Oct 22, 2010

$$ Tips From Us

First, yes I realize the irony that the last blog post was about a surprise credit card bill which maybe doesn't position me as a leader in finances. But just hear me out.

Amanda was shocked to hear me describe Ross as "cheap." She and most my college friends always accused me of being cheap so for the cheapskate to call someone cheap, just, wow. Let that be the preface here: Ross and I are both cheap and both very involved in our finances.

With very nearly a year of marriage and 18 months of fully combined finances under our belts, here are the things we've done/learned that have worked really well for us. (Thanks Emal for inspiring an advice column.)
From  howstuffworks.com

  • Combine finances. For us, this works great. Before we combined our dollars I think we were both guilty of assuming the other had money, even if we didn't. This would mean we maybe spent ours a little more frivolously and volunteered the other one to run errands like picking up milk. Combining our finances made us more aware of how much we really did or did not have as a team. It also facilitated many conversations about our financial goals and how we could work together to achieve them. And it helped us accept each other more, which sounds corny, but for example it made my loans more of a reality to him and once they became a part of his world too, were easier to just accept (even if he still doesn't like it). For me since he was working for tips at the time, it helped me adjust to that pay schedule, which I've never had. Combined bank accounts created a stronger "team" feeling, improved our fiscal awareness and facilitated more communication. From my experiences, I recommend combined finances to every couple.
  • Talk. Pretty self explanatory but we talk about our finances constantly now. Probably 5-6 days a week. Because we do it so often, it's usually very casual. "The electric bill was $X" or "I want to put $X into savings this month" or, in fairness the least fun, "I'm going shopping. Think we can afford for me to spend $X" which is usually followed by "$X!? No, try "$x." I like that it makes us very honest with each other, very informed and I think both of those things are why we rarely, if ever, argue about money.
  • Pay yourself first. I know this isn't a novel idea but when we started saving for the house we very purposefully did this and it works so well. As I kinda mentioned in my last post, now when we have an unexpected expense it is our fun money that takes the hit, not our savings.
  • Create an imaginary line. When we combined our checking accounts (warning: about to share money details, possibly tacky) we had $3000 in our first combined checking account. Our goal immediately was to never let it fall below that because then we knew we'd be spending more than we made. This worked great! With that magic minimum in mind we've rarely if ever spent outside of our means, never overdrafted our account and always had enough money readily available for life's curveballs, be it plane tickets or new tires. Remember, its not "if" you have emergency expenses, it's when.
  • Get rid of debt. Duh right? We've accepted some of our debt as long term, specifically my school loans and our house, but otherwise, if we have debt and we come into a little money (like a tax refund for example), we pay that sucker off. It saves us money on interest and means we always have an honest picture of our debt to income ratio.
  • Protect your $ from yourself. We just did this most recently. In July we put about 3/4 of our savings account into a CD. The interest rate is crap. But it's in a two year CD so we can't spend it. When we want to buy our forever home in a few years, the bulk of the downpayment will already be saved and accessible. And if for some reason we have to tap into that, let's be honest, it would be such a big emergency in our lives that a) the penalty for pulling out early won't matter and b) we have bigger problems than the downpayment on a dream home.
That's it. That is all the wisdom on money that I have. I'm very enthusiastic about people having financial independence so if I develop more wisdom, I'll share it with you. And we can be financially independent together.

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