How to turn your 401(k) into a monthly income that supports you through retirement.
By Walter Updegrave, Money Magazine senior editor
June 14 2007: 11:49 AM EDT
NEW YORK (Money) -- Question: How do I convert the balance in my 401(k) into a monthly income when I retire? - Jim, Midlothian, Virginia
Answer: You're dealing with an issue that more and more people, especially aging baby boomers, must face as they enter retirement without the benefit of a traditional "check a month" pension from their employers. Yes, Social Security does provide a reliable monthly income - in fact, one that rises with inflation - but it's not enough for most people.
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So the question is, how do you take what is essentially a lump sum of cash sitting in your 401(k) - or, in your IRA rollover account, if you move your 401(k) to an IRA after retirement - and convert it into an income that in combination with Social Security can support you throughout a retirement that could easily last 30 years or longer?
You've got several options. One is to simply invest the money in a diversified portfolio of stocks and bonds and then pull out enough so that your withdrawals plus Social Security will provide enough to live on.
That sounds simple enough, but there are a number of practical issues you'll have to sort out in order to pull it off. The main one is how much can you afford to draw from your account without running through your money while you're still alive. After all, a 65-year-old man today has about a 50/50 shot at living to 85 and a one-in-four chance of still being around at 91.
And unless Federal Reserve Chairman Ben Bernanke and the rest of the gang at the Fed find a way to stop inflation, during that time prices are likely to keep rising. Which means you'll have to increase the amount you pull from your portfolio each year if you want to maintain your purchasing power.
A variety of studies show that if you limit your initial withdrawal to 4 percent to 5 percent of your account balance, and then increase that amount for inflation each year, you stand a pretty decent chance of your money lasting 30 or more years. So, for example, if you've got $1 million in your 401(k), you would withdraw $40,000 to $50,000 the first year. If inflation cruises along at, say, 3 percent a year, you would then withdraw $41,200 to $51,500 the second year, and increase that amount by 3 percent the next year, etc.
A big advantage of this strategy is that you've got control of your nest egg and you can dip into your stash for more money if you need it. But there's also a downside. If you run into a bear market that triggers big losses in your portfolio, you could run out of money while you've still got many years to live.
A retirement mistake Boomers should avoid
Another way to go is to put your money into what's known as an immediate annuity - a.k.a. an income or payout annuity. In that case, you would turn over your 401(k) balance to an insurer that would promise you monthly checks for life (or, as long as either you or your spouse is alive, if you choose the joint-and-survivor payment option). Today, for example, a 65-year-old man buying a $250,000 immediate annuity would receive lifetime fixed payments of roughly $1,700 a month.
The plusses to this approach are that you know in advance how much income you're going to receive each month and you know it will keep flowing in as long as you're alive. But there are disadvantages too. Your monthly income won't keep pace with inflation, so your purchasing power will decline as you age.
Another drawback is that when you buy a lifetime annuity you generally give up control of your principal, which means you can't dip into it to pay unanticipated expenses. I recommend a strategy that I believe gives you the best of both of these options: the liquidity and growth potential of managing your own money and the security of a guaranteed monthly payment.
Don't get risky with late retirement saving
Here's how the strategy works: You put a portion of your 401(k) balance into an immediate annuity and then invest the rest in a diversified portfolio of stocks and bonds (or, more likely, stock funds and bond funds). The annuity gives you payments that won't run out and that, combined with Social Security, can fund much of your day-to-day needs.
The money you invest can provide any extra money you need as well as a stash for emergencies. And because that money is invested in stocks and bonds it should provide enough growth over the long term to help maintain your purchasing power in the face of inflation.
All in all, I think this is a pretty good way to convert a lump sum in a 401(k) - or any other account, for that matter - into a sustainable income that can support you throughout retirement. I've given you the basic outline of the strategy here. But if it appeals to you, you can learn about the details by clicking here.
One final note: This is a very important decision. So before you take any big step - like actually buying an immediate annuity - I think it's a good idea for you to run the numbers on a few different scenarios (different amounts in an annuity, varying mixes of stocks and bonds, higher and lower withdrawal rates). This will give you a better sense of how you might want to pull off this strategy and how long your money might last under different scenarios.
Unfortunately, there aren't a lot of online calculators that let you do this sort of analysis, but there is one I know of: Fidelity's Retirement Income Planner. (If you're not a Fidelity customer, you can still use the calculator for no charge by registering at the site.) If you're not comfortable doing this sort of number-crunching, then it's probably a good idea to have a financial planner run some scenarios for you.
After all, retirement can be a long trip these days. And you want your money to be there for the entire ride.
6.14.2007
An era of cheap money - gone
Rates around the world are heading higher, which could mean the beginning of the end of an era of supercheap capital.
By Grace Wong, CNNMoney.com staff writer
June 14 2007: 11:50 AM EDT LONDON (CNNMoney.com) -- This month's rise in global interest rates is probably a sign of the beginning of the end of an era of supercheap money - a change with profound implications for the recent record-setting stock rally, the buyout boom and economic growth worldwide.
The question now is how much more rates might rise in the United States and elsewhere, and how that will affect world markets - and hundreds of millions of investors and consumers from Tokyo to Frankfurt to New York.
Video
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Have you ever thought about getting into the stock market? Here are some basics you need to know before you invest.
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For years, the world has enjoyed historically low interest rates. This has helped fuel a boom in corporate mergers and private equity buyouts and a rally in stock prices and in other assets, such as real estate. But with economic growth outside the United States picking up and fanning inflation, central bankers around the world are pushing rates higher in a bid to cool growth and avoid bigger problems later on.
"There's been too much global liquidity and now we are seeing a shift away from multi-decades of declining rates and declining inflation," said Josh Stiles, managing director of research firm IDEAglobal in New York.
"This is the end of the cheap money cycle," Marc Pado, U.S. market strategist at Cantor Fitzgerald in New York, said.
The European Central Bank, which sets rates for most of Europe, hiked rates to a six-year high last week. The Bank of England and Bank of Canada are both expected to raise rates next month, and the Bank of Japan is expected to hike rates by the fall.
Higher rates raise the cost of borrowing for businesses and consumers and are poised to impact everything from economic growth and corporate profits to the performance of stocks and bonds and the payments that home owners make.
Here's a brief look at what higher rates will mean for global economy, financial markets and investors around the world.
Bonds
There has been no market where concerns about inflation and rising interesting rates have played out more dramatically than in the usually staid bond market.
The yield on the benchmark 10-year Treasury note hit 5.3 percent this week, the highest level in five years. Yields have backed off a bit since then, but are still up from just 4.5 percent three months ago. The drop in bond prices - and rise in yields, which move in the opposite direction - has come as bond traders unwind bets that rates would stay low - or even head lower still.
"People are being more optimistic about the U.S. economy, and therefore have written off rate cuts from the Fed that they were expecting," said Laurent Fransolet, head of European fixed income research at Barclays Capital in London, referring to the Federal Reserve.
After having been so low for so long, investors are waking up to the reality that yields will rise to more "normal" levels. Long-term Treasury yields have been kept low in recent years, in large part due to strong buying from foreign central banks. But as those overseas investors diversify their holdings, their appetite for U.S. government debt is expected to drop, analysts say. That in itself could feed more bond market selling and more upward pressure on rates.
Bond yields aren't just rising in the United States. The yield on a global basket of government bonds is at 4 percent - the highest level since December 2000, according to the Lehman Brothers Aggregate Global Treasury index, which tracks the performance of government bonds from 33 countries.
Those heavily invested in bonds may be lamenting the heavy selling, but the rise in yields may be something investors have to get used to, said Ken Mayland, president of ClearView Economics, a firm specializing in economic research. "Demand for capital has become much more intense. The improvement in the world economy justifies paying a higher yield - that's not a bad thing," he said.
Higher yields also make bonds a more attractive investment, and if yields keep climbing, as many market watchers expect them to do over the next few years, that could lure some investors away from stocks.
Stocks
Global stock markets have rallied, supported by the buyout boom and a flood of funds from investors large and small alike. But rate concerns pummeled stocks over the past two weeks, until the markets snapped back Wednesday and showed further signs of life Thursday.
