Of Breakups and Closed Accounts
In our last issue, we discussed whether you should blend your finances when you get into a relationship. Money will be your biggest source of friction, and having boundaries doesn’t hurt. I listed some of the different financial relationships couples choose. There are different options besides “What’s mine is mine and never ‘ours’ or “It’s all or nothing or I’m out of here.”
Sometimes your best efforts to create a life together fail, and the relationship ends. Today, we’ll discuss how to unblend your finances. Whether you decided to share all of your accounts, or only share expenses, you should separate your finances as soon as possible, because you can be sure that someone’s name is on the wrong paperwork.
Take a look at your…
- Rent or Mortgage: Who is on the lease agreement or loan? It should be the one who actually lives there. Ignore that piece of wisdom and risk having your home sold out from under you.
- Utilities, cable, and cell phone: Whose name is on the accounts? They should be in the name of the person using them. If you don’t transfer ownership, you could have your utilities cut off without notice.
- Insurance: This includes car, apartment, home, life, and medical. You don’t want to be without insurance, and you don’t want your money going to the wrong person if you don’t update your beneficiaries.
- Credit cards and loans: Do you want to have your credit affected by charges that aren’t yours, or be forced to make payments on a car you don’t use?
“But Jill,” you say, “these all sound like things that happen in a hostile breakup. We’re not like that.” Even if your breakup is friendly, and your ex is as trustworthy and competent as a super hero’s alter ego, you still need to separate your accounts to protect yourself in case something happens to one of you. If one of you dies, or is mentally incapacitated, the law won’t recognize verbal agreements or promises. They only see whose name is on a piece of paper.
Let’s talk about verbal agreements. Let’s say the house and car loan are in your name, but you want to be nice. You don’t need them, and your ex does. Your ex has agreed to make payments, so it’s no big deal, right?
Wrong. Your credit will take a hit with the first missed, or late, payment. And, you may not be able to get a new car or house for yourself because your debt to income ratio is too high. The bank won’t take verbal agreements with your ex into consideration when you apply for your loan.
Here’s something else to think about: Can you maintain your current lifestyle if you live separately?
If you end up with the house or the car, can you afford the payments? Can you pay for the utilities, the maintenance and the insurance? You may have to make tough decisions, because you could be without the things you need to live if you don’t plan ahead.
Too many people have found themselves temporarily homeless, or had their credit ruined, after a breakup. Don’t let this happen to you.
Of Love and Shared Bank Accounts
I recently led a discussion about relationships and money: how to blend, and end, your finances with someone else. Questions were asked, and there were some interesting conversations going on in the room. Then, a few weeks ago, a long time reader of Quick Tips asked about shared bank accounts. I decided it was time to write about this subject again.
First of all, you may choose not to blend your finances at all. Many couples keep separate accounts and actually have happier and more successful partnerships because there are fewer arguments about who spent money on what and who overdrew the bank account. Others choose to handle their money and debts together, and they do just fine. The choice is yours.
Look at your habits and goals when you consider whether to combine your accounts or keep them separate:
- How does each of you handle savings and debt repayment? Do you have similar philosophies, or are your bank balances mirror opposites, with one carrying a large debt balance and the other carrying a large savings balance?
- Do you have the same financial goals? Or, is one of you saving mainly towards retirement, while the other wants to save for amazing vacations and a nice car.
- Does one, or both, of you have any issues that you would bring into a blended financial arrangement? For example, are there any debts that are currently in collections or that were charged off; bankruptcy; judgments; wage garnishments; or tax liens?
Some people find this subject to be a touchy one. I even received an angry comment on my blog by someone who insisted that married people should share everything equally. But, keeping separate accounts isn’t about holding out, or being less in love. Sometimes, it’s about protecting each other and making decisions that will carry you furthest towards your mutual goals.
If You Have Separate Accounts, How Do You Split Expenses?
Most people assume 50/50, but there are other options. You could choose different percentages based on incomes, family size, habits and hobbies. For example, if you have shared custody of your 3 kids with a former partner, then you might pay a higher percentage of the food bill. If your hobby raises the electric bill (gaming, woodworking, sewing), then you might pay a higher percentage of the utilities. You don’t have to use percentages – you can divide up the bills, where one of you pays for this expense and the other pays for that expense. The choices are as varied as the couples who make them.
The bottom line is that you need to make informed choices that are right for you individually and as a couple. Money is the biggest source of friction in relationships. Have the conversation before you get married or move in together, so you know what to expect ahead of time. If you’re already living together, it’s not too late to make changes.
