Married Finances: One Year In

In August, I canceled my monthly auto transfer to the joint checking account and my husband changed his to cover all of our household expenses. Today, that change really kicks in. It’s real.

We set an annual household budget for 2017 back in December. It was actually pretty easy – we took the contents of “Shared Spending 2016” and turned that into a budget with a few tweaks.

We set up auto transfers for each of us to pay for half of it, assigned particular credit cards to be household ones, and paid for those credit cards out of the joint account.

My husband proudly pronounced recently that Mint told him he had spent $0 on groceries, which meant he had been good all year at using the household credit cards to buy groceries. Slowly, we’re figuring out this game.

We forgot a few things like condo insurance, umbrella insurance, toiletries, occasional parking, and the endless stamps we seem to buy, lose, and re-find. The toiletries thing came to a head when I realized that my husband bought Fancy shampoo for him out of the groceries budget, yet I was buying Fancy shampoo for myself out of my personal money. (This may have resulted in some crying, possibly.) That prompted a re-evaluation of what we had each been spending out of personal money that should have been household. We found that I had been buying a lot of needs out of personal money, like moisturizer, cleanser, body wash, shampoo, conditioner, and other hair products, and allergy medicine. I had been proclaiming about how frugal I was by spending only $X on lunches on campus on odd scheduled days. Those plus all the food out my husband had bought because he ate more food than me all turned into household purchases.

The joint account is incredible for the visibility. It means that we can both easily see how much we’re spending in various categories and how much it costs to run our household for a year. We’ve been doing so well with the budget overall that other than for wedding stuff, we haven’t had to transfer in extra money.

We’ve also both been a bit more frugal all year, what with paying for the wedding reception ourselves.

 

We ignored the elephants in the room all year: the question of what my plans were after I completed the coursework portion of my Master’s degree and the fact that my husband is earning 95% of our household income this year.

That all came to a heat when, in the span of a few weeks, my husband received a promotion he’s been working towards for many years, I completed the coursework portion of my Master’s degree, and we realized that if we continued on the path we were on, my savings account would have a zero dollar balance at the end of the year.

Gulp.

 

 

Whoever said you shouldn’t ask your partner for a pre-nuptial agreement because the discussions are hard was silly because talking about money in marriage is such vulnerable conversation and skipping it is a recipe for disaster.

Talking about all of this has brought back memories of how controlling my parents were around distributing money. Since college, I’ve been staunchly financially independent from anyone else (except that whole somewhat needing a job thing). I’ve paid my own rent, bought my own groceries, and bought clothes as I saw fit, not as my parents saw fit. My husband is much more easy going than my parents and it’s vastly different, but these feelings still come up.

 

No matter how expensive these past twelve months have been, we wouldn’t trade them for the world. The engagement couch has been a huge quality of life boost and was a far better decision than selling the condo and moving last year would have been. The elopement, the engagement ring, the fancy wedding band, and this joyful wedding reception we’ve planned have all been incredible, though I’ll have to report back on the wedding reception’s joy level later as right now, it’s in the stressful mad dash to the end.

If we went back in time, we would re-make the same decisions again.

We just can’t contribute to them 50/50 right now financially. Marriage isn’t 50/50 each year and this is one of those years. It’s an ebb and flow as my mom once said.

Or as my husband said, we have too much money for either of us to worry about how we’re buying the food we’re eating that night. <3 Our new spreadsheet titled “Combined net worth” shows that as of May 31st, 2017, 4% of our investments would cover our household budget, less the travel splurges. We have more than ten years of those expenses in cash or liquid investments. We can’t yet maintain our current lifestyle or cover non-employer health insurance with our investments, but we can keep a roof over our heads, feed ourselves, and have a pretty good stable life.

We feel really incredibly fortunate that my husband’s income is sufficient for us to live off of. It’s more than sufficient – more than half of his overall net income for the year would be saved even covering the household expenses entirely out of his paychecks.

 

It took us longer than it should have to realize we would come to this point because I felt like I couldn’t talk to anyone about it other than my husband. I briefly said something to a few people over the last few months and all of their immediate responses were “Why don’t you just live off of your husband’s income and stop worrying about all of this?” If your knee jerk reaction is the exact opposite of what the couple would prefer to do, perhaps you should keep your opinions to yourself rather than being entirely unsupportive. The intricacies of all of this are huge and complicated with all the money mindsets, past experiences, and that we never intended to get married until we did. We’re consciously choosing what to do with our money going forward as it makes sense and feels right to us, rather than our state telling us we had to combine from the date of our marriage forward.

