Early Retirement Extreme Forums

Early Retirement Extreme Forums » Friends & Family Questions

1. 

   bigjimslade33
   

   Novice
   Joined: Nov '11
   Posts: 5

   How should we handle merging (or not) finances when one spouse has lots of liabilities? Here's a tricky situation with some components many EREers will have to face. Please share your thoughts!

   My wife is generally frugal, a hard and conscientious worker, and a reasonable financial partner. I will likely always have significantly higher earning power than she will, but she’ll do okay. In a vacuum, I would be okay with merging our finances. However, in addition to having less earning potential than I do, she has three big liabilities that I need to consider:
   1) Huge student loan debt (six figures). (I knew it when I married her, I’m glad she got the education she did, and I know I’ll have to contribute to paying them off one way or another, but the loans are still a bummer!)
   2) She wants to spend at least a few years as a stay-at-home mom when we have kids. (This is okay with me too, but by definition this will shift even more financial responsibility onto me.)
   3) She doesn’t realize it yet, but my wife is likely to want “us” to provide some financial support for her father. She is incredibly close to her father, who is a financial train-wreck. (He is in his 60s with no retirement savings, no savings of any kind, a huge mortgage, home equity loans, car loans, huge student loans, huge credit card debt, and big spending habits. And now he's starting to talk about retirement, which demonstrates just how out of touch with his own financial reality he is.) The interest on his debts will start to overwhelm him, his standard of living will go down significantly, and he will inevitably come to us asking for financial support at some point. He will see his predicament as the result of unforeseeable bad luck, rather than as the entirely foreseeable result of living beyond his means and racking up debt at his age. My wife will have a hard time seeing his financial suffering while we have a big nest egg.

   Frankly, I resent the guy's reckless behavior, and don't want to spend my life energy (in the form of savings or income) bailing him out. And, given that I’m already committed to major financial support for his daughter’s living expenses and debt repayments, I feel even less inclined to take on any liabilities related to her father’s reckless and stupid financial behavior. I want to be a generous and good provider, but I need to draw the line somewhere. I’m happy taking care of her, but not happy hitching my wagon to her financial train wreck of a father.

   Given these liabilities, I am wondering how to best structure our financial lives. (We are recently married, and no permanent decisions have yet been made about how to structure our finances.)

   I could pay off her six-figure student loans with my nest egg, which would be one of the best investments we could make (effectively a guaranteed annual return, every single year for what would have been the life of the loans, of around 8%, with no down years, no risk, and no tax. Part of me thinks I should do that. I’m effectively on the hook for a lot of that money anyway, because she simply can’t make enough to contribute to our shared living expenses and debt service simultaneously. So maybe I should just pay more now to reduce the interest burden?

   However, there are a few potential downsides of doing that.
   1) This debt is not officially my legal liability. If we ever got divorced (hopefully not), the debt would remain her individual liability. If I pay the debt, I will in effect have transferred a massive amount of my life energy to her (total savings from around 5 years of hard work). If we then ever got divorced and I didn’t somehow get "credit" for this expense in any divorce settlement, I will have made a mistake.
   2) Some part of me thinks that having her in debt provides some insurance against her wanting to spend our money bailing out our father. If she’s debt free and sees our nest egg building up, it will be hard for her to see her dad’s standard of living start to painfully implode. She’ll want to send him money. Whereas if she still has her own debts, she might be more reluctant to want us to bail him out, and he might be more reluctant to ask.

   So I guess I really have a few questions:
   1) Should I pay off my wife’s debt?
   2) If I do, can I get credit for doing so in any future divorce settlement?
   3) Is there any way I can structure our finances to avoid having to bail out her dad?
   4) How should I think about merged vs. shared finances in this situation?

   Posted 1 year ago #
2. 

   m741
   

   Master
   Joined: Jan '11
   Posts: 733

   I'm not married so don't have much to add. However, keeping separated finances in a marriage is one of those things that sounds like a bad idea but works out very well for some people.

   Personally I would want to keep separate accounts but would pay maybe 50%-75% of the student loan bill monthly.

   Posted 1 year ago #
3. 

   jennypenny
   

   Expert
   Joined: Jul '11
   Posts: 1,338

   Is there such a thing as a post-nup? (not a joke) Whatever you work out you should try and get it in writing.

