Kim Basenback, CFP®, and Mike Zarrelli, CFP®, discuss managing finances for couples in this edition of Technical Tuesdays.
Managing Finances for Married Couples Transcript
Mike:
Hey, everyone. Welcome to our Technical Tuesdays videos. I’m Mike Zarrelli, and I have Kim Scott, now Kim Basenback, with me today. Kim, how are you doing?
Kim:
I’m doing great, Mike. How are you?
Mike:
Doing well. We’re filming on a Friday, Friday afternoon, too, so we’re ready to rock and roll for the weekend.
Mike:
Well, today we wanted to talk about managing finances for married couples, and Kim got married back in July, so we thought it would be great to interview Kim and talk about what she’s doing with Jordan. So Kim, without further ado, let’s start off with, what’s your story? Where’d you guys meet? When did you get married? Things like that.
Kim:
Sure. So, Jordan and I met, like a lot of couples these days, online and went on a few dates. And I guess, as they say, the rest is history. But I will say we met just a few months before the pandemic started, so by the time the world was shutting down, we at least knew we wanted to be in each other’s COVID bubble, as you know. From there, we really had a chance to get to know each other really well since everything was closed and we could hang out with each other and our roommates. It was a great time to get to know each other really well. We got married in July of 2021, so at the point of recording this, almost three months ago.
Mike:
Yeah. Awesome. It was a good wedding. I was there. It was a fun time. Actually, most of the office was there too.
Mike:
So Kim, now that you’ve had a few months under your belt being married and you’ve kind of been able to have these discussions with Jordan, what’s your method going to be for managing the finances? Is it going to be like a mine-yours-ours type of deal or just totally separate? Yeah, what are you thinking?
Kim:
Yeah. It’s funny now being on this side because I can say I’ve had a lot of conversations with clients around how they’re going to set up their finances as they get married and such. I had an idea of what I wanted, but obviously there’s two players in the game. So what we decided to do is we’re going to do a his-hers-and-ours. The way we see it is everything is joint, but we are going to give each other – we each get some play money every month. Everything funnels into a joint account, and then we each get some fun money as we say. That way it’s money that we don’t have to consult each other. This is our money, if we want to spend it on something frivolous, we can. If we want to buy each other a gift, we can without the other person knowing. It gives us some freedom in that regard, while also still mostly building things together, just giving us some side money for each of us.
Kim:
I will say, too, after talking to a number of clients about this, it’s different for every couple. Some couples put it into separate accounts, and then they each put a proportional amount into a joint account. Some people keep money totally separate, and that works really well for them. Sometimes when people are in a second marriage, it just is easier and cleaner to keep things separate, especially if there’s kids involved on either side. There’s no cookie cutter, but this is what works really well for us.
Mike:
Yeah. Great point. I think as it is with most finances, it’s personal, and it’s up to your style, your preferences. I’d probably be the same way. I’m not married, so no telling what I will actually do, but I’d probably be a his-hers-ours type of deal.
I wanted to take a tangent on one thing you mentioned is, we don’t have to talk about certain expenses. What would be the threshold? How much would someone have to be thinking about spending to need to consult the other before making that purchase?
Kim:
Yeah, sure. So for us – again, this is different for every couple -and I would say right now, as we’re newly married and figuring out our finances and rejiggering where money is coming from, we talk about it quite frequently and we talk about most expenses at this point, but we’ve agreed that our threshold is somewhere in the $200 mark, where if it’s going to be over this, we really need to talk through it together. But, again, right now it’s all so new that we’re just running everything by each other, figuring out what makes sense.
And I forgot to mention, Mike, what you said brought it back for me, but on the his-hers-and-ours, one of the most interesting conversations is figuring out what goes under the category of fun money and what goes under joint money. So I think that’s something, no matter what route you go under, if you do the his-hers-and-ours, it’s good to understand, if I get a facial, that is under my fun money. If we eat out together, that’s under joint money. Some of those are pretty self-explanatory, but some people have very strong opinions about what should be separate and what should be joint expenses. So that’s a good thing to make sure you’re on the same page before you get all that set up.