Is this a path towards more combining? Is it bad if it is or isn’t? I’m confident that we will continue to consciously make the decisions and course correct as it makes sense for us going forward, however that ends up.

 

Here’s to an incredible first year of marriage and I’m so glad I’ve had you by my side through all the chaos of the last year!

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Married Finances: The Agreement

Note: I’m not a lawyer. This post describes our process of developing our nuptial agreement and not the actual legal agreement itself.

Separate or combined bank accounts don’t make a marriage. Communication and shared values do far more than your decision to keep your money legally separate or combined.

I’ve been startled as I’ve talked about our post-nuptial agreement to people in person by the number of people who keep their finances separate from their spouse’s and don’t have a nuptial agreement. I very firmly believe that if you don’t have a nuptial agreement, you are essentially accepting your state’s laws by getting married, no matter how you title your bank accounts. One friend keeps their finances separate from their spouse and bought a house post-marriage with their separate money, but hasn’t protected their asset at all.

My husband and I don’t have combined finances, nor do we have a plan at the moment to ever have them.

We do, however, have a notarized and legally binding post-nuptial agreement. It describes my pre-marriage property and liabilities, my husband’s pre-marriage property and liabilities, and our joint pre-marriage property and liabilities. It also spells out exactly what we plan to do with our money in our marriage, while also leaving us the flexibility to change our minds on some pieces later, which is great because so far, we’ve learned that the first way you come up with to run your shared finances isn’t necessarily the way that will stick.

It took us about three and a half months after our wedding before our post-nuptial agreement was signed and executed. It wasn’t a time full of arguing – it was a time full of discussions and then trying to convey our ideas to the lawyer drafting the agreement. Some of those discussions were emotional, though those ones especially were important to have. Talking about money doesn’t stop there either – we continue to talk about it and those discussions form the base of our married money plans.

Goals

There were three key pieces for us in drafting this agreement:

  1. We want to own our primary residence together, while protecting my separate interest in the property.
  2. We want to keep all separately titled assets to be separate and all jointly titled assets to be joint.
  3. We want to allow ourselves the flexibility to change our minds later on whether income is separate or joint by default, without having to re-draft the agreement as it did have a reasonable cost to it ($2,000).
  4. Later added: we want to be able to leave our separate estates not necessarily to each other.

Condo

The first piece would be really easy if my husband had half of the condo value liquid at the time of the marriage AND was willing to part with it in order to buy into the condo. (We had originally planned to get married once my husband reached that point, which we estimated would have happened sometime in 2018.) That was not the case, so we needed to come up with a new creative solution. Furthermore, based on the mortgage balance and the valuation at the time we got married I owned 75% of the condo, meaning that I already owned more than I needed to of the condo. We agreed that all appreciation up until our marriage date was my separate property, which gives me a pretty decent amount of equity in the condo. My husband will buy into the condo until he owns half by paying the existing bank mortgage and paying me back for my “extra” equity.

Having a plan to own the condo together is such a relief. We have some projects that we were procrastinating until we owned the condo together and it also helps out a lot with the (current) income differential. When we first started dating, I was making more money than my husband and I had more assets. He’s made more than me the last couple of years to the point that my income only made up one third of our household income in 2016, which is a pretty big difference, even at my also six-figure income level. I was starting to feel a bit of a pinch in continuing our 50/50 share of the shared expenses, especially considering that I was paying for all of the housing expenses for a condo where I already owned more of it than I needed to! Assigning the remainder of the small mortgage to my husband frees up just over $12,000 from my budget, which is a huge boost to my current no-income budget.

Separate Income

We ended up declaring all income separate to the earning party, for two reasons:

#1: It seems like a “normal” nuptial agreement declares pre-marriage assets separate and post-marriage assets joint. We decided that wasn’t a fair option since that would keep my pre-marriage assets separate while sharing my husband’s larger post-marriage income while I’m in a phase of no income. That didn’t feel right to either of us. I wasn’t comfortable sharing my pre-marriage assets (yet).