Before the recent pull back, the Dow industrials and broader S&P 500 had risen to record highs. Stocks in Europe were rallying too. The pan-European Dow Jones Stoxx 600 is close to its record high.
Why all the turmoil in stock markets? Rising rates dampen economic growth, and that can hurt corporate profits - and stock prices. They also are likely to crimp merger and buyout activity, which has been a key source of support for stocks worldwide.
"Valuations are a function of interest rates," says Christopher Zook, chairman and chief investment officer at CAZ Investments in Houston. "As interest rates move higher, valuations will come down," he said.
Investors are starting to reassess their willingness to take on risk, but rates will have to move much higher before they really start to hurt the stock market, analysts said. The recent selloff took the Dow industrials and the S&P 500 down about 3 percent apiece - a modest decline given the market's recent run. Still, it's not clear the selling is wrung out of the market yet.
Peter Dixon, strategist at Commerzbank in London, expects markets to level off as investors reassess where they see opportunity.
"The warning shots fired by the market will perhaps make investors stop and think about whether they can continue to pile into asset classes without abandon and not have to pay the price at some time," he said.
It will take some time for this to play out in the market, and some markets may be hit harder than others. Dixon thinks European stocks will sell off less than in the United States, mostly because recovering consumer demand should offer support.
Economic growth
Rising rates could hurt economic growth, especially in the United States, where rising mortgage rates could threaten the already fragile housing sector by increasing the burden on home buyers.
The housing sector already faces pressure from an oversupply of homes on the market and falling home values in some markets. The sector also faces risks from ongoing problems in so-called subprime loans to borrowers with weak credit.
Weakness in the housing sector has worried economists, and the market still may worsen. At their last meeting in May, Federal Reserve officials said the downturn in housing was turning out to be more severe than expected.
But even though central banks abroad are raising rates, the Fed won't necessarily follow along. The U.S. economy grew at just a 0.6 percent rate in the first quarter - the weakest in just over four years - though the second quarter looks to be stronger.
Still, Paul Donovan, senior global economist at UBS in London, noted that inflation seems to easing and said he expects the U.S. economy to slow further in the second half. He believes it's actually more likely that the Fed will lower rates eventually, rather than hike them, as many investors now fear.
And when it comes to the global economy, the outlook remains upbeat. The main reason central banks are lifting rates overseas is that global growth has been strong, and isn't slowing as much as economists had expected.
"Globally, growth has in some cases surprised on the upside. You've got a situation where rates are rising because growth isn't slowing relative to where expectations were rather than a situation where rates are pushing down growth," Donovan said.
He expects global growth of 4.9 percent this year, which matches the forecast from the International Monetary Fund.
By Grace Wong, CNNMoney.com staff writer
June 14 2007: 11:50 AM EDT LONDON (CNNMoney.com) -- This month's rise in global interest rates is probably a sign of the beginning of the end of an era of supercheap money - a change with profound implications for the recent record-setting stock rally, the buyout boom and economic growth worldwide.
The question now is how much more rates might rise in the United States and elsewhere, and how that will affect world markets - and hundreds of millions of investors and consumers from Tokyo to Frankfurt to New York.
Video
More video
Have you ever thought about getting into the stock market? Here are some basics you need to know before you invest.
Play video
For years, the world has enjoyed historically low interest rates. This has helped fuel a boom in corporate mergers and private equity buyouts and a rally in stock prices and in other assets, such as real estate. But with economic growth outside the United States picking up and fanning inflation, central bankers around the world are pushing rates higher in a bid to cool growth and avoid bigger problems later on.
"There's been too much global liquidity and now we are seeing a shift away from multi-decades of declining rates and declining inflation," said Josh Stiles, managing director of research firm IDEAglobal in New York.
"This is the end of the cheap money cycle," Marc Pado, U.S. market strategist at Cantor Fitzgerald in New York, said.
The European Central Bank, which sets rates for most of Europe, hiked rates to a six-year high last week. The Bank of England and Bank of Canada are both expected to raise rates next month, and the Bank of Japan is expected to hike rates by the fall.
Higher rates raise the cost of borrowing for businesses and consumers and are poised to impact everything from economic growth and corporate profits to the performance of stocks and bonds and the payments that home owners make.
Here's a brief look at what higher rates will mean for global economy, financial markets and investors around the world.
Bonds
There has been no market where concerns about inflation and rising interesting rates have played out more dramatically than in the usually staid bond market.
The yield on the benchmark 10-year Treasury note hit 5.3 percent this week, the highest level in five years. Yields have backed off a bit since then, but are still up from just 4.5 percent three months ago. The drop in bond prices - and rise in yields, which move in the opposite direction - has come as bond traders unwind bets that rates would stay low - or even head lower still.
"People are being more optimistic about the U.S. economy, and therefore have written off rate cuts from the Fed that they were expecting," said Laurent Fransolet, head of European fixed income research at Barclays Capital in London, referring to the Federal Reserve.
After having been so low for so long, investors are waking up to the reality that yields will rise to more "normal" levels. Long-term Treasury yields have been kept low in recent years, in large part due to strong buying from foreign central banks. But as those overseas investors diversify their holdings, their appetite for U.S. government debt is expected to drop, analysts say. That in itself could feed more bond market selling and more upward pressure on rates.
Bond yields aren't just rising in the United States. The yield on a global basket of government bonds is at 4 percent - the highest level since December 2000, according to the Lehman Brothers Aggregate Global Treasury index, which tracks the performance of government bonds from 33 countries.
Those heavily invested in bonds may be lamenting the heavy selling, but the rise in yields may be something investors have to get used to, said Ken Mayland, president of ClearView Economics, a firm specializing in economic research. "Demand for capital has become much more intense. The improvement in the world economy justifies paying a higher yield - that's not a bad thing," he said.
Higher yields also make bonds a more attractive investment, and if yields keep climbing, as many market watchers expect them to do over the next few years, that could lure some investors away from stocks.
Stocks
Global stock markets have rallied, supported by the buyout boom and a flood of funds from investors large and small alike. But rate concerns pummeled stocks over the past two weeks, until the markets snapped back Wednesday and showed further signs of life Thursday.
Before the recent pull back, the Dow industrials and broader S&P 500 had risen to record highs. Stocks in Europe were rallying too. The pan-European Dow Jones Stoxx 600 is close to its record high.
Why all the turmoil in stock markets? Rising rates dampen economic growth, and that can hurt corporate profits - and stock prices. They also are likely to crimp merger and buyout activity, which has been a key source of support for stocks worldwide.
"Valuations are a function of interest rates," says Christopher Zook, chairman and chief investment officer at CAZ Investments in Houston. "As interest rates move higher, valuations will come down," he said.
Investors are starting to reassess their willingness to take on risk, but rates will have to move much higher before they really start to hurt the stock market, analysts said. The recent selloff took the Dow industrials and the S&P 500 down about 3 percent apiece - a modest decline given the market's recent run. Still, it's not clear the selling is wrung out of the market yet.
Peter Dixon, strategist at Commerzbank in London, expects markets to level off as investors reassess where they see opportunity.
"The warning shots fired by the market will perhaps make investors stop and think about whether they can continue to pile into asset classes without abandon and not have to pay the price at some time," he said.
It will take some time for this to play out in the market, and some markets may be hit harder than others. Dixon thinks European stocks will sell off less than in the United States, mostly because recovering consumer demand should offer support.
Economic growth
Rising rates could hurt economic growth, especially in the United States, where rising mortgage rates could threaten the already fragile housing sector by increasing the burden on home buyers.
The housing sector already faces pressure from an oversupply of homes on the market and falling home values in some markets. The sector also faces risks from ongoing problems in so-called subprime loans to borrowers with weak credit.
Weakness in the housing sector has worried economists, and the market still may worsen. At their last meeting in May, Federal Reserve officials said the downturn in housing was turning out to be more severe than expected.
But even though central banks abroad are raising rates, the Fed won't necessarily follow along. The U.S. economy grew at just a 0.6 percent rate in the first quarter - the weakest in just over four years - though the second quarter looks to be stronger.
Still, Paul Donovan, senior global economist at UBS in London, noted that inflation seems to easing and said he expects the U.S. economy to slow further in the second half. He believes it's actually more likely that the Fed will lower rates eventually, rather than hike them, as many investors now fear.