Next issue, I’ll talk about separating your finances after the relationship ends.
One if Full Price, Two If Black Friday
The holidays are coming! The holidays are coming! Guard your budgets and hold onto your wallets. You might be thinking I’m crazy, but the retailers have positioned their holiday displays to disarm you of your cash.
Now is the time to remember how you felt last year when you overspent.
Can you make this year different? Can you stick to your list and not overspend? You can if you make a detailed plan. Write down exactly what you will be buying and the dollar amount you plan to spend.
Here are some suggestions that should help you with your holiday budget list.
1. Gifts
- How much for immediate family?
- How much for extended family?
- How much for friends and co-workers?
- How much for people whose services you use?
2. Entertaining
- How much will it cost when you host a gathering?
- How much will you spend on hostess gifts when you attend a party?
3. Travel
- How much will it cost for local travel (gas, tolls, parking, etc)?
- How much will it cost for long distance travel?
- How much will it cost for vacation?
4. Traditions – this can be anything from an afternoon tea to a night on the town.
If you write it all down, you might realize you’re planning on spending $300-$500 on gifts for people who aren’t on your immediate family list. And hosting dinners can be expensive just because you want to put on a good appearance. Ever notice a big stain on the tablecloth and found yourself running to the store at the last minute to buy one full price?
Holiday fun can wreak havoc on your budget, but it doesn’t have to. Now is the time to get a jump start on planning, and to put away money for the details that are important to you. Think of it as your own layaway plan. Take money out of each check, in addition to your regular savings deduction, to create your own holiday fund.
Doing this now will make January 2013 less stressful.
What I Learned about Money from Sitcoms
I love to watch old sitcoms on TV Land and Nick at Nite. They’re like comfort food for the brain. I’ve seen the episodes already so there’s no suspense, and I certainly don’t expect to learn anything.
But sometimes they surprise me.
A couple of weeks ago, I was watching reruns of The Nanny. In the episode “Close Shave”, Fran is having trouble paying her credit card bills.
Here’s the conversation between Fran and Niles:
- Fran: I have to pay my American Express because if I buy a piece of gum, the S.WA.T. team storms the building. Meanwhile, I pay my MasterCard with my Discover Card, my Discover card with my Optima Card, My Optima Card with my City Trust Visa.
- Niles: But doesn’t that leave a very high balance on your Visa?
- Fran: Exactly! And that’s why they gave me an espresso machine which I sell to pay off my American Express, thank you.
This reminded me of the Cosby episode “Theo’s Holiday.” It’s the one where Theo wants to move out using money from a modeling career (that he doesn’t have). Cliff and the family show him the real costs of living on his own.
(Start at 3:32) To see the full episode watch Part 2 and Part 3
For sitcoms, these episodes are very realistic in the way they portray people who are uninformed about money. But, the solutions weren’t realistic at all. How nice would it be if we could solve our problems in 23 minutes just like they do on TV?
Now, imagine you’re a child watching the same episodes for the first time. What would you learn? There’s a telling discussion on TV.com.
How will your kids learn about money? Will they learn from TV, or because you took the time to teach them like Theo’s family taught him? What about yourself? You’re old enough to know that your problems won’t magically go away like Fran’s. Be informed and make informed choices that are right for you.
People want their finances to be perfect – like a TV show. But most of us don’t go from a plan to success by receiving a windfall. There’s usually a long journey and detours in the road. What matters most is how you get yourself back on track. Keep yourself moving forward towards your goal and you will accomplish it.
And, if you need a little comfort, try an old sitcom. They’re cheap, there are no calories and you might learn something… but don’t count on it.
Facts about College Kids that Scare Me
Where do kids learn about banks and credit? I have gone into many schools and spoken with many teens about money. There are always a handful who say things that startle me. I have heard things like…
- Do I really need to pay credit cards back?
- If paying bills bothers people, why don’t they just throw the bills away?
- I know I have money left in my checking account because I still have checks.
- Why do people need to work when they can get money anytime they want with an ATM card?
Sound unbelievable? Not only are these ideas commonly believed by kids, but there’s a logical thought process behind each one. If you don’t explain what you’re doing, your kids will make assumptions about money based on what they hear you say and what they see you do.
Take the idea that money from the ATM is free for you anytime you need it. The boy who believed that probably heard his parents complain about not having any money, then watched as they took money from the ATM. What other conclusion could he have drawn?