   1. Why rush to pay off her debt while she's working?

   2. I think it depends on your state.

   3. There is no need to change how you manage your finances. Just make it clear to her that he's not your dependent. We've run into this a couple of times. We've agreed that if it's an emergency situation (my sis was hospitalized, my brother and his wife lost their jobs at the same time) then we'll discuss possibly helping them for a bit (which we've done). When it comes to systemic financial problems (SIL pays for cleaning lady and lots of personal extras but then couldn't afford to fix her well) we say no.

   4. This is tricky. We have merged finances and it has worked out for us. If you merge them though, you end up on the hook for everything. On the other hand, if you keep them separate you end up trying to quantify the intangibles (like raising kids--the going rate for daycare doesn't really equate to a mom at home with her own children). Maybe a blend of the two?

   Posted 1 year ago #
4. 

   slacker
   

   Journeyman
   Joined: Nov '10
   Posts: 110

   A six-figure student loan?? That must have been some education it bought! And yet, you'll likely have SIGNIFICANTLY higher earnings than she EVER will! (well..assuming you're not making a few hundred thousands an year of course)

   hmm...in a way it's not fair that people (kids mostly) are expected to make this huge financial decision at a very young age, when most of 'em haven't had one taste of debt ,of a comparable magnitude, before, or its pain, and mostly don't have a thorough theoretical understanding of it at least, thanks to the 'education' they've had until then..which speaks much for the education system itself, more of which brand of education is what this debt is taken on for.

   Posted 1 year ago #
5. 

   slacker
   

   Journeyman
   Joined: Nov '10
   Posts: 110

   hmm..well,is there such a thing as a post-nup?

   if not, then could something like setting up a trust or something have any role to play here, in ensuring the wealth remains with its rightful owner? MikeBos, Maus or any of the other people more familiar with the law, please clarify?

   Posted 1 year ago #
6. 

   jennypenny
   

   Expert
   Joined: Jul '11
   Posts: 1,338

   Re: student loan--A simple 4 year stint at our state college (including room and board and books) would run about $100,000. I'm not saying it's the best route, but I wouldn't consider someone foolish for choosing to finance a state college education. And if it's in a field in demand, at least you're always employable even if you don't make a huge salary. It's costly but not the worst decision a 18YO can make :)

   Posted 1 year ago #
7. 

   with3kids
   

   Novice
   Joined: Nov '11
   Posts: 12

   I may be a bit of a contrarian here on this topic, but here is my two-cent worth. Take it as you wish, and adapt it to your own situation...

   My wife also had student loans, although not as much as yours, and she has been staying at home for 8+ years (ironically, she never made much use of her expensive education, in the traditional sense of the word "use"). So, most of my expenses are related to paying for that choice. Technically, I have been transferring a huge amount of life energy and money to her. Without that transfer (not to mention the kids), I would have been FI several years ago. I am still striving to have partial FI, etc., but with a different perspective.

   Most importantly, though, I have no regrets for doing it. I am very happy to continue doing it, and I think that's (part of) what marriage is about. I don't have pre-, post-, or while-nup agreement with my wife. While I recognize it may not work for everybody, if you are ready to commit yourself entirely to the other person, unconditionally, you get so much more out of it. Same for having kids. If you start measuring what you are giving each other and what you get in return, you go down a very slippery slope, because there will always be one giving more than the other at any given point in time, and I am afraid you will always be disappointed.

   I don't have your problem #3 yet, but it actually may be coming at some point in the near future. Same thing -- I will take care of her parents. Now, I agree with JennyPenny (and others) that you are not responsible to pay for your father-in-law's unnecessary expenses. I am also not encouraging anybody to make irresponsible choices (a six-figure student loan seems like it is), but, after the fact, you are in it together :-)

   All the best

   Posted 1 year ago #
8. 

   LiquidSapphire
   

   Master
   Joined: Jul '11
   Posts: 434

   The other thread you started on this topic had some good feedback on it with regards to the dad.

   It is possible to craft a post-nuptual agreement, definitely do this with lawyers, no sense in drafting something that won't hold up in court in the end.

