Category Archives: Money

Things to Consider When Combining Finances With a Partner

Moving in with a significant other is a huge step and one that can be beneficial for both of you. However, I’ve seen my share of partners struggle with the addition of financial confusion to their already complicated relationship. It can be a rocky transition, even when you love each other.

If you’re on the verge of moving in with a partner and beginning to merge our finances, there are a few things you need to consider. Here are my top tips for making the transition as smooth and painless as possible.

You Need to Have a Real Financial Heart-to-Heart

In today’s society, talking about your financial mistakes and secrets can be as embarrassing as talking about that secret mole on your back or that time you threw up in class during high school. Unfortunately, no financial merger can survive if you both refuse to air out your dirty laundry.

The period before you officially combine finances should serve as a platform for an intense discussion about the good, bad, and the ugly aspects of each person’s money situation. Now’s the time to reveal that your credit score is low or that you’re facing 70 grand in student loan debt.

Although you might be nervous about opening your financial situation up to scrutiny from your partner, there’s nothing worse than unearthing money problems later on in the relationship. Rip the bandaid off now and have a frank, kind conversation with each other in which you’re completely honest about your finances.

Some topics to cover in this discussion include:

  • Any outstanding debt
  • Credit scores
  • Savings accounts
  • Salaries
  • Big financial goals
  • Subscription services or other monthly expenses

Talking About Your Responsibilities Beforehand Is Essential

Since you’re merging finances for the first time, it might not be very clear as to who is in charge of what. Who will pay the rent each month? Who is responsible for handling grocery shopping? What about monthly expenses like electricity, internet, and water?

Don’t wait until later to clearly define both of your goals. This will make it easier to start things out on the right foot. Plus, you’ll spend less time fighting about who let things slip between the cracks. You don’t want to wind up resenting each other because you never clearly outlined fiscal responsibilities.

Establish a Method for Checking In With Each Other and Your Finances

Although you definitely need to have a conversation about your finances upfront, the communication can’t stop there. Deciding to merge your finances means that you’re committing to sharing things with your partner, including when you splurge on a new toy or a fancy pedicure.

Between keeping up with your budget and re-evaluating savings goals, there are many topics to continuously discuss with your partner. That’s why I suggest setting up a time once a month where you can both sit down and review your situation.

Things to talk about at this meeting can include:

  • How much you both spent over the past month and where you overspent
  • Any financial changes you may face in the next month
  • Big expenses that are coming up in the near future
  • Saving goals and what needs to be done to achieve them
  • Any issues you have encountered, either with each other or with your finances
  • Ways to improve your financial situation in the coming months and years

In Conclusion

Combing your finances can certainly seem scary, but what’s scary is entering into a monetarily bound relationship without making boundaries and expectations clear. Take time to thoroughly explore your financial situations together before they become intertwined.

You’ll thank yourselves later as you watch other couples fall apart over budgeting arguments and hidden bank accounts.

3 Myths About Saving for Retirement

Unfortunately, there’s a lot of confusion surrounding the topic of saving for retirement. You’d think it’d be something we learn about in school, but most of us just gather bits and pieces of knowledge from parents, coworkers, relatives, or friends. Although almost everyone knows that saving for retirement is important, many people don’t have their facts straight.

Today, I want to break down three of the most common myths about saving for retirement. As a society, we need to do better about educating young people (and old people) about the value of saving early and saving correctly.

Myth #1: It’s Not Worth Saving If You Make Less Than $20/Hour

I can’t count the number of people who’ve told me that they aren’t going to save money for retirement until they’re making at least $20 an hour at a full-time job. So many people graduate from college and start a part-time gig that doesn’t pay well, and as a result, they assume that they’re not ready to save for retirement.

That’s simply not true. The earlier you start saving for retirement, the better, no matter how much money you make. Think about it this way. If you saved just $1,000 a year for retirement (about $83 a month) for three years after college, that money could be worth over $70 grand by the time you retire!

Every little contribution counts, so start now regardless of how high or low your salary is. Don’t wait until it’s comfortable to start saving. Trust me, the sacrifice will be worth it in the years to come.

Myth #2: You Can Only Save If Your Job Offers a 401K

Many people don’t even contemplate the idea of saving for retirement until they see a 401K listed in one of their job benefits. In truth, you can start saving for retirement much sooner, with or without a full-time job.

Even if you don’t have access to an employer provided 401K, you can open an IRA with a bank and begin socking away money for the future. You won’t get a company match, but you’ll get the same tax benefits and compound interest. You are never too young to start saving; I’d even recommend beginning your contributions at age 18. It’s not difficult to open an account, and you can easily learn to invest with something like the Couch Potato Method.