And when it comes to the global economy, the outlook remains upbeat. The main reason central banks are lifting rates overseas is that global growth has been strong, and isn't slowing as much as economists had expected.
"Globally, growth has in some cases surprised on the upside. You've got a situation where rates are rising because growth isn't slowing relative to where expectations were rather than a situation where rates are pushing down growth," Donovan said.
He expects global growth of 4.9 percent this year, which matches the forecast from the International Monetary Fund.
4 steps to starting your own business
Make your Fortune
Before you ditch your job to become your own boss, remember this: Entrepreneurship is time consuming, stressful and draining - and that's before you even launch. Take these steps first; then you can walk out the door.
By Josh Hyatt, Money Magazine
Work two jobs
Get as much of your new business as you can set up while you're still collecting a regular paycheck. You want to exit your job with a business plan in hand - you can pick up the basics at sba.gov or by reading gobignetwork.com, where entrepreneurs discuss business plans (check the Getting Started forum). Or you can hire an adviser for $2,500 or more. To refine your pitch, meet with investors, even if you don't need their money right away. If you're launching a business in an entirely new field, consider taking a part-time job in that industry first.
Before you ditch your job to become your own boss, remember this: Entrepreneurship is time consuming, stressful and draining - and that's before you even launch. Take these steps first; then you can walk out the door.
By Josh Hyatt, Money Magazine
Work two jobs
Get as much of your new business as you can set up while you're still collecting a regular paycheck. You want to exit your job with a business plan in hand - you can pick up the basics at sba.gov or by reading gobignetwork.com, where entrepreneurs discuss business plans (check the Getting Started forum). Or you can hire an adviser for $2,500 or more. To refine your pitch, meet with investors, even if you don't need their money right away. If you're launching a business in an entirely new field, consider taking a part-time job in that industry first.
How to get rich in America
Make your fortune
A dozen entrepreneurs, a dozen success stories: proof that you don't need a lot of money to make a go of it, but you do have to be smart about how you invest your energy.
By Josh Hyatt, Money Magazine
Smoothie operators
Kyle and Aaron Campos, 27 and 33
Buckeye, Ariz.
Lesson: If you must borrow from your friends and family, keep it formal
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The downside of mixing business with blood should be obvious - or at least it will be when you start getting late-night calls from Aunt Tillie asking about your schedule for an IPO. But hitting up relatives is how a lot of businesses get going. It's what Kyle Campos and his older brother Aaron had to do. In 2004 the brothers, both software engineers, quit their jobs in Santa Barbara and decamped to Buckeye, Ariz. After visiting relatives there earlier that year, Kyle had become convinced that the town was "filled with wide-open opportunities," especially compared with the software biz. "The tech sector was getting hit hard," says Aaron. "I didn't have a good feeling."Aaron and Kyle, neither of whom had run a business before, began brainstorming about starting one together. Both had frequented a smoothie joint in Santa Barbara, and they fell in love with the idea of starting their own. They found an industry consultant online who helped them write a business plan. Then they hired an experienced designer. The Main Squeeze would be a 1,200-square-foot store with hardwood floors and stainless-steel tables. And it would cost more than the $130,000 they had saved. That's when they drew up a list of 40 friends and relatives they could solicit as investors. "We wanted it to seem like we were offering them an authentic business opportunity," notes Kyle. For that they turned to CircleLending, a site that helps informal borrowers create formal lending deals. The siblings spent $99 to set up a loan agreement, choosing an attractive interest rate (9%), a repayment schedule they figured they could afford (either five or seven years) and a $1,000 minimum. Four folks each lent them $1,000, and another four each threw in $5,000. Last year the Campos brothers whipped up a profitable $210,000 in sales, and they've been paying their investors on schedule for close to two years. Says Kyle: "Not one has complained."
Find out how you can do it
A dozen entrepreneurs, a dozen success stories: proof that you don't need a lot of money to make a go of it, but you do have to be smart about how you invest your energy.
By Josh Hyatt, Money Magazine
Smoothie operators
Kyle and Aaron Campos, 27 and 33
Buckeye, Ariz.
Lesson: If you must borrow from your friends and family, keep it formal
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The downside of mixing business with blood should be obvious - or at least it will be when you start getting late-night calls from Aunt Tillie asking about your schedule for an IPO. But hitting up relatives is how a lot of businesses get going. It's what Kyle Campos and his older brother Aaron had to do. In 2004 the brothers, both software engineers, quit their jobs in Santa Barbara and decamped to Buckeye, Ariz. After visiting relatives there earlier that year, Kyle had become convinced that the town was "filled with wide-open opportunities," especially compared with the software biz. "The tech sector was getting hit hard," says Aaron. "I didn't have a good feeling."Aaron and Kyle, neither of whom had run a business before, began brainstorming about starting one together. Both had frequented a smoothie joint in Santa Barbara, and they fell in love with the idea of starting their own. They found an industry consultant online who helped them write a business plan. Then they hired an experienced designer. The Main Squeeze would be a 1,200-square-foot store with hardwood floors and stainless-steel tables. And it would cost more than the $130,000 they had saved. That's when they drew up a list of 40 friends and relatives they could solicit as investors. "We wanted it to seem like we were offering them an authentic business opportunity," notes Kyle. For that they turned to CircleLending, a site that helps informal borrowers create formal lending deals. The siblings spent $99 to set up a loan agreement, choosing an attractive interest rate (9%), a repayment schedule they figured they could afford (either five or seven years) and a $1,000 minimum. Four folks each lent them $1,000, and another four each threw in $5,000. Last year the Campos brothers whipped up a profitable $210,000 in sales, and they've been paying their investors on schedule for close to two years. Says Kyle: "Not one has complained."
Find out how you can do it
Tying the Financial Knot
Getting hitched? Don't even think of it before you've had 'the talk' with your beloved. No, not that talk. The one about money.
By Jennifer Ordonez
Newsweek
April 9, 2007 issue - Tax time can tax even the strongest marriages, but newlyweds Brad and Drew Erb, who took their vows last October, should be feeling particularly in love as April 15 approaches. Over the past six months, the couple has done nearly everything possible to avoid the kind of financial conflicts that often lead to nasty fights between husbands and wives: they combined their checking and investment accounts, made each other beneficiaries of their respective 401(k)s and are bumping up their life insurance. Brad, who is now on his wife's medical plan, saves a few hundred dollars a month. Even better, filing a joint tax return this year gave them a 15 percent higher refund. "Our situation is probably luckier than a lot of people's," says Brad, a Winter Park, Fla.-based financial adviser for Edward Jones.
He's right. All over the country, freshly married couples, confronting that cold 1040 "EZ" form for the first time together, are finding out the hard way that when it comes to marital stress, sex has nothing on money. "Money is the last taboo," says Olivia Mellan, a psychotherapist and author of "Money Harmony: Resolving Money Conflicts in Your Life and Relationships." "Money is never about money. It's about love, power, security, control, old age, self-esteem, freedom, independence." That, financial advisers say, is why squabbling over finances tops the list of reasons couples divorce.
So how can married couples—or those about to get hitched—keep money worries from ruining their love lives? The quick answer is that old cliché: communication. Preferably the brutally honest type. It may not be easy to come clean about your financial shortcomings. But your mate will find out sooner or later—probably when you're sitting down to do your taxes—and if it's later, it's going to get ugly. Now's the time to exercise that "better or worse" clause in your wedding vows. What's your real income—not your "dating inflated" version? How much debt do you really have on those credit cards? Does the repo man carry your picture in his wallet? With marriage and money, advisers warn, ignorance is definitely not bliss.
That's advice Amie Provencher and James Schiffner, who just tied the knot, are determined to take to heart. The two met online three years ago through eHarmony, the matchmaking Web site. Provencher and Schiffner are like-minded about a lot things, but it's hard to imagine that money is one of them. Like the cobbler whose children have holes in their shoes, Provencher is a finance manager who, by her own admission, "hates bills." Schiffner, 38, a computer security analyst, doesn't. "We actually have really different philosophies. He pays a bill as soon as he gets it. I don't," Provencher says. Both are "addicted" to their chiropractor (not cheap) and like to go out for sushi dinners at least once a week. But while Provencher will spend $200 on a haircut and has a newfound fondness for pricey moisturizers (she recently turned 40), Schiffner spends almost nothing on grooming.