#2: The catch to having my husband buy into the condo instead of simply making all contributions to the condo equity post-marriage joint is that we need to keep our incomes separate in order for this to work.

This means that all of his income is his to keep and my income is mine to keep.

If we change our minds on this later, then we can simply deposit our incomes to joint accounts in order to make the income joint rather than its current separate form. We definitely plan to re-evaluate this plan when a big life change happens, such as having kids, selling this condo, buying a new property, retiring, or if we need to provide support to any family members. As my husband says, it’s not worth worrying about something until it happens because we don’t really know how we will feel until it does.

  1. If we choose to have kids in the future, we would most likely update our post-nuptial agreement with a new financial disclosure and then make future income from then joint.
  2. If we sold this condo, then we would distribute the proceeds according to the equity as described in our agreement to our separate accounts. We would then buy any new property in a 50/50 ratio from our separate property or share rent in a 50/50 ratio.
  3. If we retired early, we would consider whether with our then-current distribution of retirement and non-retirement accounts we could support our then-current lifestyle out of our separate accounts or whether it would be more jointly advantageous to re-adjust our agreement somehow while still maintaining its spirit.
  4. If we in the future own this condo in a 50/50 ratio, then we could make all future income from there joint.

Taxes

Keeping our incomes separate will create for an annoying situation when we file our taxes each year, however, as the overall tax bill has to be split somehow. If we choose to make income not separate in the future, we will likely do it on a calendar year basis to help make the taxes clearer.

One of our lawyers suggested running Married Filing Separately returns and then using the ratio of incomes from that to determine who was responsible for what ratio of the joint tax bill. We didn’t like that because it would result in the higher earner seeing the entirety of the marriage tax bonus or penalty, which didn’t feel fair when it was a joint decision to get married. At first, I tried to suggest that we should split the penalty based on the ratio of incomes until I realized that that wouldn’t work so well in the years where there could be a bonus.

Our conclusion on taxes after hours discussing it is to treat the marriage tax bonus/penalty jointly. That means that I will have to run through two Single returns and a Married Filing Jointly return in TurboTax in order to calculate the split. That doesn’t seem so bad with our current tax situations.

We’ve already run through our 2016 taxes and it wasn’t that much more time to do the extra tax return.

Implementation: Hers, His, and Ours

The “default” for accounts in a nuptial agreement seems to be that the valuation at the time of marriage is considered separate and then any new growth or contributions is considered joint. Considering that I had about $250,000 in retirement accounts at the time we got married, that seemed to take away the value of compounding from starting to save for retirement at age 19. We ended up in the end agreeing that any growth in the condo value was joint and all other asset growth on separate assets is separate.

In practice, this looks like having hers, his, and ours accounts:

  • Hers: Roth IRA, 401(k)s, HSAs, Series I Savings Bonds, checking and savings accounts, taxable Vanguard index funds, and some portion of the condo equity
  • His: Roth IRA, 401(k), checking and savings accounts, taxable Vanguard index funds, some portion of the condo equity, and the mortgage
  • Ours: Checking and savings accounts, some portion of the condo equity, and in the future, taxable Vanguard index funds

Each year, we’ll create a year spending plan for the year and each of us will contribute 50% of the monthly agreed upon amount to our joint checking account. We funnel all joint purchases through specific credit cards that are not used for personal expenses and vice versa. There’s no owing each other money. If we have unbudgeted expenses (i.e. how we’re paying for our wedding reception later this year), then at the end of the month, we add up how much those were and we each put half of that amount into a joint account to cover those costs.

Our system isn’t that different from a couple who does allowances for discretionary spending except that rather than depositing everything to a joint account and transferring the discretionary spending to separate accounts, we deposit everything to separate accounts and transfer an agreed upon amount to the joint accounts. We’re both pretty open with how we spend our money and we have compared spending over the last few years that we’ve been dating. We’re both relatively frugal compared to our incomes (we both have saved over 50% of our incomes the last few years), so we aren’t doing this to avoid disagreements about money.

We don’t want to inflate our lifestyles based on the other’s income. If we can’t contribute 50/50 to our primary residence, for example, then that property is too expensive to buy. If we were to re-buy this condo together, we could each contribute half of the 20+% down payment and we could pretty comfortably afford the carrying costs with a 15 year fixed rate mortgage.

