Jill Russo Foster

Tips for Successful Personal Finances

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First Together Then Apart – Now What?

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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 mortgage? It should be the one who actually lives there. Ignore that piece of wisdom and risk having your home sold out from under you.  Your name shouldn’t be on there if you don’t live there.
  • 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 or worse yet – have collection accounts on your credit that you didn’t even know about.
  • 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, remarries, 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 or divorce decrees 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, or worse bankruptcy after a breakup. Don’t let this happen to you.

Relationships & Finances

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Finances don’t have to be difficult, but there are things you need to think about when you get into a relationship. You have a way of handling your finances and it’s worked great for you and you like the system.Your partner has a way of handling their finances and it works for them. Seems simple enough. Then you find out that you do things totally opposite. Now what?

You have to come to a compromise that both of you are comfortable with. First, start by really listening to your partner and putting yourself in their shoes. It’s hard to do, but it’s really important.  Listen to their reasoning and why they do what they do. Then have the same conversation with the roles reversed. Now come up with a negotiated and agreed upon game plan.

This will take multiple conversations and time. If you both agree to the plan, you have conquered the first hurdle.  Here are some of the questions you need to come to an agreement on:

$  What are our goals / what do we want to achieve?
$  How do we get there?
$  Who is going to be responsible for what? Think bill paying, savings, spending, bank reconciliation, credit, debt, investments, retirement, and more.

I have seen this work in many different ways.  Here are a few examples:

They keep everything separate. Each person keeps their own income in their own bank accounts.They have agreed to who pays for what bills. Each handles their own investments and goals.

One person handles the big/long term items of the finances and the other handles the day to day finances. So long term is for the future – investments, retirement, savings, college, home buying, etc. and short term are more of the daily finances – bill paying, household purchases, routine items that are in the day to day budget.

The do everything together philosophy. All happens with a meeting of the minds and each person is involved in all aspects of the family finances.

No matter what you choose and how you choose to handle your finances, it all starts with communication and a game plan. All people should know what is going on, where to find the information and how to access it. After my mother died, my father had a hard time figuring out the finances, as he wasn’t involved with them.

Make your joint choices and know that you have the option of trying and changing until you find what is right for the both of you.

 

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Don’t Let Money Ruin Your Romance

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In honor of Valentine’s Day, I want to talk to you about love and money. I have known many couples who were in love until they found out about the other person’s money habits.

Your money incompatibility doesn’t have to end the relationship. If this is the one, you can make it work. You just have to ask the right questions.

This is what you need to know about each other:

  • Financial Issues: Income, assets, expenses, debt and credit. Understand what is going on with each other’s finances. Are there debts and back taxes? Are the savings accounts available to use jointly? Should some of the assets be merged or sold off, and if so which ones?
  • Money Type: Are you a Spender or a Saver?  If you know, you can use your joint goals to meet in the middle on common ground. If you’re habits are extreme, you might want to keep separate bank accounts. That way, one of you won’t feel pinched while the other is in a constant state of sticker shock.
  • Long Term Goals: What do you want from life?  Do you want to be married or single? Do you want to be a homeowner or rent for the rest of your lives?  Do you want to have children? These questions need to be answered so you can save towards the same goals.
  • CFO (Chief Financial Officer): Who is in charge of the money? Is it one of you or both?  Will you split the responsibilities by category or do everything jointly? Knowing will keep “that’s mine” arguments to a limit.

With this information, you can decide if you want to keep your finances together or separate.  Joining your bank accounts together with someone who has ignored debt or back taxes may mean your money is at risk (even if it’s not your obligation), and in the end, puts you both in the same deep hole with no way out.

Finances can be the doom of relationships.  Being informed and making proactive choices is the best way to make the relationship work.

Why Financial Envy is a Waste of Time (Update)

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You see this happen all the time. You are in a situation with other people and someone mentions his nice vacation plans. What is the first thing that pops into your head? Are you genuinely happy for him or do you automatically think about how much he’s spending (that includes jealous thoughts of the “he must be making more money than me” kind). You know what I mean.