That may not seem like such a big deal; but month after month the differences can add up. Financial adviser Suze Orman urges people to pay close attention to little clues like these before they decide to walk down the aisle. Does your boyfriend over-tip at restaurants, even though he has credit-card debt? Orman says that may mean he doesn't respect his money and will take the same approach to yours.Provencher and Schiffner are evolving. She says he has helped raise her money consciousness. "James came into the relationship clean, with no debt and a really high credit score. He's enabled me to get in pretty good financial shape." Provencher's willingness to change is a good sign, says Orman, whose latest book, "Women & Money," urges women to confront money fears instilled in them by a historically patriarchal society. If Orman had her way, people with poor credit ratings (known in the business as FICO scores) wouldn't be allowed to get married until they demonstrated at least two years of steady financial improvement. "There's exceptions to every rule," Orman says, "but I always say, FICO first, then sex." Orman believes that when spouses have very different credit ratings, it often means trouble down the road. Consider the consequences, she says, of buying a house with your credit-challenged spouse. Your mortgage rate will likely be based on the lower credit score—or, at best, an average of the two. That means more debt and higher monthly payments, not the sort of thing you want to find out for the first time when you sit down with the mortgage broker. "You have to be able to address things beforehand," Orman says. "Everything."
Of course, as long as opposites attract, spendthrifts will couple with hoarders—and people like Ruth Hayden, a St. Paul, Minn.-based financial consultant, will have clients. The author of "For Richer, Not Poorer: The Money Book for Couples," Hayden says the key to marital happiness is compromise. "What I teach to my couples is that 30 percent of their challenges will actually be resolved. The other 70 percent have to be managed." Brad and Drew Erb have some things to work out. Brad's father, a university professor, grew up in a Mennonite household where frugality was next to godliness. "Our parents never made a whole lot of money, but they were always conscientious about living below their means," says Brad, 33. "Debt makes my skin crawl."
Drew, 28, says her kin couldn't be more different. They're "the classic American family where credit cards rule everything." The first in her family to go to college, Drew says her parents "wanted to help me but their attitude was, 'Get loans and we'll help you pay it back'." During college and afterward, while working as a horticulturist, Drew amassed lots of credit-card debt. But when she and Brad got engaged, she decided to get serious about her finances. She quit horticulture and took a higher-paying job as an office manager. "I felt that I wasn't contributing very much to our marriage and that Brad would be bearing the brunt of it." So far, the couple, who live in the house Brad bought before they met, can think of only one real splurge: new furniture. Since they got engaged, they have been able to pay down about half of Drew's debt.
Another secret to avoiding financial stress: deciding together if one spouse is going to stop working to stay home with the kids. Married last June, Filipa and Eric Bryson moved from her hometown in New York state to her husband's in Rhode Island. She left behind her job as an elementary-school teacher. She thought she'd find a new job, but after giving birth to their son she had a change of heart. Surprisingly, she loves being a stay-at-home mom. "Now it's all about, 'Can we afford for me to stay home?' " Filipa says. "I never thought I would be like that."
For the Brysons, the decision has worked out well, because they both agree it's what they want for their family. For young couples trying to make every dollar count, it's especially important to map out short-and long-term savings goals. Amie Provencher and James Schiffner already do this. They both plan to start saving for a house, and would like to have a rainy-day fund. But first, Provencher has to finish paying off her student loans and old credit-card debt. Schiffner, meanwhile, has his own debt to retire. He splurged and bought Provencher's $10,000 engagement ring on credit. "The way to save money for a home is to just save money," he says. "And we're not there yet." The important thing is, they're "not there" together.
By Jennifer Ordonez
Newsweek
April 9, 2007 issue - Tax time can tax even the strongest marriages, but newlyweds Brad and Drew Erb, who took their vows last October, should be feeling particularly in love as April 15 approaches. Over the past six months, the couple has done nearly everything possible to avoid the kind of financial conflicts that often lead to nasty fights between husbands and wives: they combined their checking and investment accounts, made each other beneficiaries of their respective 401(k)s and are bumping up their life insurance. Brad, who is now on his wife's medical plan, saves a few hundred dollars a month. Even better, filing a joint tax return this year gave them a 15 percent higher refund. "Our situation is probably luckier than a lot of people's," says Brad, a Winter Park, Fla.-based financial adviser for Edward Jones.
He's right. All over the country, freshly married couples, confronting that cold 1040 "EZ" form for the first time together, are finding out the hard way that when it comes to marital stress, sex has nothing on money. "Money is the last taboo," says Olivia Mellan, a psychotherapist and author of "Money Harmony: Resolving Money Conflicts in Your Life and Relationships." "Money is never about money. It's about love, power, security, control, old age, self-esteem, freedom, independence." That, financial advisers say, is why squabbling over finances tops the list of reasons couples divorce.
So how can married couples—or those about to get hitched—keep money worries from ruining their love lives? The quick answer is that old cliché: communication. Preferably the brutally honest type. It may not be easy to come clean about your financial shortcomings. But your mate will find out sooner or later—probably when you're sitting down to do your taxes—and if it's later, it's going to get ugly. Now's the time to exercise that "better or worse" clause in your wedding vows. What's your real income—not your "dating inflated" version? How much debt do you really have on those credit cards? Does the repo man carry your picture in his wallet? With marriage and money, advisers warn, ignorance is definitely not bliss.
That's advice Amie Provencher and James Schiffner, who just tied the knot, are determined to take to heart. The two met online three years ago through eHarmony, the matchmaking Web site. Provencher and Schiffner are like-minded about a lot things, but it's hard to imagine that money is one of them. Like the cobbler whose children have holes in their shoes, Provencher is a finance manager who, by her own admission, "hates bills." Schiffner, 38, a computer security analyst, doesn't. "We actually have really different philosophies. He pays a bill as soon as he gets it. I don't," Provencher says. Both are "addicted" to their chiropractor (not cheap) and like to go out for sushi dinners at least once a week. But while Provencher will spend $200 on a haircut and has a newfound fondness for pricey moisturizers (she recently turned 40), Schiffner spends almost nothing on grooming.
That may not seem like such a big deal; but month after month the differences can add up. Financial adviser Suze Orman urges people to pay close attention to little clues like these before they decide to walk down the aisle. Does your boyfriend over-tip at restaurants, even though he has credit-card debt? Orman says that may mean he doesn't respect his money and will take the same approach to yours.Provencher and Schiffner are evolving. She says he has helped raise her money consciousness. "James came into the relationship clean, with no debt and a really high credit score. He's enabled me to get in pretty good financial shape." Provencher's willingness to change is a good sign, says Orman, whose latest book, "Women & Money," urges women to confront money fears instilled in them by a historically patriarchal society. If Orman had her way, people with poor credit ratings (known in the business as FICO scores) wouldn't be allowed to get married until they demonstrated at least two years of steady financial improvement. "There's exceptions to every rule," Orman says, "but I always say, FICO first, then sex." Orman believes that when spouses have very different credit ratings, it often means trouble down the road. Consider the consequences, she says, of buying a house with your credit-challenged spouse. Your mortgage rate will likely be based on the lower credit score—or, at best, an average of the two. That means more debt and higher monthly payments, not the sort of thing you want to find out for the first time when you sit down with the mortgage broker. "You have to be able to address things beforehand," Orman says. "Everything."
Of course, as long as opposites attract, spendthrifts will couple with hoarders—and people like Ruth Hayden, a St. Paul, Minn.-based financial consultant, will have clients. The author of "For Richer, Not Poorer: The Money Book for Couples," Hayden says the key to marital happiness is compromise. "What I teach to my couples is that 30 percent of their challenges will actually be resolved. The other 70 percent have to be managed." Brad and Drew Erb have some things to work out. Brad's father, a university professor, grew up in a Mennonite household where frugality was next to godliness. "Our parents never made a whole lot of money, but they were always conscientious about living below their means," says Brad, 33. "Debt makes my skin crawl."
