmed, seek outside help as counseling can be a great way to heal a broken marriage.

Post by Frugal Dad

Last week I wrote about a newlywed couple that had to deal with the issue of “financial infidelity.” To make a long story short, Karin bought a laptop (with her own money) without telling her husband Jim about it first.  He flew into a rage and started throwing temper tantrums, accusing his wife of “financial infidelity.”

Photo by Ed Yourdon

I personally think the husband is out of his mind, but the situation does bring up an important question; what constitutes financial infidelity and how do you deal with it?

While I am no expert in infidelity (thankfully), it occurs to me that other forms of cheating are a bit more-clear cut.

When you break an implicit or explicit promise – that’s cheating.

But money is tricky.

Where do you draw the line?

If I come home to find that my wife put the house up for sale without discussing it with me first, I’m going to feel cheated.

If, on the other hand, I bring home Honey Nut Cheerios rather than Corn Flakes because the Cheerios are on sale – it’s no problem.

So do you draw the line simply based on the dollar amount? Do I have discretion up to $10 and after that, I have to consult with my wife?

In my household, we both work.  I happen to make more money than she does.  Does that mean I have more discretion than she does?  If that’s the case, she’d be guilty of “financial infidelity” at a lower number than I would.  Does that make sense?

I believe there is no “global solution”.  Each couple has to make their own agreement, be crystal clear where the boundary is and communicate about it often.

So what do you do when your spouse breaks that boundary?

Here’s an approach I’ve come to rely on:

1.   Communicate what you feel and why.

Rather than blame your spouse from the get-go, just tell him/her you are upset, scared, afraid, whatever…and tell them why. You may find out that they did what they did for a perfectly justifiable reason – even though they failed to talk with you about it first.

2.   Get agreement on how to handle similar situations in the future.

Communicate how you would like to handle the situation going forward and find out if your partner agrees. Don’t try to force them into agreeing.  Just ask them how they would like you to handle it if the situation were reversed.

3.   Don’t expect perfection.

Your wife is probably a great person – but she’s not perfect.  Neither are you.  There may be some area where she continually lets you down in the financial world.  Can you accept it?  Has your wife accepted your imperfections?

Some battles are just not worth fighting.  Make sure you pick your battles well.

How have you dealt with issues like this in the past?

A Giveaway for Frugal Dad Readers

As an extra incentive to pick your brains, Jason has twisted my arm and convinced me to give away 3 copies of my course, “Money School for Couples”. It’s a course I created to help couples stop arguing about money. It’s made up of 10 short videos, some exercises and a few whitepapers.  Basically, it’s everything I’ve learned over the last 25 years. The course teaches you how to fix a marriage by fixing the finances. I’m going to use Random.org to pick the lucky winners.

All you have to do to have a chance at snagging your free copy is:

a.   Enter a comment with your answer to one of the three questions below.

b.   Agree to give me your honest feedback about what you like and dislike about the program.

1.   Have you ever had to deal with “financial infidelity”?

2.   Have you ever crossed the line when it comes to cash?

3.   What system do you use that has helped you and your spouse avoid these kinds of battles?

Post by Frugal Dad

It seems like divorced couples still have problems even after the divorce.

That’s something I’m going to have to deal with next week. Here’s the story:

Mary & Harvey have been divorced for more than 15 years. Their split was amicable. Harvey was the principle support provider. Truth be told, Harvey was the only provider and Mary was grateful and lucky. In fact, they were both pretty lucky – that is until this morning.

Harvey is a high-priced advertising executive who was pulling down over $500,000 a year. Somehow he and his firm continued making the big bucks in 2008 and 2009 despite the economy. But reality finally caught up with them recently.

In late 2009, his firm cut Harvey’s salary by 50% and then by another 50% this morning. Harvey is still pulling in about $125,000 – and that is certainly a very nice check. But it’s a far cry from $500,000. And Harvey isn’t used to the reduced wage. He’s having difficulty making the support payments to Mary. And it gets worse.

He called asking her to sign off on the documents so he could take a loan against his 401(k) to pay taxes and credit card bills.

I’m not sharing this story because I think we should all go on a hunger strike in solidarity with the pain and suffering of all those who used to earn a half a million clams.

But I do have a great deal of empathy for this couple. Even though they make a lot more money than most of us, they face problems we all do.

Both Harvey and Mary made a number of mistakes for many years. Of course that doesn’t matter now and it won’t help them or anybody else.

Here are the steps I’m going to recommend when I meet with them:

1. Track expenses.

There is nothing more important than knowing what it costs you to live – especially if you are forced to make drastic cuts. I believe they have to write down everything they spend money on to make sure they know where to make those cuts.