The idea that you don’t have to pay your bills back comes from a general assumption about the world based on ideas of fair play. You don’t have to run laps in gym if you have a sprained ankle. You can take a make-up test if you have a sick day. Why can’t you just put off the bills if you don’t have money because you got sick? If you can’t pay, they shouldn’t expect you to. That’s fair, right?
But kids grow out of these crazy ideas, don’t they. It’s not like they hold them onto them into adulthood. Trust me, they may not believe the exact same things, but their misconceptions and ignorance can still hurt them.
Here are some scary facts about college kids and credit cards from credit.com:
- 91% of undergrads have at least 1 credit card
- Undergrads have an average of 4-6 credit cards (that means more than half have more)
- $3,173 is the average amount of undergrad credit card debt (that’s not including student loans)
- 25% of undergrads have paid late fees
- 15% of undergrads have paid over limit fees
Does this scare you? It scares me! Don’t let your kids make assumptions. Teach your child about money and credit by speaking with them. You don’t have to be perfect (no one is), but showing your child the process behind your decisions can be eye-opening.
The Money Talk – 3 Easy Tips: How to teach your kids about money
A Talk for Parents
(Children Ages 7 -17 can attend)
Using these tips, you can help your kids…
- Cope with product advertising
- Understand that credit cards aren’t magic money.
- Develop strong short-term budgeting skills
- Use their imagination for long-term financial planning
September 27, 7:30-8:30pm
$30 per adult (children under 18 free)
Location: Jazzercise Fitness Center of Stamford,
633 Hope St, Stamford, CT (back entrance/2nd floor)
The book Cash, Credit and Your Finances: The Teen Years
is FREE for the first 10 registrants.
With this book, you can help your children learn about credit, loans, and savings before they leave home. Today’s world is not a cash world, it’s a credit world. A credit world is a much more complicated world to live in. If your children don’t learn early, they could be headed for financial difficulties.
Books by Jill Russo Foster available for purchase after talk.
Sponsored by InterPlay Health
For Reservations: Email info@interplayhealth.com or call 203-845-8856
Both talks by Jill Russo Foster, an award winning author and personal finance expert. Her books – Thrive In Five: Take Charge of Your Finances in 5 Minutes a Day and Cash, Credit, and Your Finances: The Teen Years – can help you take control of your finances.
Visit JillRussoFoster.com
or email jill@jillrussofoster.com
It’s September! Kick off to better credit!
It’s time to order your next credit report
This month use TransUnion
Hello everyone! This is your quarterly reminder from me.
Order your free credit report from www.AnnualCreditReport.com.
AnnualCreditReport.com is the ONLY authorized source for a truly FREE annual credit report that’s yours by law. You have the right to know. Exercise your rights! Learn more.
When ordering online:
- Select your state, then click Request Report.
- Fill out your information, then click Continue.
- When it asks you to select a service, select TransUnion.
Not comfortable ordering online? There are three ways you can order your report:
- Order online at www.AnnualCreditReport.com. By ordering online you can have your report back in minutes!
- Mail your postal order by downloading the form at www.AnnualCreditReport.com
- Call in your order at 1-877-322-8228
It doesn’t matter how you get your report, the most important thing is that you do! Then…
- Review it for accuracy!
- Follow the instructions with the report to correct any errors.
- And, always remember to keep copies for your records.
Do you want to know your credit score? Use CreditKarma.com. Credit Karma will give you a close approximation of your FICO score, and it’s free.
Wishing you the best for the school year and the coming holiday season!
P.S. This is your final reminder for this year. New reminders will begin in January.
Start Small to Have It All
This is Part 2 of my “Having it All” series. The first part is “Step One to Having it All”
Everyone has a different definition of Having it All. In the first article, I asked you to list a few goals based on what you want out of life. Now, I want you to pick one for this exercise.
Living Debt Free with Enough Money for Expenses
That’s part of the “Having It All” dream for many people, so I’ll use it to illustrate how to start small and take action steps towards your goals.
As an example, I am going to use “Save $20 per week to build $1,000 in emergency savings in 1 year.” See how specific this goal is? That lets you check your progress and feel good about your success.
It’s also a good example of starting small. It may not seem like much, but $1,000 can cover a leaky roof or a brake repair. The less often you use your credit cards, the more your savings accounts will grow. One thousand in emergency savings is a good base for building the “debt-free” dream.
