How would you begin the finance questions to get started with the intimacies of credit reports, and other information with a significant other?
Well I would need to know more about where you are in your relationship.
Are you just dating?
Has there been talk of marriage?
Has a ring been exchanged and a date set?
So here's what I think. The first date is too soon to get into anyone's finanical business and the honeymoon is too late.
Dating: Just watch and observe how the person handle his or her money. Listen carefully to conversations about money. Ask what they think about saving, debt, charity, tithing, etc.
Engaged: Take a premarital course in which issues of money are greatly discussed. Pull each other's credit reports and look over them together, not with any judgment but with an eye to how you might deal with any money issues.
I have a beautiful fiance that I love and would do anything for, however I am finding planning for the wedding to be very stressful. One the one hand, I want to give my fiance the most elegant, romantic wedding possible. On the other, I am suffering from severe sticker shock (what we are talking about could easily surpass $20,000). I do make good money but also have quite a bit of student loan debt (as does she). I want to have a big, fun wedding as well but am having a hard time reconciling spending what could be a huge chunk of student loan debt (or a future down payment on a house). How do I approach this conversation with my fiance? Complicating things is that I am currently working overseas and can't be there in person to work through these things. Are there any resources or guides to help us through this process? Finally I do want to thank you so much for your advice over the years. I made some bad choices in grad school and at the worst had nearly $10,000 in credit card debt. That is gone and now I am aggressively tackling my student loans! It feels really great to have my finances under control and I hope to never be in that much debt again.
I can tell from your note you're a sensitive person. You talk about caring what she wants even over the money even tho you have concerns about the cost of the wedding. Good for you!
But you HAVE to have the talk. I totally agree with you that if I had ANY student loan debt I wouldn't spend much on the wedding. My values. And it appears to be yours too.
In many ways this is the first BIG test of how you will handle difficult financial situations as a married couple.
So stop the madness (spending $20,000 more on thee wedding) if that is not what you want.
Talk to her. Tell her how you feel. See if there are ways to compromise to keep the cost down.
Show her how much interest you would save paying off the student loans.
I know this is a hard talk when you are so far away. So try putting your thoughts in a very lovely letter. Send it to her. And then call her. That way you will have you points outlined.
Talk. Soon. Because I would hate for you to be counting the cost and feeling unwise on one of the most important days of your life.
And remember your marriage isn't about or defined by the PARTY (reception) you have getting married.
Hi Michelle, Love your chats and advice! So, I have a question about retirement. I'm in my early 30s, earn about 59K and am currently putting away 13% (pre-tax, maxed out employer match - I put in 3%, they put in 10%) into a low fee mutual fund. I've been saving in this manner since about age 29 (got a bit of a late start, I know). I wonder, though, if this is enough? My plan is to continue to increase my pre-tax retirement contributions by 1% each time I get a raise. I a few years, I could easily save between 15% and 18% pre-tax (which includes my employer match). I also put a little bit into a Roth IRA. I have a nagging feeling that I should be saving more than I am now, but I don't have a good sense of just how much I should save (including employer match). 15%? 20%? I have no consumer debt, about $6,000 in a combined life happens/emergency savings account, and approximately 60K in student loan debt. Thanks!
Based on the numbers I see you are doing a pretty good job of saving for your retirement, which I should point out is easily still 30 years away.
Do this try the ballpark retirement caculator at www.choosetosave.org.
To figure out how much you will need in retirement you should consider not just your investments but what you expect to get from Social Security, any other pensions, how much you plan on living on year to year, etc. You may very well be saving enough right now.
I started reading your chats a little over a year ago, and while at first I thought your advice on avoiding debt was a little extreme, I soon realized you were 100% right...which pushed me to start paying off my student loans ASAP. I just wanted to share that, since those loans went into repayment 14 months ago, I've paid off almost all of the $15,000 total (plus about $600 in interest). And, honestly, my salary isn't that big...it was all a matter of ruthless budgeting. With my next paycheck, I'll be 100% debt-free, just as I'm about to make a big move to a new city. I feel a huge weight lifted off my shoulders! Thanks SO much for your pointed (but on-point) advice, Michelle!