But in the past few years, I have learned to stop comparing my financial situation with friends and family family (I’m not perfect but I am improving). I have come to realize that I am projecting my values and beliefs onto other people. What I think or believe about another person’s finances has no basis in reality. I am not in their shoes and don’t know what their situation is.

People spend money on things that are important to them. I know that some people may think I travel a lot. When one vacation ends, I am already planning the next. I personally always want to have a trip to look forward to. You might be thinking thoughts like “how can she afford it?” or “where does she get the money to travel?” You may even be envious. But you won’t know exactly how I make my little dreams come true because personal finances are just that – personal. .

Although in a few weeks,, I will shed some light on how we travel.

The other side of comparing your finances is the presumption that you are somehow morally better or worse than others. Grim tales of credit card debt are all over the news, often mixed with stories of foreclosure and homelessness. You may feel good about yourself because your debt is lower, but do you know why the person on the news has the debt? Was it really insane overspending, or was it a medical emergency or a layoff. Maybe the credit cards were used as a last resort to pay bills?

I have heard it said that “to compare is to despair.” This thought process of judging others is detrimental to you. You have no idea whether another household spends more money than they have, is in debt to their eyeballs, or has planned ahead to achieve their desires. You don’t know how much they earn or how much they give to charity. It is much easier to judge someone else than look inward at your own spending habits.

In the budgeting process, people track their daily expenses to see how much they spend and in what category. This can be a great exercise. Once you see where your money is going, you can make life-changing decisions. Where do you want to spend? What do you want to save for?

There are no right or wrong answers. There are only personal choices. Maybe you choose electronics over vacations. Maybe you choose decorating and entertaining over both. Maybe you choose to give your children spectacular holidays or birthdays over everything else. These are the kind of choices your neighbors, friends and family members made when they did something that impressed you and made you envious. They simply chose to spend their money in a different way than you.

So the next time you see someone order an expensive meal at a five star restaurant, purchasing the latest greatest electronics, or buying a designer outfit, don’t judge them. Not only is the thought process destructive, but it is a total waste of your time.

You’ll have to prove it. Make sure you have the paperwork.

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will-inheritance

Things that mean very little in a court of law:

  • Your memories
  • Your mother’s memories
  • Your friends opinions
  • Photos of you smiling with some of your stuff in the background.

What am I getting at? I want you to face the fact that paperwork is part of life.

You can have a lot of wonderful things without legal documents: love; a nice meal; a beautiful sunset. But, you can’t get legally married, register the birth of your child, or insure your home without them. So, if you’re basking in the glow of a beautiful sunset in your own backyard, enjoying a barbecue, and surrounded by family and friends – there was paperwork involved.

Don’t slack on it. Strive to keep it up-to-date on an annual basis. Neglecting your paperwork can be just as bad for your family life as neglecting a loved one’s birthday.

Go through your files and check up on your:

  • Life insurance
  • Long Term Care insurance that may combine with life insurance
  • Retirement accounts – IRA’s, 401K / 403B, Roth IRA’s
  • Savings bonds
  • Bank accounts that are payable on death
  • Investments (stocks, bonds etc)

Legal documents are too often overlooked and the results can be devastating. Who’s in charge of your stuff if you suddenly pass away. If you haven’t updated your paperwork, you may have left everything to an unreliable friend, or a deceased parent instead of your spouse or adult child. In this case, I suggest that you name a second beneficiary.  For our wills, we even have a third beneficiary.  My attorney suggested this and it’s terrific.  When my father passed away, I didn’t have to update my will.  My second choice was already in place.  How easy was that?

I know you’re busy, but when you, or your family, are dealing with a major life crisis, you won’t want to spend time thinking about these things. Make a habit of reviewing your important documents on a regular basis so your loved ones will receive the things you labored to give them.

If you need more convincing, check out this ABC news story

Of Breakups and Closed Accounts

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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

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love and money

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.

If you’re in a relationship, how do you handle finances as a couple?

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Broken HeartAre you in a relationship? If you are, you know what it’s like to share your life with someone you love: your joys, your sorrows… and your money.

