Finances when married

[Midtowner]

Yup, we use the envelope system, but it's all run behind a budget as well. Obviously, there are some things you can't use an envelope system for, like most utility bills, but they go into the budget. We mostly use the envelope system for Gasoline, Groceries, Date Night, Blow Fund, Out to Eat Fund, Clothing Fund, Tithe, etc.

Describe the envelope system. I'm getting the image of stuffing a bunch of cash into various envelopes and waiting for bills to come. This can't be right.

Also, we have an emergency fund....right now we have it in savings, but I'm going to open up a money market account soon, as Dave suggests. They draw more interest. Only drawback is there's a 48 hour waiting period to get your money out. But, that's where I have a credit card. If an emergency comes up, I'll use the card, then pay it back when I get the money out of the account.

Good plan, but credit cards aren't bad at all if used responsibly. First, they build credit. Having many credit cards and a lot of unused available balance can really help your credit score. Your credit score will help you obtain better rates on mortgages, car loans, etc. as well as allowing you to qualify for other money-saving special financing plans at various retail, furniture, etc. type stores. Second, look for a credit card with a decent rewards program. If you fly a lot, get one that gives you frequent flyer miles (they also provide some great lost luggage insurance and other types of benefits). Personally, I have a card through Chase which pays back 1%-5% on everything I buy. I've *made* $150+ this year in cashback just for using my credit card. The key is to pay it 100% off every month and not to buy anything you can't afford. If you do that, there are plenty of security and financial incentives to use the plastic.

Also, there's nothing wrong with having a home mortgage. You basically have to have one in today's society. We'll have one, but we'll probably go with a 15 year note, instead of the 30 year......less interest....and of course we'll attempt to pay it off early.

Mortgages are great. As far as working hard to pay it off though, I'll have to differ with you there. Think about it.. your average home loan right now is in the 5.8%-6.0% range. Your average decent mutual fund does about 8% a year. Take that extra cash and invest it in an interest/revenue bearing account which grows faster than your mortgage does and you'll be money ahead.

Debt isn't a bad thing, and in that sense, debt can make you money. It's not uncommon for an investor to take out a loan at a good interest rate, invest the money in a relatively safe investment and end up money ahead.

[Midtowner]

Midtowner never acted like he was married.

How does one act when one is married oh master of how married people act?

[Jack]

Read mranderson's exchange with Randy.

[bandnerd]

Seriously, Jack, what does it really matter?

Are YOU married? Why are you posting to this thread if you aren't? Are we going to be that elitist that someone who doesn't meet 100% of the criteria of the subject of the thread can't post here?

Get over it.

Back to topic.

[Patrick]

Describe the envelope system. I'm getting the image of stuffing a bunch of cash into various envelopes and waiting for bills to come. This can't be right.

The envelope system works along with your budget. The cash money that is budgeted for things like groceries, gasoline, spending money, etc. are divided up into envelopes. You're limited to that cash for the month, so you don't continuously run to the ATM and violate your budget. I basically make my budget the 1st of each month, and withdraw all the cash I need then. That's it.

Obviously, bills and stuff like that will be paid for by check, online, or whatever, and hopefully you've designated a guestimated amount into your budget for each bill.

The whole idea of the envelope system is it keeps you from overspending, plus you feel more like you're in control of your money, instead of putting everything on the card. It also helps the psyche understand exactly how much your spending.

Good plan, but credit cards aren't bad at all if used responsibly. First, they build credit. Having many credit cards and a lot of unused available balance can really help your credit score. Your credit score will help you obtain better rates on mortgages, car loans, etc. as well as allowing you to qualify for other money-saving special financing plans at various retail, furniture, etc. type stores. Second, look for a credit card with a decent rewards program. If you fly a lot, get one that gives you frequent flyer miles (they also provide some great lost luggage insurance and other types of benefits). Personally, I have a card through Chase which pays back 1%-5% on everything I buy. I've *made* $150+ this year in cashback just for using my credit card. The key is to pay it 100% off every month and not to buy anything you can't afford. If you do that, there are plenty of security and financial incentives to use the plastic.