Drew, 28, says her kin couldn't be more different. They're "the classic American family where credit cards rule everything." The first in her family to go to college, Drew says her parents "wanted to help me but their attitude was, 'Get loans and we'll help you pay it back'." During college and afterward, while working as a horticulturist, Drew amassed lots of credit-card debt. But when she and Brad got engaged, she decided to get serious about her finances. She quit horticulture and took a higher-paying job as an office manager. "I felt that I wasn't contributing very much to our marriage and that Brad would be bearing the brunt of it." So far, the couple, who live in the house Brad bought before they met, can think of only one real splurge: new furniture. Since they got engaged, they have been able to pay down about half of Drew's debt.
Another secret to avoiding financial stress: deciding together if one spouse is going to stop working to stay home with the kids. Married last June, Filipa and Eric Bryson moved from her hometown in New York state to her husband's in Rhode Island. She left behind her job as an elementary-school teacher. She thought she'd find a new job, but after giving birth to their son she had a change of heart. Surprisingly, she loves being a stay-at-home mom. "Now it's all about, 'Can we afford for me to stay home?' " Filipa says. "I never thought I would be like that."
For the Brysons, the decision has worked out well, because they both agree it's what they want for their family. For young couples trying to make every dollar count, it's especially important to map out short-and long-term savings goals. Amie Provencher and James Schiffner already do this. They both plan to start saving for a house, and would like to have a rainy-day fund. But first, Provencher has to finish paying off her student loans and old credit-card debt. Schiffner, meanwhile, has his own debt to retire. He splurged and bought Provencher's $10,000 engagement ring on credit. "The way to save money for a home is to just save money," he says. "And we're not there yet." The important thing is, they're "not there" together.
Managing Money and Staying Married
Author Steve Pybrum took questions on Thursday, April 5, on how couples can manage their money to keep their marriage healthy.
WEB EXCLUSIVE
Newsweek
April 9, 2007 issue - When two people are combining their lives in wedded bliss, it's not all about romance. They are also combining finances and sharing the burden of sometimes conflicting spending habits. According to interviews with divorcing couples, 75 percent split up over financial issues. But accountant and author Steve Pybrum says that doesn't have to be the case if couples are willing to honestly discuss their financial situations and expectations. Pybrum says people need to lay their cards on the table before they walk down the aisle, and work on their financial well-being just as hard as their emotional well-being to avoid some of the major pitfalls that couples face when balancing their mutual check book. During an hour-long Live Talk on Thursday, April 5, author Steve Pybrum took questions about his book "Money and Marriage: Making It Work Together" and on helping couples navigate the financial landmines of marriage. Read "Love by Numbers"
Columbus, OH: I have always dated men who didn't make any money and now I'm dating someone who makes a lot of money and it makes me uncomfortable that he is always paying so we can do the things that I couldn't otherwise afford to do. How should we deal with this so I don't feel like a golddigger even though it doesn't bother him to treat me?
Story continues below ↓
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Steve Pybrum: Hello Columbus, you have a very complex situation that may/will need some professional counseling to make you feel great about this new relationship. Because of your past choices you have selected men who did not have high earnings-- now that you found one... this part is a good thing!! But having healthy feelings about this relationship is necessary or your are going to drag this guy down to where he feels like he needs to date someone else that is better adjusted and feels worthy and is a person that feels welcoming to the idea of success. The hard answer is that your poverty mentality and somewhat low self esteem cause you to feel uncomfortable with the very old tradition of the man treating. The good news is that it sounds like he can afford to treat. He is treating and he needs to feel like you appreciate his generosity. So you need to get into a position of being able to accept in a healthy way his generosity. It’s a tall leap for you and I would strongly recommend a marriage and family counselor who is familiar with these issues. A professional who can offer to be helpful to you and prepare you correctly for this new relationship.
_______________________
Bossier City, LA: Do you think these legitimate debt management agencies, that make payments on your behalf every month to your credit card companies, are beneficial in helping people get out of debt?
Steve Pybrum: Hello Bossier City Credit counselors and debt management experts have all come under recent scrutiny. You need to be watchful that these agencies are working for you with you best interests in mind and they should not charge any form of ‘up-front’ fee. It usually is a pay as you go situation. Yes, they can be helpful to people that do not understand the steps of debt consolidation and then retiring the past due debt. Many people across America are in a ‘debt’ situation in their own household and the problem is bigger than they know how to deal with. So try the agency and monitor results and make promises to yourselves not to get behind and ‘in-debt’ again.
_______________________
Tampa, FL: My boyfriend makes significantly more money than me but when we get married I don't want him to feel the pressure to be the sole breadwinner. My career, however doesn't cap nearly as high as his. Is there a way I can balance the financial burden more so that I feel I am financially contributing?
Steve Pybrum: Hello Tampa Your need for control is past your ability to earn in this case. It appears that for now the reality of your relationship is that husband is the breadwinner. You should do what ever you can do to make him feel emotionally supported and appreciated. Then you can work at your own pace in the direction and in a business where there is a realistic chance that your earnings can surpass his. Then you can feel the glow of being the breadwinner and your household wins because you will have a lot of money coming in. But whoa, having a lot of money coming in is not going to make for you a great relationship. The great relationship will come if you both work as a team, as a married couple and applaud each other for what they are able to do in reality and not feel that you need to out do husband which may cause you to do some naughty things emotionally to him to put him back in his place. Best wishes for a great relationship and a strong financial future.
_______________________
Los Angeles, CA: A previous wife and my husband owed a $12000 debt. The previous wife claimed bandruptcy and now my husband has to pay the whole debt. The divorce agreement said she would pay it. Which is correct?
Steve Pybrum: Hello LA The X-wife filed bankruptcy, a Federal right. I assume that she did this after she signed the final divorce documents and the marital settlement agreemen. You must seek the advice of a bankruptcy lawyer to find the answer to your question who can carefully look at all the documents and promises, likely if she has named the X-husband as a creditor and has named the creditor in question in her bankruptcy papers, by Federal Law. She is off the hook and likely husband has gotten caught holding the bag and will have to pay the entire amount of the debt?.
_______________________
Bradenton, FL: In your experience, how can a divorce be avoided when the woman makes much more money than the man?
Steve Pybrum: Hello Bradenton 25% of the women in the workforce make more than the men they live with and these women like this idea. And very few of them gloat about it. And in fact most of them try to keep this from becoming an issue in their relationship. But this is hard on the male ego and the man often slows down in his work and his quest for success because she makes so much more. And it this slowing down and not moving forward in earnest that will make this successful woman angry. So the best thing to do is to talk about the matter set some achievable goals together and above all the man must forge ahead to do good for the wife, the family and the preservation of a lifetime relationship. Your question though infers that you are only going to put forth an effort just enough to keep from getting divorced. This is not advisable.
_______________________
Chicago, IL: My girlfriend has $50,000 in student loans that cannot be consolidated further. She is 37 years old. Would I be responsible for this debt, too, once we are married? Is there anything she can do to get out of debt quicker? She's still only paying interest on the loan now at $500/month.
Steve Pybrum: Hello Chicago Student loans. The theory is that you go deep in debt at a low interest rate with deferred payments to secure a good job so that you can repay these loans. At 37 she has a lot of years remaining to retire this debt and often times professionals of all kinds are deeper in debt with an amount greater than $50,000 in student loans when starting their professional career. The quick answer is that no you will not be responsible for her debt unless you are a signer on the student loan promise to pay. You can insulate yourself for sure about this by having a pre-nuptial agreement. This type of agreement is talked about in detail and a sample of what it could look like are in my book “Money and Marriage for Engaged Couples.” The prenuptial agreement is a useful tool and should be considered by everyone before entering marriage.
_______________________
Orlando, FL: My fiance and I both own our own homes. They are both valued at around $170,000, with $80,000 mortgages. We would like to buy a larger home together, but are confused about what to do with our current houses, given the uncertainty in the housing market in our area. Our accountant has advised renting at least one of the houses in order to increase our tax deductions, and we would probably sell the other to use the capital for a downpayment on a larger house. Given our two financial goals - first, to increase our tax deductions, and second, to generate funds for a downpayment on a larger house, would it make sense to refinance the rental to take equity out of it to use towards the downpayment, then pay down the mortgage when the second house is sold?