Ah don't make me cry.
WONDERFUL. CONGRATS. YOU ARE THE BOOM DIGGITY (for the less hip that means totally the awesomest, no lie.)
I know lots of people think I'm too extreme about being debt free. But it's notes like yours that keep me uplifted and convinced that I'm right.
You should send a letter for my Debt Defeater Feature in my live video chat. I profile folks like you and you get this great free tee-shirt. You can't buy the shirt. It's only given to folks who pay off a lot of debt. (Just finish this week's video chat so go watch later).
Anyway, I'm so happy that you know have that feeling of getting that student loan monkey off your back
I've heard both arguments regarding how much to take for college loans: 1) take the full amount offered in case of emergency, then whatever is not used, repay immediately, and 2) take as little as you need, then apply for more if the need arises. Which would you suggest, if you had to take some? Thanks.
Don't take any if you can. Stay in-state. Live at home and commute. Go to community college for two years and transfer to 4-year university, etc.
But if you feel you have to take on the debt, borrow as little as possible. I've found that people who say they will pay back what they don't use are lying to themselves. There are always financial needs and ways to persuade yourself you need the extra funds.
So borrow the bare minimum and if the need arises, do just about anything else than rely on student loans.
Hi Michelle. I'm tasked with talking to high school seniors about college budgeting. What do you think is important to include for them? Thanks!
Tell them not to look around at what their peers have or are getting or doing or buying.
Tell them if they need to take out loans then they need to carefully consider where they can go to school. For some it might mean living at home, staying in state, etc.
I lived on so very little while I was in college and I had a FULL academic scholarship. But I didnt' go shopping much. I didn't eat out much (meaning no pizzas all the time).
I'll admit I looked homey and people didn't see me at the campus parties but I still had a great time in college.
I have been on the fast since Feb.1 with my fiance and we are doing well. I didn't realize how easy it would be. The hard part is facing the fact that I spend too much of my money on the credit card and debit card dependency rollercoaster. I was broke when I was younger and cash was the only way that I survived. With the fast, it's back to basics and I've saved more than $200 just in lunches...
I had an expensive wedding but was fortunate that my wife's parents paid for much of it. We had a budget, consulted each other during every decision, and had a wonderful wedding. There is no reason that a wonderful wedding has to be expensive. When I look back, I remember dancing with my wife and friends, laughing with family at the reception, etc. Your spouse and your loving guests will be your memories. The location, food, etc. fades into the background.
Thanks for the hindsight.
And me too. Low-budget wedding.
This year 20 years of marriage.
Hey - if you are overseas now, can you do the wedding overseas? Then you can have a nice little wedding, and maybe not so many people will come and well, that's what I would do - I guess it depends on where you are...
Not a bad idea if it won't cost those who want to come an arm and leg.
$20K. Hah...we spent $28K in 2002 and when my best friend married in 2006, he couldn't use many of our vendors because they had gone up so much in price. However, we were older, financially stable and with no debt. You should not spend this much when you hold debt. And have this talk with your fiancee NOW. Even long distance. The longer you wait, the more invested she will become in the big wedding that she's been planning. Also, the more she will have told others. You need to set a budget that you are both comfortable with. If you can't do that, and both be comfortable with spending, then what are you going to do when you go to buy a house and you want to buy within your means and she wants to buy the house of her dreams? What will you do when you have children? This same discussion with a different base topic will be the core of your lives together and will recur again and again. Find out if you are financially compatible. More than 50% of marriages that dissolve do so over fiscal differences.
More advice for the soon-to-be married guy.
Very good points.
I think divorce can hurt kids, but it also depends on the people themselves. I briefly dated someone with a small child, and I decided up front that if things became serious, I'd be participating in that child's life (to whatever extent) and that included probably contributing to college expenses. A parent who bails on any college assistance because of divorce really might have done that regardless.
Today's e-letter: Children of divorced parents receive less financial support for college
You know I wasn't surprised by this data. Still it made me sad.
Once again the kids getting caught in bad decisions their parents made.