Now let’s break down the goal into action steps by first asking a simple question…
Do you have $20 a week to save?
If the answer is Yes…
Step 1. Set up a separate savings account in a different bank or credit union than the one you normally use. This way you won’t have easy access and it won’t be linked to your ATM/debit card.
Step 2. Visit your HR department to set up an automatic transfer from your paycheck, or, visit your bank to have $20 per week transferred from your checking account to your new savings account, or if you do online banking you can set this up yourself.
If the answer is No…
Step 1. Reduce expenses until you can save $20 per week.* (I’ll write more on this below.) Can you bring your lunch to work? Can you cut out the impulsive shopping? Think of how you can reduce your spending to come up with the $20.
Step 2. Return to the top and take Steps 1 and 2 above.
Step 3. Tracking and celebrating your success
I want you to check in on your progress throughout the year. Are you on track to meet your goal or did something happen to throw you off? We all want to be perfect, but that’s not real life. Things happen that get in our way. You have to understand this and get back on track as soon as possible to achieve your goal.
Keeping track also allows you to celebrate and feel good about what you’re doing. This is your baby that you’re nurturing – your future, your wealth, and the beginning of your dream life.
*Just a note about personal austerity measures. “What…” you might ask, “…does giving up eating out and impulse shopping have to do with having it all!? That’s my dream lifestyle!”
First, I’ll have you know that a lot of millionaires are pretty tight fisted. They spend their money selectively instead of blowing it on any old thing that comes along. So, I challenge you to think like a millionaire.
Second, many successful entrepreneurs like Bill Gates, Mark Zuckerberg, Julia Childs, Martha Stewart and Oprah Winfrey started with small budgets. They built their fortunes by working hard and investing their money back into their businesses, making a little bit go a long, long way. They had the discipline to put off luxury living until after they had money.
Third, cutting back doesn’t mean living unhappily. Take joy in building your dream life from the ground up.
I used saving money as an example. I challenge you to break down one of your goals into simple action steps. Let me know what you’re working on and join the discussion.
College Expenses: Books, Printing, and Meals
You’ve figured out how to cover the cost of tuition and room and board, and you think to yourself, “Now I can coast through the school year on a small budget.” Think again. College costs can continue to add up. Here are some things you may not have considered.
Text Books
Don’t underestimate the cost of books. This is not high school. They don’t come free with the course.
It’s not unheard of for a text book to cost $300 new. Some courses require multiple books. Multiply that by 5 classes and you’ve got a big dent in your budget. If you want to save time, you can buy your books at the college book store. If you want to save money, do your shopping ahead of time and try these options:
- Buy Used. You can find used text books on Amazon, Barnes & Noble, and eBay. Not to mention, online stores like ecampus.com, and bookbyte.com.
- Rent. If you know you’ll never open the book again once class is over, you can rent from websites such as bookrent, bookrenter.com or chegg.com.
If you do rent or buy used, double-check your course requirements and the ISBN number to make sure you get the right edition of the book.
Do you need a printer?
Even though a few courses will be (mostly) paperless, you should plan on having to print some of your course work. But, you don’t have to buy a printer, because most colleges have printers for campus use. (Check with your college).
However, you may want a printer if you’re the type who does homework at the last minute, or if you’re taking courses that require a lot of writing. Let’s compare your options:
- Using the campus printers: There may be a charge per page, but it’s usually pennies. Compare that to the cost of buying your own printer, paper and toner.
- Using your own printer: If this is the option that works best for you, you’ll want to find good deals on paper and toner. Consider buying paper by the box and using recycled toner cartridges.
Meals and Snacks
Cafeteria meal plans. Colleges usually offer multiple meal plans. You can have 3 meals a day 7-days a week, or you can have a plan that covers lunch and dinner but not breakfast, or weekdays but not weekends. You need to choose a plan that fits your course schedule and weekend plans.
Snacks and food in the dorm room. Many college students feel that a small fridge, popcorn air-popper, and coffee-maker are essential. Check with the college to see what types of appliances are allowed in the dorms. If keeping simple foods in your room is part of your budget strategy, you’ll need to have cash and access to a grocery store to keep your fridge stocked.
Consider your class schedule. This is especially important if the cafeteria isn’t open all day. Will you miss an important meal each day if the cafeteria is only open from 7am-9am, 11am-2pm, and 4-7pm? That could make the small fridge in your dorm an essential instead of a luxury.
The cost of books, paper, toner and food can really add up. Thinking ahead will save you money.
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