Both of our parents are still married, 30+ years later, and have had the one-pot approach from the beginning of their marriages. We certainly didn’t get this example from our parents on either side! Our parents, however, got married when they didn’t have much in the way of assets or incomes and I agree that it is pretty silly to have a prenup or keep things separate in that case. We didn’t screen for each other based on our financial status, though we did originally meet in undergrad, which probably was somewhat of screening for financial status, and we knew that we had similar financial values, which matters far more than if our assets were at similar levels.

Preparation for Marriage

I’ve talked to a few people who are healthy savers in their twenties and worry about what their prenup will look like when they do eventually get married. I worried about this plenty back before it was pretty clear to me that my husband and I would get married. I wish I’d worried about it a bit less and just concentrated on building my wealth as a single woman because that’s really all I could do.

One of my reasons for aggressively paying down the mortgage on my condo was to pay it off before getting married so that I would own it 100% as my separate property. In hindsight, that is really against the spirit of being married and living in a place together! If my husband had significantly less income and assets than me OR we planned to rent out the condo and buy a different place together, only then would leaving the condo as my separate property make sense. While we’re both living in the condo, having it just be my separate property is binding. It leaves the questions of how to handle paying for replacing appliances, painting, buying new furniture, any remodeling, etc. that we’ve been managing for the last two years without a strong solution.

The particulars of the nuptial agreement that we ended up settling on are really quite specific to the asset levels and locations that my husband and I both have, as well as our recent incomes and income potential. If the person with fewer assets also had very little income or if most of the wealth had been generated while the two of you were a couple, it’s much harder to see a way to come to a fair nuptial agreement at all. We ended up at the point of marriage in the case where both of us had healthy assets (in the multiple hundred thousand dollar range on both sides) that were not equal and both of us had six figure earning potential, which made a nuptial agreement a pretty reasonable plan.

Marriage and money is such a complicated topic! How we manage our money is pretty specific to our situation and won’t necessarily apply to other couples. I really do believe that the one-pot style is the best for the vast majority of people simply because most people don’t come into marriage already as millionaires.

2017 Joint Spending Plan

I’ll go into more detail in later posts about how and why exactly my husband and I plan to keep parts of our finances separate, including how we’re handling the condo. For now, let’s look at what our joint spending plan looks like for 2017. We spent about an hour one weekend in mid-December looking at the categories we counted as shared expenses in 2016 and estimating what we would spending 2017 on those categories.

Note that this plan does not cover our personal spending – that is separately tracked for both of us. We’re following a his/hers/ours formula to our assets and spending, based on what we drew out in our postnuptial agreement. My husband plans to follow his non-budgeting formula which works out great for him and I plan to use Cait Flanders’ Mindful Budgeting Planner to track my personal spending in 2017.

Spending Plan

2017-joint-spending-plan

Housing ($16,293.07)

  • $9,559.88 HOA monthly and special assessments (known amounts), property taxes (I estimated based on the assessed value of the condo and the 2016 tax amount)
  • $2,230 Maintenance – this is the average amount I’ve spent annually since buying the condo. If it doesn’t all get spent, it’ll roll forward as float to cover future maintenance or condo assessments. My husband tried to say that we don’t need to budget for condo maintenance each year because everything this year was a one-off expense. I showed him my data for 2012-2016 that showed that 2016 was exactly in line with average and he agreed to put this in.
  • $925.91 Electricity – This is the 2016 spending plus the expected per kWh increase for 2017. Our usage has stayed relatively flat or decreasing over the years and the utility company keeps increasing the cost per kWh each year… I’m not really sure how to budget for heating since I’m home more than I used to be and the heaters are on more instead of being off all day, so I guess we’ll see how this goes!
  • $17.88 VoIP line
  • $2,750 House cleaning – $110 biweekly, assuming 25 visits
  • $809.40 Internet

An astute reader might notice that there is no mortgage payment listed here, which costs about $12,000/year. Did we pay off the mortgage or is it a separate expense? And whose separate expense is it? I’ll answer those questions in a future post.

Food ($8,980)

We generally toss household toiletries like paper towels and toothpaste into here for simplicity.