2. Mary is going to have to find work.

If Harvey’s company had to make these kinds of cuts, the firm he works for might be on the ropes. That means there is the real possibility that Harvey is going to be out on the streets before long. At that point, Harvey won’t be able to give Mary any support. What is she going to do then? Loans and advances only go so far.

3. Don’t sign off on Harvey’s request to take a loan against the 401(K)

If Harvey doesn’t have the cash to pay the IRS and the credit card companies, that means he is still living way beyond his means. It also indicates that he’s not a great planner.

Theoretically, half of that 401(k) belongs to Mary but those IRS and credit card bills are 100% Harvey’s.

Finally, I don’t know what tax liability Mary takes on if Harvey is unable to repay those loans.

I’m more a fan of the couple finding a way to drastically cut their spending and find a payment plan for the IRS and credit card companies.

What have I missed? What other advice would you give Mary? If you were in her place, would you allow Harvey to borrow against the 401(k)?

Post by Frugal Dad

How would you advise a recent college graduate who wants to get married, is in debt but is able to save money every month?

I received this email from Dean who is in this situation right now:

I have about $24,000 of low interest student loans to pay off, and am building up emergency savings. I know it’s smart to pay the minimum on the loans while they are at a low 3% and invest some extra money, but am I really able to invest for a year knowing that I need a full year to gain long-term gains privileges?

Even as I write this it seems like putting in $300 a month would be a good idea, while putting the rest ($400+?) in savings.

I think I’ll have to pay for a ring in about a year (knock on wood), so I should keep that liquid.

What advice would you give Dean?

Before I get started, I have to come clean on my own bias.

I just hate debt. It’s more than just a financial issue. I just don’t like owing money to anyone and I don’t like it for other people either.

My experience tells me that nobody ever got rich having debt.  More important; I’ve never met anyone who had a lot of debt who was really happy.

Of course, plenty of people made money in real estate.  And they did that by taking out mortgages.  But that is just about the only kind of debt that ever makes sense to me. And as recent events prove – mortgage debt can also be dangerous.

Having owned up to that, here are my thoughts for Dean:

1. You have to take a great deal of pride in having the foresight to even look at this issue.   Many young folks don’t even take the time to consider asking for advice. They do what they think is right without bouncing the ideas off of other people.  Dean is a frequent visitor and commenter on many financial blogs.  That means he’s doing what he can to educate himself and make smart decisions.  Bravo Dean!

2. I also like the idea of building up an emergency savings account.  Just make sure you know how much you need in that account.  From the information you provided, it’s tough for any of us to tell you what that amount needs to be but a good rule of thumb is 6 to 12 months of spending.  But remember than an emergency fund is liquid and it’s invested in the bank.  You won’t get much of a return but you get liquidity and safety.  That’s what you should be looking for when you set up an emergency fund.

3. I don’t like the idea of investing the money you could be using to pay off debts.  If you invest that money, it assumes you can do so and earn more than the 3% that you are paying on your debts.  Bank accounts aren’t paying 3% so you must be investing in the stock market.  While you’ve made a killing on that strategy this year (so far), nobody can guarantee that strategy will work out over your own time frame.   In fact, the interest they charge you on your debts could sky rocket just at the time when your stock market investments tank.  Not a pretty picture.  I’d play it safe and throw everything I had at the debt.

4. I’m not a huge fan of making investment decisions based on tax consequences.  The tax angle is important, but it’s secondary. The most important consideration should be your goals and risk tolerance.  You can’t control where the market is going to be when you need the money.  For that reason, if you invest in the market, you should do so with the idea of keeping your money invested for at least 5 to 10 years.  If you need the money in 12 months and you invest in the stock market, you are speculating and therefore, taking on much greater risk.  This doesn’t turn me on all that much.

5. “The Ring” scares me.  Dean, if you are in debt, I’m going to assume that your fiancé knows about it.  Have you discussed your finances with her?  Is a ring the best use of your money when you are just starting out?  Do you think it’s more important to invest in a ring than it is to invest in yourself?  Have you and your future wife considered the trade-offs between the rock and the freedom (of having less debt)?

Again, I admit that I have a bias against spending a ton of money on jewelry and I might be alone on this. In fact, I only bought a “nice” ring for my wife on our 20^th anniversary – when it was well within our budget and at a time when we were fortunate enough to have no debt.

(Had she insisted on having an expensive rock on her finger before we got married, it would have been a huge red flag for me.  It could signal that we had different values and therefore not well suited for each other.)

Readers, what do you think?  Would you give Dean different advice?  How do you feel about spending money on a wedding ring when you are a debt?

Post by Frugal Dad