Mike:
Yeah. Great point. There’s a lot of gray areas in terms of how to categorize expenses and such. And to your point, there’s still a lot of ironing that needs to be done in figuring out when do we need to talk about things and also just building trust with each other.
So the next question I have is, how often would you guys want to talk about finances? Monthly, semi-annually? When do you want to start setting up a schedule?
Kim:
Yeah. Another good question. For us, we haven’t found – obviously, since it’s only been three months in – we haven’t found our perfect rhythm yet, and obviously we’re talking about it a lot more right now, but for us, at least once a year, from the bigger goal perspective of what’s our plan for the year? What are we…how much are we saving to each place? For right now, our big goal is buying a house, probably within the next year, hopefully, depending on the housing market. A lot of it is how much are we saving towards the house? How much are we putting in that account? So forth. But then on the smaller scale, we’ve talked about at least semi-annually to quarterly, just checking in on the smaller day-to-day things versus, like I said, the annual would be the bigger picture stuff.
Mike:
Yeah, yeah. Good point. Okay. So I got another question. This one’s a little more tricky. Let’s say one of you brought debt into the marriage and it was debt obtained before you got married. How would you handle that debt moving forward now that you’re a joint couple?
Kim:
Great question. I think it may depend on the type of debt. If it was credit card debt or a car loan or something like that, and depending on the interest rate, I imagine we would tackle that pretty aggressively together, wanting to get rid of that debt. In our case, Jordan had some student loans. He’s a teacher, and so he had some student loans going into it. For us, it’s more of just being strategic since he’s on the loan forgiveness program, being strategic how that’s paid off, but still working on it together. I think it depends on the type of debt and how quickly we need to get rid of it.
Yeah. Fair. It’s okay to give the it-depends answer. Last question before we wrap up is actually going back to the tuition-student loans question. If and when you have kids and it’s time for them to go to college, how much would you put towards paying for their college? Would you pay the whole thing, or do you want them to have some skin in the game?
Kim:
This is a great question, and one that I guess, given what I do, we’ve already talked through this, of course. We have slightly different opinions on this. Jordan wants to, assuming we’re in a place that we can, wants to fully fund their undergraduate degree. He wants to pay for everything in full, no debt for them, no necessarily no skin in the game for undergrad. For me, having, I put myself through college and had a lot of skin in the game, and so I saw a lot of value in students or individuals going through college having some sort of skin in the game. In my preference, I would like to pay for the bulk of it, but maybe finding a way for them to have some skin in the game. I imagine when the time comes, we’ll find some sort of compromise, whether our kids are responsible for their books or for their transportation if they have a car, or maybe something like that where they’re having some sort of responsibility but we’re still helping them through that big expense because I can say, especially with Jordan having the student loans, it’s a lot to need to be paying off those student loans, so if we’re able to help our kids get through that without the loans on the backend, then that would be ideal. But I also know it’s really important for us to make sure we’re in a good financial position so they are able to get student loans for college. If we need to be in that position, or if it would be good for them to have skin in the game, I’m open to that. I think we’ll probably continue to have conversations about that, but yeah, I think probably some sort of a combination would be a good middle ground for us.
Mike:
Great. Fair. That works. Well, before we wrap up, any other just little nuggets or advice that you’d want to give to newlywed couples managing their finances?
Kim:
Sure. Yeah. I would continue to say, as I said earlier, there’s no cookie-cutter answer. So it really depends on what works for the couple and what works for how you guys want to set up your finances, where money flows. And sometimes it is helpful to have one person manage the day-to-day finances, and maybe another oversees the bigger picture. It depends on what works for you guys. All that to say, we have this conversation quite frequently with clients, and a lot of us have been through it ourselves or have significant others that we have to have these conversations with. So I would say we’re here to help and help navigate through having those conversations and help figuring out what works well for you.
Mike:
Yeah. Great. Just want to echo, you can reach out to us at 301-949-7300 or at questions@FSAinvest. We’ll see you next time for our Technical Tuesdays. Thanks.
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