  • $450/month Groceries – our average spending in 2016
  • $255/month Restaurants – one nice dinner out and 3 takeouts
  • $520/year Costco – we make one trip quarterly

Taxes (unknown)

That glorious marriage tax penalty will hit us for the 2016 tax year. We won’t know exactly how much it’ll be until I’ve collected all of our tax forms and can do our taxes in our beloved TurboTax. I have an estimate though that it will be somewhere between our travel budget for the year ($5,000) and our food budget for the year ($8,980). On the other hand, with our income projections for 2017, I expect getting married to save us a larger sum than our penalty in 2016 and that will be a joint bonus. Thanks to my husband’s income increasing by 33% over his 2015 income, we don’t expect to get hit with any underpayment penalties.

Travel ($5,000)

This covers (for both of us) one trip for a friend’s milestone birthday, a Christmas trip, a relative’s milestone birthday trip, and one weekend getaway. Some of this might get paid for with credit card points, but we still count it as spending and then the credit card points as income, resulting in $0 coming out of our checking account.

Entertainment ($1,512.16)

  • $1,000 theatre tickets and such
  • $10.95/month Adobe Lightroom
  • $10.95/month Netflix
  • $16.41/month Spotify Family, shared with two other family members
  • $4.37/month Pandora

Transportation ($1,570)

  • $25/month: there’s usually reason to take a few Ubers a month
  • $30/month: one gas tank fill-up per month
  • $500: the January car insurance payment will be my separate expense. We plan on paying for it as a family expense in July, though that’s still uncertain at this moment. This is related to the fact that it’s my car and I’m the primary driver of it.
  • $210: annual car registration
  • $200: car maintenance is usually pretty low

Gifts ($880)

We’ll donate out of our Donor Advised Fund balance throughout 2017. We also estimated four wedding presents for a total of $880. We’re still sorting out what we’re doing about combining Christmas present spending as one of us likes to be far more generous than the other person.

Wedding (unknown)

We’re throwing a wedding reception in 2017 at a local restaurant for our friends and family who couldn’t make it to the wedding. Our estimate at the moment is that this will cost somewhere around $10,000-$15,000. It’s really hard to know how much it’ll cost until we know how many people are coming since the largest cost is the reception venue and that is based on consumption, which depends on how many people come. We are really excited to share this joy with our friends and family! We’ve received some wedding gifts already, totaling about $8,500 so far, which will cover most of this cost, which is why I’m not expecting this to be a huge part of our budget in 2017. Any costs of this which can’t be covered with cash wedding gifts will be taken out of our separate accounts in a 50/50 ratio.

Miscellaneous ($1,764.77)

Since we decided to round up the amount we deposit per month to the nearest thousand dollars, I added that extra amount as a Miscellaneous category to cover stuff we haven’t thought of, like when we decide we need a new alarm clock or a new kitchen tool.

Implementation

This plan adds up to $34,235.23 total for 2017 or an average of $2,942.30 per month. We rounded that up to $3,000 and will each deposit $1,500 per month to the joint checking account to cover these costs.

Currently, we are using two credit cards to pay for joint expenses:

  1. American Express Blue Cash Preferred ($95 annual fee, though we only paid $75 at our most recent renewal) for 6% cashback on groceries, 3% cashback on gas stations, and 1% cashback elsewhere. This one is in my husband’s name. This will earn us $239.80 per year in cash back rewards versus $169.20 with the no annual fee version of the card.
  2. Chase Sapphire Reserve ($450 annual fee with a 100,000 point bonus) with 3 points per dollar spent on travel and restaurants and 1 point per dollar spent elsewhere, with the ability to redeem the points at 1.5x on travel with Chase’s portal. This is our primary everything else card at the moment and has a pretty high limit. It has a $75 additional annual fee per authorized user though so this card is just in my name. With the wedding reception counting as a Restaurant in Visa’s books, this card should earn us about $630.08 in rewards in 2017 while keeping things simple.

We will keep a one month buffer in the joint checking account, so the two credit cards are on auto pay and I don’t have to make sure to pay them each month, which is a welcome change from the last few months during the transition.

If we have any future large expenses that come up during the year that our joint accounts can’t cover (like the living room remodel in 2016), then we’ll come up with a budget for the expense and transfer that amount from our separate accounts into a joint account. For example, when we found out the designer’s cost (~$3,000), we each put half of it in a joint account. We didn’t do that with the living room furniture parts since it was going to be spread out over a longer period of time, but had we been married when we decided to take on the expenditure, we would have each put half of the $12,000 budget into a joint account once we had the budget in hand.