I completely agree. Problem is, most Americans get in the credit card loop and DON'T pay them off every month. I, like you, use a credit card to build credit history, but I pay it off every month, and only spend my allotted budgeted money for that. For example, I usually use my credit card for clothing purchases....but only up to the $100 I have budgeted every month. I pay my card off every month. So, I get the activity which ups my credit score, but I don't pay the bank anything.

Like I said, most Americans aren't that responsible though. Midtowner, we just have self control over these issues. Report came out today that said the mean credit card debt in the US is around $5,000, and 95% of Americans carry balances every month.

Mortgages are great. As far as working hard to pay it off though, I'll have to differ with you there. Think about it.. your average home loan right now is in the 5.8%-6.0% range. Your average decent mutual fund does about 8% a year. Take that extra cash and invest it in an interest/revenue bearing account which grows faster than your mortgage does and you'll be money ahead.

Okay, I agree with that. I personally would do that, but guess what percentage of Americans invest in a mutual fund? It's not very high actually. I think I read less than 15%. Most Americans are actually pretty ignorant when it comes to finances. For example, my parents stash all of their money away in savings. They have thousands of dollars in savings. Yet, it's only making 1.4% interest. Ouch. They've put some of it in CD's, but even that's only around 4%. Inflation is around 5-6%. Had they put their savings in a mutual fund years ago, they'd probably be millionaires by now. But, like most Americans they're pretty ignorant about finances.

Debt isn't a bad thing, and in that sense, debt can make you money. It's not uncommon for an investor to take out a loan at a good interest rate, invest the money in a relatively safe investment and end up money ahead.

True. As an example we have a car loan for my wife's car at 1.9%. Got it when they had the good deals awhile back. The money I'm saving I'm putting in my Roth IRA which I have divided up into a variety of mutual funds.

I haven't got the money right now to invest in mutual funds....we're just now working on getting our Roth funded, since we already made the complete match on the 401K. Next step will be mutual funds, probably when I start my career.

Anyhow, my point is, by saving the money that would've gone to pay the car in cash, I'm paying the 1.9% interest, but getting back around 8% interest from the mutual funds. That gives me a net 6%, plus I'm improving my credit score.

Great discussion.

[Patrick]

By the way, Dave Ramsey's suggestions fit better for the typical average American who has high credit card debt.

Since both you and I have good self control, we can bend the rules in our favor and make it work.

For example, I also use credit card for gasoline. It's simply more convient. But, again, the approx. money is budgeted every month on paper, to pay that off.

The only envelopes I have are those for cash......things like groceries, spending money, out to eat fund, date night fund, etc. Those are things that would be easy to go over on if the money wasn't taken out at the beginning of the month. For example, once the out to eat fund is gone for the month, that's it! If I didn't have the fund, I'd probably be more likely to give in, especially when it's been a long day and I don't feel like cooking.

[Patrick]

Here's a description of Dave Ramsey's envelope system:

http://www.daveramsey.com/etc/cms/in...ContentID=3461

[Patrick]

Personally, I think requiring students to take a course like Dave Ramsey's Financial Peace University, would help improve the debt problem in America. So many Americans graduate high school, without the slightest idea how to manage money, manage a checkbook, plan a budget, make smart investments, save for retirement, etc.

[Midtowner]

I concur as to that Patrick. High school has become something of a joke in my estimation. There is very little, if any useful knowledge imparted upon the students. I'd love to see a reallignment of high school classes. With our current statutory requirements, Oklahoma students are required to study 4 years worth of certain subjects with an unfortunate lack of other subject matter. I'd love to see something that would prepare these kids for the 'real world' be it college or the work force.

I recall my first HS had a class that taught these life and financial values. I'm pretty sure that such a class is not offered in public schools.