Myth #3: I Need a Million Dollars to Retire

Oh boy, don’t we wish this one was true. Reaching a million dollars in your 401K or IRA isn’t the end-all-be-all of retirement saving. At one point in time, a million could take you a long way after you quit working. Now, that isn’t necessarily true. People are living longer and inflation is changing the value of our dollar.

Experts estimate that depending on when you retire, you likely need 10 to 12 times the amount of your current income. That means that if you and your partner are used to living on $150K a year, you’ll likely want to have $1.5 million or more in the bank before you retire.

If you’re worried that you’re not aiming to save enough, reach out to a financial expert for advice. Don’t just assume that achieving the “millionaire” status will mean you can lead a cushy life once you stop working full-time.

In Conclusion

Don’t believe everything other people tell you about saving for retirement (including me!). Do your own research. Make your own calculations. Whatever you do, don’t leave the task until your 30s or 40s. The earlier you can start, the less you’ll have to worry when you’re old and gray.

4 Things You Might Be Forgetting to Plan for In Your Annual Budget

There are a million things to think about it when it comes to planning your yearly spending. From groceries to rent and electricity, it can be difficult to think of all the expenses you need to anticipate.

To help you cover all of your bases, I’ve come up with five different categories that you might have accidentally skipped in your planning session last January. These are expenses that almost everyone encounters, but many of us forget to plan for them and are surprised when they pop up. Don’t let these things be the tipping scale that ruins your carefully planned budget.

1. Your Car Maintenance and Registration

If you drive a car, then budgeting for vehicle maintenance is a must. According to CAA, just your regular car maintenance can be as much as $800 a year, and that’s assuming you don’t have any serious problems to address. Heaven forbid you to need to change your tires or buy new brakes.

Consider setting aside roughly $50 a month in a separate savings fund marked “car expenses.” That way, when it’s time for your oil change or any other expense, you’ll have a nice nest egg to draw from to cover the cost if you don’t have room for it in that month’s budget.

Also, remember that you’ll need to have your car inspected and registered every year you own it. That’s about $100 extra dollars you’ll fork over during at least one month. Either schedule that payment in your budget ahead of time so you’re not taken by surprise or add a little bit extra to your car expenses savings account.

2. Annual Fees From Credit Cards and Subscriptions

Depending on which credit cards you use and how many you have, you might need to pay hundreds of dollars in annual fees. That doesn’t mean the cards aren’t worth it, but you certainly need to plan to accommodate those fees ahead of time.

In that same vein, think about the various memberships and subscriptions you’re a part of. If you only pay on a yearly basis, it’s easy to forget about the expense until it pops up on your radar. No matter how big or small the fee may be, make sure it has a place in your annual budget so that you can be prepared.

3. Birthday, Wedding, and Christmas Gifts

Did you know that, during the holiday season, the average American spends $700 on gifts and goodies? If you haven’t made room for that in your budget, you can easily go overboard buying presents for your friends and loved ones. Many people wind up facing credit card debt in January after the holiday season ends, and that’s a terrible way to start the new year.

My suggestion is to do the same thing as you do with your car expenses: create a savings account that you contribute to throughout the year. If you put about $50 away every month, by the time December rolls around, you’ll have more than enough to cover most of your holiday expenses.

The holiday season isn’t the only gift-giving occasion to plan for. Think about family birthdays, weddings you’ll attend, and any other big presents you’ll need to purchase. The more you can prepare, the less dramatic those expenses will seem when they roll around.

4. Tolls and Gas

Depending on where you live, you might spend a substantial amount of money on toll roads. Those small trips may seem insignificant, but over the course of a year, the small fees can add up. Look at your toll account from last year to see how much you spent and fit that amount into your budget for this year.

According to the US Energy Information Administration, the average American resident can spend anywhere from $400 on gas annually to more than $1,300. It all depends on where you live, so although I can’t tell you how much you need to budget for gas, I can tell you that you should. Figure out what your monthly average is and try to pay attention to how accurate that has been this year.

In Summary

As you can see, many of these things are the expenses we think very little of. Gifts for friends? Just swipe the credit card. Toll road fees? We barely even acknowledge those. Vehicle expenses? Just hope the car keeps running.

Over time, these costs can all add up, throwing your budget off course. Try to incorporate them in your budget ahead of time so that nothing takes you by surprise. After all, you’d rather be over-prepared than under-prepared.