Married Finances: Donor Advised Fund

The Why of Donor Advised Funds

I’ve always been intrigued by Donor Advised Funds. Now that we’re married, we will no longer itemize by default, so Donor Advised Funds seem a great way to itemize sometimes. By my initial calculations, we will be able to itemize $12,320 in 2016 before any further charitable donations and not counting my husband’s charitable donations thus far this year. That’s $280 short of the married standard deduction. If we take each of our separate charitable savings accounts, as well as our separate desired charitable donation rates of our expected gross incomes for this year and next and contribute that to a Donor Advised Fund, then we should be able to itemize closer to $20,000 in 2016, which is a reasonable additional tax savings.

We would then make our 2016 and 2017 donations out of the Donor Advised Fund and in 2018, group contributions to the Donor Advised Fund to cover 2018 and 2019 income. This will become even more key going forward as the mortgage interest paid gets lower and lower each year as the mortgage amortizes and we will likely lose that deduction entirely in the next few years.

It’s even better to do this this year as I expect we could drop a tax bracket in 2017 and it’s better to take more deductions when you’re in a higher tax bracket.

Another benefit is that we can take appreciated shares from our taxable accounts to contribute to the Donor Advised Fund, rather than donating to charities with cash. My taxable account is aged enough at this point that about three quarters of its shares have long-term capital gains, so I would use those shares to contribute to the Donor Advised Fund and then avoid paying capital gains taxes on the shares.

Where to open one?

Vanguard, Fidelity, Schwab all offer them, with a variety of minimums and fees.

We both have all of our non-workplace investments at Vanguard, so that seems like a great place to start. Unfortunately for us, their minimums are far higher than what we are prepared for at the moment: you need $25,000 to open a new account, each additional contribution must be at least $5,000 and each charity grant must be $500.

Currently, we both tend to donate $50-100 to charities on occasion and would prefer to be able to continue doing that for the near future.

Fidelity and Schwab, on the other hand only require a $5,000 commitment to open a new account and allow you to grant as little as $50 at a time to a charity. Schwab’s minimum additional contribution is $500. According to Bogleheads, Fidelity’s is $1,000, but I can’t find that on their website. They both have a minimum administrative fee of $100, which seems reasonable to me for the tax savings.

We both have checking accounts at Schwab because they offer unlimited international ATM fee reimbursements. Those accounts might be a good one to combine in our combining of accounts considering that we usually travel internationally together and even before we were married, we never tracked cash separately – whoever had the right denomination of cash was the one who paid and I always got to keep the coins. This worked out great for me when we would travel to countries with bills no smaller than a five. Thus, Schwab is a reasonable contender for our Donor Advised Fund.

One of us has some workplace accounts at Fidelity and I have the Fidelity Visa, so that could also be a reasonable place to open our Donor Advised Fund.

It does appear that if we changed our minds on how much we donate to charities at a time and wanted to switch over to Vanguard later, we could do so by submitting a grant proposal to our new donor advised fund at Vanguard, so we’re not long-term committed to whichever provider we choose.

I did all of this research, presented it to my husband, and he cut me off while explaining why I would pick Schwab to explain which one he would pick, which turned out to be Schwab. So it looks like we are going with Schwab!

What does it take to open one at Schwab?

You need to provide all of the normal information you do when opening an account: name, SSN, date of birth, home and mailing addresses, employment status and occupation. You provide a primary account holder and secondary account holders, which both have full and equal privileges. You can designate successors and/or beneficiaries. You indicate the investment options you prefer, which can be as simple as Schwab’s Total Market Equity Index fund or a Money Market fund if you don’t plan to keep assets in the Donor Advised Fund for too long before granting them to charities.

Your initial contribution needs to be at least $5,000. It looks like the simplest way to transfer money into the Donor Advised Fund is to have the assets already in a Schwab brokerage account, to write a cash check, or to do an ACH transfer from another bank account. You can, however, also transfer shares from another institution. Our plan is to transfer shares from our separate Vanguard taxable accounts that have long-term capital gains as Schwab Charitable can pull from two separate Vanguard accounts.

What to name it?