One of the biggest reasons for divorce (or breakups)  is finances.  I know you don’t want that to happen, so what can you do about it?  Talk. Communication is the key to handling joint finances.

People have different ways of handling their finances.  One person might be a saver who really values the money saved for future dreams and needs, while the other might be a spender who lives in the moment.  If these two individuals become a couple, there can be disagreements about money that can escalate to divorce.

Take a minute to talk with each other about your money habits. It can be a really eye opening conversation.  Really listen and try to understand the other person’s point of view. What did they learn about money growing up? What do they want right now? Where do they want to be in 1, 5, 10 years and beyond?   With this understanding, you can choose a path that will work for the both of you.  Meaning, the spender will save a portion and the saver will spend some money.   Come up with mutual goals and agree on how you will achieve them together.

The goal is to handle your household finances and your goals in a blended way so that both people are comfortable.  To do this, communication and action is key so that all feelings are heard and considered.

If you’re in a relationship, tell me how you handle your finances as a couple. Who handles the money? Who makes the budget? Who sets the goals?

Who handles the finances in your relationship?

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I met a woman who asked me some questions when she found out what I do for a living.  This subject is one that all of you should be aware of.  You wouldn’t believe how many people this affects.

Are you married or in a relationship with joint finances? Even when couples share accounts, living space, or property, it’s typically one person who handles the finances in a relationship – paying the bills, savings, investing, etc.  But, the other person shouldn’t be left in the dark.

Because this is your joint future, both should know what is going on and how to access the information at any time. The definition of the word joint is defined by Merriman-Webster as “united, joined, or sharing with others”.

Both of you should be making decisions together, understanding where you are today with your money and where you want to go for the future. You should both know the names of your banks and investments and how to access these accounts if you use an online account.  Think of it this way, if the person handling the finances is not able to do it – what would happen?  Could you put food on the table?  Would the utilities be on?

Remember, too, that your children can see how the money is handled in your relationship. What you do, and don’t do, shows them just as much as what you tell them.

I also believe that each person needs to establish credit in their own name and if you are  listed as a co-owner on the assets you should also be listed as a co-owner on the liabilities. What that means is that if you own a home (your name is on the deed) you should also be on the mortgage.

Many partners are left out of the finances.  If that’s you, and something happens to the person who handles everything, you are going to have a difficult time.  You may find that  the  bank accounts that you thought were joint are not.  You may find that you thought you owned the home you live in, but you don’t.  You may find that you need to open a credit card or take out a loan and you have no credit in your name.

All this happens more times than I can count.  If this describes you, then you need to have a conversation today with your partner. You need to what know what assets you have, what liabilities you owe and have a plan for moving forward to achieve your goals.  The first step is having this conversation.

A Mortgage and A Divorce: Not a Love Story

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In a divorce, the best way to handle the mortgage is to refinance. This is to protect both parties. If you’re making the payments, the loan should be in your name. If your ex is making the payments, then take your name off the loan.

Why is it so important? Because your mortgage company considers a divorce decree to be a personal matter – not a legal matter. A divorce agreement can’t prevent foreclosures or repossessions. It also can’t prevent your ex from ruining your credit if he or she refuses to make payments. The loan document is all that matters.

What if the divorce decree put your ex in charge of mortgage payments, but he or she is refusing to make payments or agree to a refinance. You could always make the payments yourself. That would save the home and your credit.  The courts will (eventually) order your ex to reimburse you, just don’t expect it to happen anytime soon.

Sometimes, the biggest income earner is ordered to pay the mortgage even if that person no longer lives in the home. This is more common when children are involved. In that case, both parties may be reluctant to refinance the mortgage, because they feel the original mortgage agreement gives them control over the other person or the home. This is a bad situation for everyone. If the person left in the home can’t afford the payments, and the person out of the home refuses to pay… then you could lose your biggest investment.

If you can’t agree to refinance, then sell the house and move. Regardless of how much you love the home, or the idea of your kids living in it, it is best if both parties move to a more affordable home than to endure the continued heartache of credit problems and payment disputes.