Steve Pybrum: Hello Orlando It seems the accountant offered some good advice... You will build your financial net worth if you own real estate that is other than your home....if you plan to sell both houses you would want to plan with the accountant to utilize your 500,000 of profit forgiveness on the sale of the two houses...by renting the one house you may have converted it to investment property and may next have to exchange this house for more rental property if you ever want to sell...keeping the rental and re-financing and over time paying down the mortage while moving into a bigger house is also a good idea...you need to have a note pad and map out the various scenerios and then one clear path will soon make sense to you... Keep the accountant in the loop to explain the tax consequences of each move you make. All the best!!
_______________________
Boston, MA: Is it okay if one person in a relationship has good credit, and the other person has zero credit?
Steve Pybrum: Well, one person having good credit is a plus and you want to do what you can to keep this persons credit unblemished. The other person you need to find the root of the problem as to why there is bad credit and first fix the problem and then go to work on cleaning up the credit report so that both of you move in the direction of having good credit. Having a pre-nuptial agreement or a post nuptial agreement will prevent the credit reporting agencies from putting negative information in the credit file of the person with the good credit.
_______________________
Boston, MA: What do couples fight most about when it comes to money?
Steve Pybrum: Well, when there is one man and one woman and the meeting is called to discuss your finances...sparks fly...
Chiefly it is because the couple has never taken the time to sit down to get to know each other so that they for themselves can understand the gender difference issues between each other and also coming to an understanding in how each other was raised as a child is an important part of the mix leading toward a healthy discussion about the finances of your married household.
_______________________
Houston, TX: If wives do not work, should they be given an allowance or is that demeaning to the work they do for the household?
Steve Pybrum: Well the non working spouse needs to have some money...that is clear and the presumption was that the working spouse would supply the money for the working persons earnings...most households of this kind come to a financial understanding as to how much it takes to:
1. run the household
2. general spending money for the non working person
From there it would require good communication skills to ask for more money from the working person for needs beyond those that had been planned for.
_______________________
Rochester, NY: Joint checking account or separate accounts? Which is better for soon-to-be marrieds?
Steve Pybrum: Younger people today are finding it more comfortable to have a combination of:
his account her account and a joint account.
_______________________
Upper Saddle River, NJ: How can you disuade a spouse from spending so much on non-essential personal items?
Steve Pybrum: This is a question that every man in America has!! The answer lies in how well you have planned your finances together...if you have had little or no discussion then the sky might be the limit in how far the non essential spending may go...if you have a frank discussion and put a lid on monthly spending for things in the non essential spending category then you may be able to limit the amount to a certain do not exceed amount per month...but for the female to outlaw such spending would cause the female to become upset.
_______________________
Chicago, IL: Is it important for both members of a couple to contribute equally to their respective 401(k)s?
Steve Pybrum: Often different contribution percentages exist for married couples....some say take 2% of my salary and reduce it and others want the maximum contribution...the max contribution people are the serious savers and have building their fianancial net worth and a sane retirement in mind the 2% are doing so only so they can say that they have a 401K..
_______________________
Los Angeles, CA: My husband and I have been married for 6 months, should we get wills?
Steve Pybrum: Hello LA Hopefully things are going well in this new marriage and you wont immediately need to have a will. But because you are married and trying to do things that will put your household in a well-kept position it would be advisable to have a will and the need increases as you own real estate together or have children or as you increase in years.
Because you are in a relatively new marriage you might want to look at my book "Money and Marriage-Making It Work Together" as there are many powerful ideas in how to run your household in a healthy and prosperous way, creating what you want to have...a great relationship and a strong financial future.
_______________________
Galveston, TX: Do married people need to get Powers of Attorneys in place for one another?
Steve Pybrum: This is similar to the question about do I need a will...today if you go to an attorney to get a will drafted likely the lawyer will have a discussion with you about having a revocable living trust instead of a will...with the revocable living trust then comes a whole package of things which would include the power of attorney over the other person should they become incapacitated and the "pull the plug" medical condition decision documents will be included in the same package. You should visit an estate planning attorney to have an initial discussion to determine what you needs are.
_______________________
Chapel Hill, NC: Is there an advantage to filing married jointly or married singly?
Steve Pybrum: Hello Chapel Hill....married single allows you to use the hightest tax rates in the land....married filing jointly likely will produce a result that causes you to pay less income tax...its really you decide on this one.
_______________________
Madison, WI: Is there still a marriage penalty for married people with no kids?
Steve Pybrum: The marriage penalty still exists and everyone should write their congressperson to fix this problem....Congress should be providing an incentive to get married and stay married...but presently the marriage penalty arises because if married persons divorced and filed as single people the way the math works out you would pay less tax...and this is not fair to members of the marriage community.
_______________________
St. Paul, MN: If one spouse is much better at managing money then the other, how should that be handled?
Steve Pybrum: This is the essence of 70% of the married households...there is a person that is fiscally more sound than the other person...this does not mean that the non fiscal person can run wild with the check book, it means that the fiscal person has to chat with the non fiscal person and live within certain boundaries because by doing so you will be building together a stronger financial future.
_______________________
Boulder, CO: I heard that everyone who gets married should sign a pre-nup, even if they are both broke, or financially equal at the start of the marriage. Is this true?
Steve Pybrum: Everyone who decides to get married should consider a pre nuptial agreement, even if they are both broke and even if they have just graduated from college. The prenuptial agreement gives you the chance to make your own rules and then you will not encounter rules from 1955 in the event the marriage ends in divorce. The pre nup agreement is a very helpful tool and can be designed in a way that it is fair and it promotes the idea that we are in this together. The agreement can foster the idea that the marriage is designed to last a lifetime.
_______________________
Chicago, IL: My boyfriend makes more money than I do and probably always will. We've discussed a pre-nuptial agreement and I've agreed that we should have one, but I feel I should have the right to negotiate it to protect myself and not just his money. How do I do this?
Steve Pybrum: A good pre nup is balanced and fair and does not put anyone in a awkward position if it were needed to be utilized, that is in the event of a divorce....its a 50-50 chance and you have an opportunity to design a way to combine your finances and purchase joint things together and unravel things if need be without a lot of legal wrangling.
_______________________
Sheboygan, WI: I am considering remarrying. I am a home-owner, but my bride-to-be has no real estate. How should we structure our finances, so I protect my equity while still showing her how much I love her?
Steve Pybrum: Men wake up...the house is a very special place for the female and to try to cut her out of the house and its equity is not really a good idea!!
But if you could explain that we are starting marriage today and now there is 50K of equity and from this day forward any additional equity because of our marrige will then be 50-50 equal earning of equity beyond the original equity amount of 50K.
If you want the female to be really happy you would live in "your" house for a short while and be working in the direction of buying "our house" in the not to distant future.
_______________________
Dedham, MA: After your marriage, how long should you wait to combine checking accounts and savings accounts?
Steve Pybrum: Immediately! Newlyweds, on average, wait 2 weeks to 2 1/2 months after their honeymoon to discuss finances. It is ultimately your personal decision as to whether you wish to create a joint checking account, but if (as it seems) you are already planning on doing so, there is nothing but yourselves that holds you from making the proper and necessary steps toward a joint checking account right away.
_______________________
Amarillo, TX: My wife won't let me see our household check book. She handles all the finances. How can I talk her into letting me see how much we're spending?
Steve Pybrum: Communication is more often than not the foundation of every relationship situation. If you express and show interest in and desire to participate in the financial goings on of the married household, it will behoove your wife to include you in the household check book. The best way to approach her is in a calm manner, a neutral arena and with sincerity and the notion of dual betterment. You are the second half of a whole and you wish to ensure the finacial survival of a long, healthy and wealthy marriage.
_______________________
Bellevue, WA: My husband has recently converted all of our check paying to online. I am not familiar with all of his passwords. How should I introduce this rather delicate topic so that I could deal with an emergency should he be out of town.
Steve Pybrum: Husbands and wives will always have their personal space, but the necessity to maintain the financial safety of the married household is a priority. This is why couples have created joint checking accounts. If one checking account is to continue as status quo, then calmly, openly and delicately discuss the necessity of knowing accessible measures for the finacial livelihood of the married couple. You are a team. Be team players.