[MadMonk]

I look at the envelope system as a way of building discipline, especially when you are first starting out. After you do it a while, you can go back to using your debit card and checks while still maintaing control. Ramsey seems a little militant when comes to credit cards though. If you know how to play the game, they can be usefull. We have a couple credit cards. One I use for monthly expenses that I don't want to use a debit card for (i.e. Netflix) that gets paid off every month and another that I carry a balance on. However, it has an interest rate of 0% and no annual fee.

What I do is let it ride for 0% for as long as the term allows (while paying it down) and then when the term is up I call to ask to extend the term. If they refuse, which they usually do, I transfer my balance to another card that has that offer and close the old account. I haven't paid a dime in CC interest (or fees) in over two years. The way I see it, as long as the CC companies are willing to give me a 0% card offer, I'm going to take advantage of it - its like an interest-free loan. In fact, my current 0% term is coming to an end in April. I have about 6 offers for 0% cards sitting on my desk. One of them has 0% through Dec '07 which will probably be my choice unless something better comes along.

[bandnerd]

My school is atually instating a class, can't remember the name, but it's going to be like a personal finance class. It will count toward a math credit (our kids are on a 4 by 4 system...4 math, english, science, and social studies) to help those that aren't really ready for Calculus. It's supposed to teach them how to figure taxes, work with credit, budgeting, etc.

Hopefully the class will go well and we can set a good example for other schools.

[Patrick]

I look at the envelope system as a way of building discipline, especially when you are first starting out. After you do it a while, you can go back to using your debit card and checks while still maintaing control. Ramsey seems a little militant when comes to credit cards though. If you know how to play the game, they can be usefull. We have a couple credit cards. One I use for monthly expenses that I don't want to use a debit card for (i.e. Netflix) that gets paid off every month and another that I carry a balance on. However, it has an interest rate of 0% and no annual fee.

What I do is let it ride for 0% for as long as the term allows (while paying it down) and then when the term is up I call to ask to extend the term. If they refuse, which they usually do, I transfer my balance to another card that has that offer and close the old account. I haven't paid a dime in CC interest (or fees) in over two years. The way I see it, as long as the CC companies are willing to give me a 0% card offer, I'm going to take advantage of it - its like an interest-free loan. In fact, my current 0% term is coming to an end in April. I have about 6 offers for 0% cards sitting on my desk. One of them has 0% through Dec '07 which will probably be my choice unless something better comes along.

Yeah, you're definitely right. I'd say Dave Ramsey's techniques are more for the beginner, with lots of credit card debt, and little fiscal discpline. I think the reason Dave is so much against credit cards is, because those that are caught up in credit card debt, obviously have impulse control problems managing them. So the best solution for them, is to simply get rid of the credit card.

For me, I have our 6 month emergency fund locked up in a Money Market account.....gets better interest than a traditional savings account....I believe it's drawing upwards of 3.5% while my Savings account is getting 1.4%. Only problem with this type of account, is I have a 48 hour waiting period to withdraw money. So, obviously, it's good to have a credit card in these emergency situations. Later, I can withdraw from my emergency fund to pay the card off.

MadMonk, one thing that concerns me with continuously transferring money from 1 no interest card to another, is actually, the more accounts you have opened and closed over a 7 year period, the lower your credit score. Not sure why that is......I guess all they see on the credit report is the number of accounts you've held in the past 7 years. Obviously, if it's a lot, that's looks bad because it looks as if you've had a lot of open avenues of debt.

[Patrick]

My school is atually instating a class, can't remember the name, but it's going to be like a personal finance class. It will count toward a math credit (our kids are on a 4 by 4 system...4 math, english, science, and social studies) to help those that aren't really ready for Calculus. It's supposed to teach them how to figure taxes, work with credit, budgeting, etc.

Hopefully the class will go well and we can set a good example for other schools.

Whoo Hooo! Glad to hear that.