Do you mind if I add two thoughts? One, you talk of wanting to give her a dream wedding, but have you talked to her about what she wants? Maybe her dreams are less extravagant than you think. And two, maybe your financial responsibility is one of the things she loves about you and she'll be on board with you. After all your hard work, I'm betting you're not with a frivolous woman :)
You may certainly add your really thoughtful two cents worth.
I don't know why people think that is 'extreme.' Seriously. You shouldn't spend more than you have/make. It doesn't make sense to do anything else. While it's *possible* you may make more in the future, nothing is certain. There *might* be some reasons to borrow money (like, for a house, or for an education), those are few and far between. I graduated college with a degree and no debt (thanks, mom and dad!). Then I was waiting tables (with other college grads). So when I went to grad school, I was determined NOT to borrow money (which, actually, didn't happen, I borrowed $3000 - which I paid off within two years of graduation). Seriously - you never know what life will bring, why have something like that hanging over your head?
That's what I'm talking about!
Debt-free all the way baby!
It's my life-long goal. Just go the house debt and can't wait to get that kicked to the curb. Oh what a glorious day that will be.
Hello Michelle. I have no debt from undergrad or my master's program, but now I am staring down up to $300,000 for four years of grad school. My current job pays a pittance, although I am saving all I can. How would you handle this? I'm told the average pay-back time is 20-30 years, which sounds . . . awful.
Me, wouldn't do it.
With that kind of debt I suppose you are talking about being a doctor? Because anything else seems crazy (to me).
And yes, unless after you finish you see making high six-figure salary you are talking about three or four decades of bondage.
Ms. Singletary: After you contribute as much into your 401k as your employer will match, and you have more money to save, is it best to put that additional money into that 401k or contribute it to a 457b or an IRA instead? Thanks.
If you want to save more yes, you can look into an IRA or a ROTH.
Or if you have any debt, use that extra money to pay off that debt including home loan.
Hi Michelle- I am big admirer of yours and always appreciate your sound advice about money-so much of it mirrors my mom's. I have a question about a windfall I will be receiving in April from my job. I will be getting a retention bonus equal to one year of my salary. After taxes, I think that works out to about a little over $40K. I plan to pay off a private student loan-$20K and two personal loans that equal $11K. That leaves approximately $10K. I have $2500 in credit card debt but I would like to buy a car and have a small emergency fund. My plan is to pay off my credit card debt in about 2 months after getting my bonus since I wont be making my big loan payments anymore. I'd like to set aside $5K to start an emergency fund and put down 10 percent on a car. I'd like to get your opinion about my potential plan. Thanks as always.
You got most things right. But I still don't know why you need to wait two months to pay off the $2,500 in credit card debt. Just get rid of it once and for all.
I would do two things
-- emergency fund (at least one month's of living expenses to start)
-- Keep a few thousand for life happens fund.
Then I want you to consider if you really truly NEED to get a car right now. If you don't, why not save the money you were putting on a monthly basis toward the student loans, personal loans and credit card debt to save up to buy the car outright?
That's what I would do.
$150 dollars for a wedding cake, a white dress($25, (Not a fancy wedding dress) Still have the dress and oldest daughter wore it to her ring dance. Total price less than $250. 38 years of marriage-- priceless!
For the guy who thinks he will be fully committed to paying for college, please remember that divorce can be expensive. One of the significant reasons that divorced parents contribute less to college tuition is that they have less to contribute. Two married parents have one set of expenses. Divorced parents are supporting two households, often have new extended families, and often higher costs. If you look at the discretionary spending for a married couple and a divorced couple, you'll often find that post-divorce, the same couple has less discretionary money available to them. Even if this doesn't happen to all couples, it happens to enough to skew the numbers down for them.
I hear you but shouldn't we question the premise.
If you get a divorce you don't HAVE to start a second family. What about taking care of the kids you already have before starting a new family. And taking care means helping to pay as much as you cant to get them through college.
I'm just saying.
Please no destination weddings! Hax is always against these and it's wrong to make others pay to save yourselves some money. Next chat, someone will be writing into Michelle asking if it's ok to put $5k on their credit card to see their only child get married overseas!