_______________________
Arlington Heights, IL: My husband doesn't share his finances with me at all. It drives me crazy but he refuses to talk with me about it. We haven't had any major problems, but shouldn't a married couple have full financial disclosure or does he have the right to keep his finances private?
Steve Pybrum: "Money and Marriage: Making It Work Together"
The answers lie within...
Sharing financial information is just as necessary as sharing personal thoughts and emotions... especially as thoughts and emotions are often linked to finances. The path to a healthy and wealthy marriage lies in open and honest communication about finances. If you show interest in the betterment of your financial future together, then there should be no reason for your husband to keep the household finances a secret. If you need to learn the "tricks of the trade" when it comes to finances, then show and prove your determination to help the married household further its path toward health and wealth.
WEB EXCLUSIVE
Newsweek
April 9, 2007 issue - When two people are combining their lives in wedded bliss, it's not all about romance. They are also combining finances and sharing the burden of sometimes conflicting spending habits. According to interviews with divorcing couples, 75 percent split up over financial issues. But accountant and author Steve Pybrum says that doesn't have to be the case if couples are willing to honestly discuss their financial situations and expectations. Pybrum says people need to lay their cards on the table before they walk down the aisle, and work on their financial well-being just as hard as their emotional well-being to avoid some of the major pitfalls that couples face when balancing their mutual check book. During an hour-long Live Talk on Thursday, April 5, author Steve Pybrum took questions about his book "Money and Marriage: Making It Work Together" and on helping couples navigate the financial landmines of marriage. Read "Love by Numbers"
Columbus, OH: I have always dated men who didn't make any money and now I'm dating someone who makes a lot of money and it makes me uncomfortable that he is always paying so we can do the things that I couldn't otherwise afford to do. How should we deal with this so I don't feel like a golddigger even though it doesn't bother him to treat me?
Story continues below ↓
advertisement
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dcmaxversion = 9
dcminversion = 6
Do
On Error Resume Next
plugin = (IsObject(CreateObject("ShockwaveFlash.ShockwaveFlash." & dcmaxversion & "")))
If plugin = true Then Exit Do
dcmaxversion = dcmaxversion - 1
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Steve Pybrum: Hello Columbus, you have a very complex situation that may/will need some professional counseling to make you feel great about this new relationship. Because of your past choices you have selected men who did not have high earnings-- now that you found one... this part is a good thing!! But having healthy feelings about this relationship is necessary or your are going to drag this guy down to where he feels like he needs to date someone else that is better adjusted and feels worthy and is a person that feels welcoming to the idea of success. The hard answer is that your poverty mentality and somewhat low self esteem cause you to feel uncomfortable with the very old tradition of the man treating. The good news is that it sounds like he can afford to treat. He is treating and he needs to feel like you appreciate his generosity. So you need to get into a position of being able to accept in a healthy way his generosity. It’s a tall leap for you and I would strongly recommend a marriage and family counselor who is familiar with these issues. A professional who can offer to be helpful to you and prepare you correctly for this new relationship.
_______________________
Bossier City, LA: Do you think these legitimate debt management agencies, that make payments on your behalf every month to your credit card companies, are beneficial in helping people get out of debt?
Steve Pybrum: Hello Bossier City Credit counselors and debt management experts have all come under recent scrutiny. You need to be watchful that these agencies are working for you with you best interests in mind and they should not charge any form of ‘up-front’ fee. It usually is a pay as you go situation. Yes, they can be helpful to people that do not understand the steps of debt consolidation and then retiring the past due debt. Many people across America are in a ‘debt’ situation in their own household and the problem is bigger than they know how to deal with. So try the agency and monitor results and make promises to yourselves not to get behind and ‘in-debt’ again.
_______________________
Tampa, FL: My boyfriend makes significantly more money than me but when we get married I don't want him to feel the pressure to be the sole breadwinner. My career, however doesn't cap nearly as high as his. Is there a way I can balance the financial burden more so that I feel I am financially contributing?
Steve Pybrum: Hello Tampa Your need for control is past your ability to earn in this case. It appears that for now the reality of your relationship is that husband is the breadwinner. You should do what ever you can do to make him feel emotionally supported and appreciated. Then you can work at your own pace in the direction and in a business where there is a realistic chance that your earnings can surpass his. Then you can feel the glow of being the breadwinner and your household wins because you will have a lot of money coming in. But whoa, having a lot of money coming in is not going to make for you a great relationship. The great relationship will come if you both work as a team, as a married couple and applaud each other for what they are able to do in reality and not feel that you need to out do husband which may cause you to do some naughty things emotionally to him to put him back in his place. Best wishes for a great relationship and a strong financial future.
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Los Angeles, CA: A previous wife and my husband owed a $12000 debt. The previous wife claimed bandruptcy and now my husband has to pay the whole debt. The divorce agreement said she would pay it. Which is correct?
Steve Pybrum: Hello LA The X-wife filed bankruptcy, a Federal right. I assume that she did this after she signed the final divorce documents and the marital settlement agreemen. You must seek the advice of a bankruptcy lawyer to find the answer to your question who can carefully look at all the documents and promises, likely if she has named the X-husband as a creditor and has named the creditor in question in her bankruptcy papers, by Federal Law. She is off the hook and likely husband has gotten caught holding the bag and will have to pay the entire amount of the debt?.
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Bradenton, FL: In your experience, how can a divorce be avoided when the woman makes much more money than the man?
Steve Pybrum: Hello Bradenton 25% of the women in the workforce make more than the men they live with and these women like this idea. And very few of them gloat about it. And in fact most of them try to keep this from becoming an issue in their relationship. But this is hard on the male ego and the man often slows down in his work and his quest for success because she makes so much more. And it this slowing down and not moving forward in earnest that will make this successful woman angry. So the best thing to do is to talk about the matter set some achievable goals together and above all the man must forge ahead to do good for the wife, the family and the preservation of a lifetime relationship. Your question though infers that you are only going to put forth an effort just enough to keep from getting divorced. This is not advisable.
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Chicago, IL: My girlfriend has $50,000 in student loans that cannot be consolidated further. She is 37 years old. Would I be responsible for this debt, too, once we are married? Is there anything she can do to get out of debt quicker? She's still only paying interest on the loan now at $500/month.
Steve Pybrum: Hello Chicago Student loans. The theory is that you go deep in debt at a low interest rate with deferred payments to secure a good job so that you can repay these loans. At 37 she has a lot of years remaining to retire this debt and often times professionals of all kinds are deeper in debt with an amount greater than $50,000 in student loans when starting their professional career. The quick answer is that no you will not be responsible for her debt unless you are a signer on the student loan promise to pay. You can insulate yourself for sure about this by having a pre-nuptial agreement. This type of agreement is talked about in detail and a sample of what it could look like are in my book “Money and Marriage for Engaged Couples.” The prenuptial agreement is a useful tool and should be considered by everyone before entering marriage.
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Orlando, FL: My fiance and I both own our own homes. They are both valued at around $170,000, with $80,000 mortgages. We would like to buy a larger home together, but are confused about what to do with our current houses, given the uncertainty in the housing market in our area. Our accountant has advised renting at least one of the houses in order to increase our tax deductions, and we would probably sell the other to use the capital for a downpayment on a larger house. Given our two financial goals - first, to increase our tax deductions, and second, to generate funds for a downpayment on a larger house, would it make sense to refinance the rental to take equity out of it to use towards the downpayment, then pay down the mortgage when the second house is sold?
Steve Pybrum: Hello Orlando It seems the accountant offered some good advice... You will build your financial net worth if you own real estate that is other than your home....if you plan to sell both houses you would want to plan with the accountant to utilize your 500,000 of profit forgiveness on the sale of the two houses...by renting the one house you may have converted it to investment property and may next have to exchange this house for more rental property if you ever want to sell...keeping the rental and re-financing and over time paying down the mortage while moving into a bigger house is also a good idea...you need to have a note pad and map out the various scenerios and then one clear path will soon make sense to you... Keep the accountant in the loop to explain the tax consequences of each move you make. All the best!!