My vote is for either “The HerLast HisLast Charitable Fund” or “The HisLast HerLast Charitable Fund”. We are still discussing which ordering sounds better and our discussions are proving inconclusive. Someone on Twitter suggested “The FewerSyllables MoreSyllables Charitable Fund”. We’re both relatively indifferent to the names ordering.

 

Next up: follow up on these action items and get our initial contributions in before 12/31/2016…

Married Finances: Life Insurance Isn’t Always Necessary

I joked to my husband that we should get life insurance on me when I leave my job, but that was only a joke because it is pretty much entirely unnecessary. (The questionnaire from my lawyer for our postnuptial agreement asked if we have any life insurance and my husband joked “We decided we didn’t need any on her life because she’s too loaded/baller for that.”) If anything happened to me, he could never need to work again. I sure hope I’m worth more to him alive though! :) If anything happened to him, I would never need to work again.

People try to sell you on buying life insurance when you’re young and healthy and have no dependents because it will be cheaper. I realize that we are a strange case and you the reader may need life insurance more than we do, but this should at the very least be an example of a critical thinking exercise.

Kathleen wrote a smart article evaluating how much life insurance her and her husband needed last year and I plugged in our numbers to the tool she linked:

I used their default final expenses cost of $15,000, the outstanding mortgage balance of $127,000, and our zero children.

I told the calculator my husband’s current expenses without mine, how much we have in savings and investments outside of retirement accounts, how much we currently have in retirement savings, my husband’s current income and marginal tax rate. It told me that I need negative $1.65M in life insurance on me. If I take out my husband’s income, the calculator then told me I need negative $200,000 in life insurance on me. When I swapped the numbers around to my current expenses without my husband’s (including the current mortgage payment), included the amount of life insurance that my husband has through his work (he has the minimum), and put that I have $0 of income, it told me that I need negative $500,000 in life insurance on him.

Now you might be saying “well what about when you have kids in the future, so shouldn’t you buy life insurance now to cover that future hypothetical?” And if you know me and my future planning at all, you’d be a bit surprised that I am not planning for that possibility, unless you also know that I don’t want kids. If you truly plan on having kids, it seems smart to me to buy life insurance before you get pregnant. The naysayers will tell you that you should buy life insurance in your twenties because it’s cheap and then you lock in low rates without worrying about any health issues. That may be the case for a lot of people, but my husband and I really truly believe that we have self-insured and don’t plan to buy life insurance. We may even manage to avoid buying it even if we change our minds and end up having children – that all depends on where our net worth stands when that happens. Mr. Money Mustache and his wife famously don’t have any life insurance either.

I’m writing this from a perspective of not yet being financially independent enough to support our joint lifestyle forever with our current net worth, but from being far enough along that our current net worth could almost support one of us forever.

A caveat here though: you really need to do research and calculations for your own situation. If you have children and you don’t have enough assets for your spouse to continue your joint lifestyle as is without your income or vice versa, then I cannot stress enough that you should very likely have at least a small bit of life insurance. What I am saying though is to not blindly buy life insurance and to think critically through your situation.

Readers, at what point would you self-insure on life insurance? How much life insurance do you have in your twenties?

Married Finances: Where to hold our joint accounts?

I’m starting a series on what our married finances look like that will run until I run out of inspiration :)

My husband and I opened up a joint checking account back when he moved in at the credit union where we both had accounts. We also both had online savings accounts at Ally Bank. At the beginning of 2016, I moved my accounts to Alliant Credit Union because I was tired of meeting the rewards checking account requirements and Alliant has the same savings account interest rate as Ally Bank.

Back when we were both at the same credit union, we would transfer money to each other to pay each other back. As things became more serious, we started using a lazy spreadsheet to keep track of who paid for what rather than paying each other back for each individual item, so that wasn’t nearly as annoying as it would have been at the beginning. Plus, Square Cash is incredibly useful and easy to use, so that made the separate credit unions transition easier.

Managing the joint checking account became far more annoying though because then in order for me to get money into it, I needed to first transfer the money to my checking account at our shared credit union and then transfer that sum to the joint checking account OR send my half of the money to my husband via Square Cash and he transfer the whole amount into the joint checking account. We hadn’t used the joint checking account in a year until we went to the first wedding of the year and paid our interior designer via check out of the joint account and then this turned into a huge hassle when we then wrote about 10 checks off the account this year. We also pay our biweekly house cleaner with a check.