I don't have a problem with destination wedding if you can afford it and the guests can afford to go. But I think the couple should consider the financial ability of the people they really want to be there.
And if you're invited and you can't afford it, don't go your baby or not.
You aren't making people pay anything. Free will.
Over financial issues. It's not usually 'financial issues' per se...it's how the different spouses *view* the issues. It's more about values OVERALL than actually about money. The money is what brings out the issues, but it rarely *actually* has to do with money.
You are right. Rarely if ever about the money.
Not that I did this - but there are lots of consignment shops one can go to...or look at ebay...or craig's list, etc. One need not spend $1k (what I spent in 2000, including alterations). Just a thought...
It's more than a thought.
I wore a consignment wedding dress. I just couldn't bring myself to spend $1,000 or more on a dress I would wear for just one day.
Paid about $250 I think.
I thought the woman who wore it before me wasn't going to be at my wedding!
Yeah, talk to your fiancee. Her definition of "romantic" may be far different from yours. While I was wedding-planning, I avoided the magazines and bridal fairs (and, if I remember correctly, the wedding-related chats here) that told me I was supposed to want "romantic" out-of-season flowers and had to have certain jewelery, attire, music, invitations (it's apparently TACKY to do anything other than send an engraved invitation that's put in a lined envelope, that's put in ANOTHER envelope, with an RSVP card and a reception card and a map to the location). We had our wedding--yes, the whole thing--in the party room at a pizza place. 40 people. A family friend who happened to be a minister did the ceremony. We bartered the rings from a jeweler friend (and they RULE). iPod playlist. We invited people by calling them and asking them to come. We wore stuff we already owned (or, in my husband's case, he needed a new sport coat, but he's worn it 100 times since). Appetizers, salad, pizza, pasta, dessert, beer, wine, and soda. Total cost was about $1,000. We put it on a credit card because the pizza place doesn't take checks (and who carries $1,000 in cash?), and paid it off with our next statement, as we always do. It was fun, it was memorable, and other than our mortgage, we have no debt (including student debt, and we have three degrees between the two of us). Elegant? Maybe not. Romantic? Well? What's more romantic--something that's personal and reflects who you are as a couple (including your priorities), or something that the Wedding-Industrial Complex says you're supposed to have?
All good ideas to keep wedding costs down.
But really I don't have a problem people spending what they have in cash if they don't have debt (student loans, credit cards, car, etc.)
My line is always have the wedding you can afford.
So, we just found out that we're expecting. Like many folks, we have no estate planning done, so after the first trimester, I plan to get down to brass tacks and get this all squared away. I plan to sit down with an estate lawyer, set up wills, living wills, a trust for our child/children should we both pass, redesignate some of our life insurance beneficiaries. I was going to try one of Mike Collins estate planning seminars (the ones advertised on WTOP). So, what else should I be thinking of? Since I've never done this before, I'm wondering what I'm missing?
You've thought of a lot. Good for you.
After the baby is here don't forget to set up the college fund.
I just asked about grad school but need to add these qualifiers - I wont have the choice of in-state vs. out-of-state because there's no guarantee I will get in in-state - my acceptances so far are all up the East Coast.
My answer still the same. That's a lot of money you don't have.
If you feel it's necessary, buckle down before and after. When you finish live like a college student, drive your car until you're on a first name basis with the local tow truck drivers, not eating out, no vacations, no credit card debt, etc.
I recently took legal custody of my half-sister who is in high school. Her father is homeless and her mother is a mess of issues. Neither contribute to her financially. I am playing catch up and have a college fund for her. Getting documents for FAFSA was impossible for me when I was in college, 13 years later the situation is now at this point. Will I supply my financials for her for FAFSA?
Wow. How wonderful for you to step in.
As far as FAFSA and whether you put in your information I'm not sure. Please talk to a financial aid counselor. If you her legal guardian and financial supporter I would surmise you would use your financial information. But she may still be able to apply as independent, which could mean more need-based aid.