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Boston, MA: Is it okay if one person in a relationship has good credit, and the other person has zero credit?
Steve Pybrum: Well, one person having good credit is a plus and you want to do what you can to keep this persons credit unblemished. The other person you need to find the root of the problem as to why there is bad credit and first fix the problem and then go to work on cleaning up the credit report so that both of you move in the direction of having good credit. Having a pre-nuptial agreement or a post nuptial agreement will prevent the credit reporting agencies from putting negative information in the credit file of the person with the good credit.
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Boston, MA: What do couples fight most about when it comes to money?
Steve Pybrum: Well, when there is one man and one woman and the meeting is called to discuss your finances...sparks fly...
Chiefly it is because the couple has never taken the time to sit down to get to know each other so that they for themselves can understand the gender difference issues between each other and also coming to an understanding in how each other was raised as a child is an important part of the mix leading toward a healthy discussion about the finances of your married household.
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Houston, TX: If wives do not work, should they be given an allowance or is that demeaning to the work they do for the household?
Steve Pybrum: Well the non working spouse needs to have some money...that is clear and the presumption was that the working spouse would supply the money for the working persons earnings...most households of this kind come to a financial understanding as to how much it takes to:
1. run the household
2. general spending money for the non working person
From there it would require good communication skills to ask for more money from the working person for needs beyond those that had been planned for.
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Rochester, NY: Joint checking account or separate accounts? Which is better for soon-to-be marrieds?
Steve Pybrum: Younger people today are finding it more comfortable to have a combination of:
his account her account and a joint account.
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Upper Saddle River, NJ: How can you disuade a spouse from spending so much on non-essential personal items?
Steve Pybrum: This is a question that every man in America has!! The answer lies in how well you have planned your finances together...if you have had little or no discussion then the sky might be the limit in how far the non essential spending may go...if you have a frank discussion and put a lid on monthly spending for things in the non essential spending category then you may be able to limit the amount to a certain do not exceed amount per month...but for the female to outlaw such spending would cause the female to become upset.
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Chicago, IL: Is it important for both members of a couple to contribute equally to their respective 401(k)s?
Steve Pybrum: Often different contribution percentages exist for married couples....some say take 2% of my salary and reduce it and others want the maximum contribution...the max contribution people are the serious savers and have building their fianancial net worth and a sane retirement in mind the 2% are doing so only so they can say that they have a 401K..
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Los Angeles, CA: My husband and I have been married for 6 months, should we get wills?
Steve Pybrum: Hello LA Hopefully things are going well in this new marriage and you wont immediately need to have a will. But because you are married and trying to do things that will put your household in a well-kept position it would be advisable to have a will and the need increases as you own real estate together or have children or as you increase in years.
Because you are in a relatively new marriage you might want to look at my book "Money and Marriage-Making It Work Together" as there are many powerful ideas in how to run your household in a healthy and prosperous way, creating what you want to have...a great relationship and a strong financial future.
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Galveston, TX: Do married people need to get Powers of Attorneys in place for one another?
Steve Pybrum: This is similar to the question about do I need a will...today if you go to an attorney to get a will drafted likely the lawyer will have a discussion with you about having a revocable living trust instead of a will...with the revocable living trust then comes a whole package of things which would include the power of attorney over the other person should they become incapacitated and the "pull the plug" medical condition decision documents will be included in the same package. You should visit an estate planning attorney to have an initial discussion to determine what you needs are.
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Chapel Hill, NC: Is there an advantage to filing married jointly or married singly?
Steve Pybrum: Hello Chapel Hill....married single allows you to use the hightest tax rates in the land....married filing jointly likely will produce a result that causes you to pay less income tax...its really you decide on this one.
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Madison, WI: Is there still a marriage penalty for married people with no kids?
Steve Pybrum: The marriage penalty still exists and everyone should write their congressperson to fix this problem....Congress should be providing an incentive to get married and stay married...but presently the marriage penalty arises because if married persons divorced and filed as single people the way the math works out you would pay less tax...and this is not fair to members of the marriage community.
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St. Paul, MN: If one spouse is much better at managing money then the other, how should that be handled?
Steve Pybrum: This is the essence of 70% of the married households...there is a person that is fiscally more sound than the other person...this does not mean that the non fiscal person can run wild with the check book, it means that the fiscal person has to chat with the non fiscal person and live within certain boundaries because by doing so you will be building together a stronger financial future.
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Boulder, CO: I heard that everyone who gets married should sign a pre-nup, even if they are both broke, or financially equal at the start of the marriage. Is this true?
Steve Pybrum: Everyone who decides to get married should consider a pre nuptial agreement, even if they are both broke and even if they have just graduated from college. The prenuptial agreement gives you the chance to make your own rules and then you will not encounter rules from 1955 in the event the marriage ends in divorce. The pre nup agreement is a very helpful tool and can be designed in a way that it is fair and it promotes the idea that we are in this together. The agreement can foster the idea that the marriage is designed to last a lifetime.
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Chicago, IL: My boyfriend makes more money than I do and probably always will. We've discussed a pre-nuptial agreement and I've agreed that we should have one, but I feel I should have the right to negotiate it to protect myself and not just his money. How do I do this?
Steve Pybrum: A good pre nup is balanced and fair and does not put anyone in a awkward position if it were needed to be utilized, that is in the event of a divorce....its a 50-50 chance and you have an opportunity to design a way to combine your finances and purchase joint things together and unravel things if need be without a lot of legal wrangling.
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Sheboygan, WI: I am considering remarrying. I am a home-owner, but my bride-to-be has no real estate. How should we structure our finances, so I protect my equity while still showing her how much I love her?
Steve Pybrum: Men wake up...the house is a very special place for the female and to try to cut her out of the house and its equity is not really a good idea!!
But if you could explain that we are starting marriage today and now there is 50K of equity and from this day forward any additional equity because of our marrige will then be 50-50 equal earning of equity beyond the original equity amount of 50K.
If you want the female to be really happy you would live in "your" house for a short while and be working in the direction of buying "our house" in the not to distant future.
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Dedham, MA: After your marriage, how long should you wait to combine checking accounts and savings accounts?
Steve Pybrum: Immediately! Newlyweds, on average, wait 2 weeks to 2 1/2 months after their honeymoon to discuss finances. It is ultimately your personal decision as to whether you wish to create a joint checking account, but if (as it seems) you are already planning on doing so, there is nothing but yourselves that holds you from making the proper and necessary steps toward a joint checking account right away.
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Amarillo, TX: My wife won't let me see our household check book. She handles all the finances. How can I talk her into letting me see how much we're spending?
Steve Pybrum: Communication is more often than not the foundation of every relationship situation. If you express and show interest in and desire to participate in the financial goings on of the married household, it will behoove your wife to include you in the household check book. The best way to approach her is in a calm manner, a neutral arena and with sincerity and the notion of dual betterment. You are the second half of a whole and you wish to ensure the finacial survival of a long, healthy and wealthy marriage.
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Bellevue, WA: My husband has recently converted all of our check paying to online. I am not familiar with all of his passwords. How should I introduce this rather delicate topic so that I could deal with an emergency should he be out of town.
Steve Pybrum: Husbands and wives will always have their personal space, but the necessity to maintain the financial safety of the married household is a priority. This is why couples have created joint checking accounts. If one checking account is to continue as status quo, then calmly, openly and delicately discuss the necessity of knowing accessible measures for the finacial livelihood of the married couple. You are a team. Be team players.
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Arlington Heights, IL: My husband doesn't share his finances with me at all. It drives me crazy but he refuses to talk with me about it. We haven't had any major problems, but shouldn't a married couple have full financial disclosure or does he have the right to keep his finances private?
Steve Pybrum: "Money and Marriage: Making It Work Together"
The answers lie within...
Sharing financial information is just as necessary as sharing personal thoughts and emotions... especially as thoughts and emotions are often linked to finances. The path to a healthy and wealthy marriage lies in open and honest communication about finances. If you show interest in the betterment of your financial future together, then there should be no reason for your husband to keep the household finances a secret. If you need to learn the "tricks of the trade" when it comes to finances, then show and prove your determination to help the married household further its path toward health and wealth.
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