And then we got married, which prompted the joint accounts debate again. Like good engineers, we’ve been developing requirements for a joint account. Our two top contenders are Ally Bank and Alliant Credit Union. We ruled out our current shared credit union as they don’t have good interest rates and the ATM fee rebates require a certain number of debit card transactions per month. We ruled out major banks as they have terrible interest rates, though we will likely keep a brick and mortar joint account as well at least for now for ease of depositing the wedding present checks that we have been getting.

  1. All of our checking and savings accounts should be at the same financial institution: her personal checking, his personal checking, her personal savings accounts, his personal savings accounts, joint checking, and joint savings accounts. Neither of us is convinced into spending money that is in savings, so this is a great convenience fee.
  2. We should be able to transfer immediately and freely between all of the accounts listed in 1.
  3. We should be able to ACH transfer quickly (ish) for free to accounts at other institutions.
  4. The checking account should refund at least 2 ATM fees per month, for free with no requirements. [Alliant does this immediately and has a $20 maximum. Ally Bank has a $10 maximum and I’m not sure how quickly they do this.]
  5. Easy to acquire free checks on the checking account because apparently we write a lot of checks off the joint account.
  6. Free bill pay, but that seems to be a given these days.
  7. A clean and friendly user interface on their website (ahem current shared credit union does not meet this!)
  8. An easy to use mobile app [Ally is currently winning this one, but Alliant’s Twitter account says they’ll have a new app out in November]
  9. Ability to deposit cash at ATMs
  10. Two-factor authentication [Neither Ally nor Alliant seem to have this…]
  11. The savings account should have a reasonable interest rate, e.g. at least 1% today.

This has been a fun decision to make! Generally I make more of our organizing personal finance decisions since I’m the planner, but my husband took to /r/personalfinance and Bogleheads to research these two options before we give one a try.

I’ll report back in a few months on how we’re enjoying the one we picked! It will, after all, take a little while to get things rearranged.

Readers, how did your banking setups change when you got married?

A Millionaire’s Elopement

We’re both on the introverted side and neither of us saw marriage as a shiny penny, but as something we were already living day and in and day out at the time that we chose to marry. Eloping thus turned out to be the perfect solution – it meant that we weren’t focusing on a big party, but on choosing to marry each other.

We had been talking about marriage for a while now off and on, so it didn’t surprise anyone that we decided pretty quickly to get married. A note to anyone else planning a wedding: all you really need is about 48 hours or whatever your local jurisdiction’s waiting period is. People were surprisingly shocked though that we didn’t have an official proposal or an engagement ring, though the latter was mostly my decision as I’m still on the fence as to whether I want to wear one. My now-husband (!) has said we could buy me one if I really wanted it, though I’d kind of rather have a tablet I think.

We made the decision to get married so quickly that we didn’t have time to draw up a pre-nuptial agreement, so we’ll be drawing up a post-nuptial agreement soon and I’ll be talking about that when we figure out what it looks like. At this time it appears that it will likely cost about what we spent flying the key people in to the wedding location. We’re both really excited to combine as much as makes sense. After all, we do already have the same Investment Policy Statement and we both hate even low-interest mortgage debt. This event has created plenty of inspiration for future blog posts!

Why do I say it was a millionaire’s elopement? Now that we’re married, we sort of have a combined net worth even if some of it will stay separate and combined, our net worth was over a million dollars as of our wedding date.

What did our wedding spending look like?

Total cost: $3,500

$2,300 Flying some key people here (2/3 of the cost of the wedding)

$800 two wedding bands

$140 Attire – I bought a dress off the rack and my husband wore a suit he already owned

$100 buying up some domain names

$84 Ubers around

Marriage license fee (I google’d “our county marriage license” to research this – I know it varies from county to county whether there is a waiting period so be careful of that!)

Fee for two certified copies of the marriage license

$6 buying some birthday cards and stamps for a few birthdays we missed because we eloped

$0 Photographer – our witnesses and officiant are hobbyist photographers

$0 Officiant – a friend officiated and was included in the post-wedding food

$0 Venue – we got married at a park

$0 Food – Dinners and lunches were paid for by either our grocery budget or our parents as a gift (I’m guessing this was about $600-800)

$0 Flowers – no time for such things

$0 Music – we were in a park! Natural noise from that

$0 Decor/rentals/lighting