[MadMonk]

Patrick,
I'm not sure if its just the number of accounts held that's an issue or if its the number of open accounts (or potential credit debt) available for use. Whenever I switch accounts, I'm always careful to close the account - not just pay it off. I check my credit report annually and make sure no account is open that shouldn't be. In any case, if it is an issue, it doesn't seem to be affecting my ability to obtain credit. I've been fortunate enough to have never been late on any credit card, car loan or mortgage payments so I'm sure that helps things. Car loans, mortgages, etc have all been a slam dunk to obtain and with really good interest rates.

[Patrick]

Patrick,
I'm not sure if its just the number of accounts held that's an issue or if its the number of open accounts (or potential credit debt) available for use. Whenever I switch accounts, I'm always careful to close the account - not just pay it off. I check my credit report annually and make sure no account is open that shouldn't be. In any case, if it is an issue, it doesn't seem to be affecting my ability to obtain credit. I've been fortunate enough to have never been late on any credit card, car loan or mortgage payments so I'm sure that helps things. Car loans, mortgages, etc have all been a slam dunk to obtain and with really good interest rates.

You may be right on that. I'll be honest...I'm not for sure.

[Jjjjunkyarddog]

wELL just my to sense when my wife and i were living togeather for 6 yrs she took care of the check book now that we have been married for7 yrs she still does it and she payes all bills but need to keep closer watch over it

[wheeler]

I think if you don't combine your finances you haven't mentally combined your lives. Marriage is not HIS and HERS. It should be OURS! Next thing you know married people will be asking if its okay to maintain separate dwellings. She wouldn't have to pick up his dirty socks and he wouldn't have to put up with "girly" stuff. What is this world coming to?

[bandnerd]

We tried having a joint account but it was just another hassle for us. I don't think I should have to justify every little purchase to my husband, and I rarely know what he gets until he shows it to me. We both know how to spend within our limits, we know what the bills are going to be approximately, and groceries.

Everyone does things differently. It doesn't make them wrong, it doesn't mean society is coming to an end. It just means they are different.

[BailJumper]

Wheeler I disagree completely. I have been married for several years and we never really even discussed a joint account. When we met we had our own accounts and took care of our business just fine. When we got married there was no reason to change it.

Of all my married friends, the number one issue they say they argue about is money. "I make most of the money and yet you out spend me 3-to-1." "I see you've been going out to eat alot" "Why did you take $200 out of the ATM the other day" blah blah blah.

My wife has a good job and so do I. We know what the bills average and we have split them up. We really never had a sit down discussion, she just had the mortage and insurances taken out of her account automatically and I picked up the utilities, cell phones, groceries, going out etc.

We only buy cars we can pay cash for so there is no car payment and low insurance rates.

I can see her account online and she can see mine. The only time we even bother to look into the others is if we are transferring money to cover something.

I can honestly say we have never argued once over finances, other than to wish we had more.

I would highly recommend seperate accounts and it has nothing to do with committment.

[bandnerd]

^^ Agree completely.

Right now, both the hubby and I make fairly equal amounts...except now that he's on my health insurance, I'm getting so much more taken out each month I'm going to be quite poor lol. So his mom and I devised a plan, since the hubby works for his father as a legal assistant, where they would essentially pay him back for the health insurance through a raise, because even with the expensive health care he's getting through my (state) coverage, it's still cheaper for his parents!

So now I don't pay rent haha. I buy the groceries. He does all the bills and the rent now, and I buy the groceries. We treat each other when we go out, though I have a feeling my money is going to become "fun" money for the two of us. I don't really spend a whole lot on myself, just clothes occasionally and workout dvd's :P

It all works out in the end. We really haven't ever argued about finances.

In the future, when he's a big-shot attorney (we can hope haha) my money will be so trite compared to what he will make, since I'm a teacher. His parents have that same deal and it's worked out just fine for them. I'm not worried about it at all.

When we want to make a big purchase (next purchase: Plasma TV, then a Wii!) we just go in half and half. No big deal. And we are certainly committed to each other!