Hi Michelle, I turned 30 over the weekend, and gave myself the best gift of all: I paid off my student loans. (I originally took out approximately $30,000, which was just under my starting salary 6 years ago, so I am pretty impressed with myself. I have also managed to save $30,000 for retirement, but that's partially due to my 8% match.) It still hasn't really sunk in that all I owe is my mortgage... I do feel kind of rich, though. :) Thanks for your encouragement!
HAPPY BIRTHDAY TO YOU. HAPPY BIRTHDAY TO YOU!
And wow what a great present to yourself.
Send me your full story. You just may be my next Debt Defeater. You get a great tee-shirt.
And you are so very, very welcome.
I just love, love stories like this.
Hi Michelle, My husband and I are in our late 20's and are planning on going to grad school in the UK in the next 2-3 years. We both work full time and our only debt is our mortgage (while we are abroad we plan to rent the house through a management company). We are both pursuing grad school because of some very specific programs that we will need to move ahead in our careers (I would like to teach at a university level and need a terminal degree to do so). We have a good amount money saved up and would like to start looking at potential ways to invest some of that money to help create some financial padding for the time that we are in school and may or may not be able to work. Do you have any suggestions for where to start?
Well if you think you may need any of this money while you are in grad school, I wouldn't invest any of it.
You need to hold onto your cash and not risk it until you are finish school especially since you aren't sure you will be working while in school.
If the point of getting the $300,000 degree is to make more money, better be sure you will. Otherwise, the degree is just a very expensive hobby.
Can't tell you how many letters and e-mails I get from folks who paid enormous amounts of money (in loans) to get an advanced degree and they aren't paying enough to even cover the loan payments.
I needed to lose about 10 lbs so I went on the 'sandwich diet" - at work. I bring a sandwich from home (with a small bag of chips). I used to eat out everyday for lunch. Not only have I lost 5lbs (over 2 months), but I also save about $30 /week. That adds up both in calories and dollars!
No, I was referring to me (single person) contributing to future partner (didn't happen, but oh well)'s child. Step parents marry the kid, too. It's a family effort!!
You are right. If you marry someone with kids you should be prepared to help foot the costs of raising that kid.
I am overwhelmed with my student loan debt. It is just in excess of $100K and I sort of feel like no matter what I do I'm never going to make a dent in it. I make decent money but also have a mortgage payment. I don't have consumer debt, have an emergency and life happens fund and am maxing out the retirement contribution at my job. Thank you!
And then look over your budget again and again to figure out how to continue paying more to get this paid off.
If you have a home, maybe you can bring in a roommate.
You might also consider dialing back some of your retirement savings to apply more money to the debt. Invest enough to get the company match if there is one but then consider putting any extra funds toward the debt.
Hi, I love your column and chats. I am a stay at home mother, my husband is an experienced accountant/audit manager, we have a preschooler and an infant. He has wanted to live in the D.C. area for years for many reasons, but when he became unemployed in 2009 he had to take the best offer given to us at the time which put us in Pittsburgh. We carry a lot of debt from mistakes made before we met and married each other. I've looked at going back to work, but the only jobs offered to me so far don't pay enough to cover daycare, commuting and other expenses. If my husband attempted to land a job in the DC area he likely would be paid 1.5 to 2 times what he makes now, but I am led to believe that the increased cost of living and commuting would eat up a lot of that. Is that true? Do you have any advice? The debt is my biggest concern because when we were both working we were making so much headway, but now that we moved and I gave birth to my youngest and have a hard time finding new work, his salary alone can cover the bills but doesn't give us much room to attack the debt. I'm not attached to Pittsburgh, but I want to do what makes the most sense financially and emotionally for all four of us. I'd also like to make a decision before my oldest starts elementary school, because at that age I think moving would be harder. Help?
You have a lot on your plate.
But you can count the cost of any move before you have to move. Your husband can look for jobs in DC and see what it's paying and then you both can factor in moving cost, housing etc. You may be right that moving again wont' get you ahead.
But right now focus on the kids. Yes, it's important to get rid of the debt but not at such an aggressive pace that it drives you crazy. Attack as much of the debt as you can but realize it may take a long time.
And that's okay.