   I'll be following the thread; my current serious boyfriend has an underwater house and $60,000 in student loans that I've been mulling over. I came to the conclusion that if we ever married I'd pay off 1/2 of the mortgage for a 1/2 interest in the property and also help with the loans as much as reasonable. In the end for me the final bill could be as high as $135,000. I have had similar thoughts though, in that I will insist on a pre-nup of some kind to somehow insure credit for paying off the student loans at least, but I don't know if this is even possible/legal; I haven't talked to any lawyers. With the amount of anxiety you have about this, sounds like it would be worth an hour's legal fees to go talk to a lawyer in your state about this.

   Posted 1 year ago #
9. 

   palmera
   

   Journeyman
   Joined: Aug '11
   Posts: 270

   Honestly, kudos to you all for taking on such a financial burden in the name of love.

   I think growing up watching one parent repeatedly screw another parent over financially had me carefully consider who I dated and became serious with. I subconsciously (and now consciously, i guess) avoided guys with massive debt of any kind (except car, housing and business loans).

   Plus, the city I live in (Toronto), both single men and women seem date and marry strategically, that is, joining forces with a partner who comes with assets, not liabilities. Yuppie men and women here are pretty gold-diggerish/snobbish. It's kind of brutal.

   A couple of my girl friends realized that thanks to these modern times they're pretty unmarriable until they get their debts under control, so that's what they're doing.

   It's amazing to me that there are still parts of the States and Canada where dudes will swoop in like that, with such optimistic devotion. I applaud that :)

   If you guys are young and not in a rush to have kids, maybe she can focus her income 100% on debt repayment or get a 2nd job for a year or two. A six-figure debt and a careless father-in-law is a LOT of slack to pick up. Unless you make tons and tons of money (six figures), in which case, go ahead, bail her out.

   Posted 1 year ago #
10. 

    palmera
    

    Journeyman
    Joined: Aug '11
    Posts: 270

    LS - I can understand buying into the mortgage - that should help him pay off his student loans, no? He's a man with two hands and feet I'm SURE he can find some way to sacrifice and burn his debt so you both can ride off into the sunset with a clean slate.

    Posted 1 year ago #
11. 

    LiquidSapphire
    

    Master
    Joined: Jul '11
    Posts: 434

    @palmera-
    Good point... I try to "help" people too much sometimes. Yeah, for the record, he has no expectation that I would help him in any way, he is completely ready to assume 100% responsibility but if it's someone I love enough to marry obviously I hate to see him struggle. The interest rate on the student loan is scary high (9%) and so it would just make financial sense to get rid of it (consolidation doesn't seem possible) and the second mortgage (also at 9%, he can't refinance independently, house is underwater by too much). The two loans are his highest interest rate loans that he's carrying and it's killer. $7K-$8K a year on just stupid interest! He's on his own for the rest of it though, he should be able to manage it once he has some breathing room.

    Posted 1 year ago #
12. 

    GandK
    

    Journeyman
    Joined: Sep '11
    Posts: 271

    We've had these discussions many times ourselves. Here's my perspective:

    As long as you're even occasionally thinking to yourself, "If we divorce someday..." I would personally advise against paying her student loans. Although you are married, it's clear that you don't see yourselves as fully joined yet. More like a joint venture. :-) And while you're looking at the math here, I doubt she is, so having a conversation with her about the math is likely to make you sound heartless to her and therefore devolve into a fight along the lines of, "You're trying to put a price tag on me/your love for me/my love for my dad."

    If it were me, I'd come at it like this: "You know I have some savings sitting here. This savings is the result of about 5 years of my life and work. This money, and the work and sacrifice that it represents, are important to me. I love the idea of us combining our money because combining our money means combining our goals and I want to get closer to you. But before we do that, I want to get a clearer picture of what your opinions are on how we should spend money going forward. I want to make sure we're on the same page..." and then introduce the topics of her debt, her dad, and most importantly, her perceived level of personal responsibility to both of those. After you hear her out, I would say something like this to her: "My vision for our future as a family is [x]... and I want to know what you want for our future also" so she knows you're picturing your future WITH HER regardless of her financial opinions at present.

    If you're not on the same page, go slowly. It's possible that time will move you closer to one another as you see where each other is coming from, so withdrawal today if she says something that conflicts with your opinions would be a bad idea.

    It's not impossible that she could become a positive influence on her dad and begin to speak to him on the subject IF you guys can manage to get on the same page, and then her dad can see you two succeeding with money. You'll both have gained some moral authority on the subject in his eyes.

    I would also tell her IF the subject eventually comes up (as gently as possible) that while you would be willing to consider paying for a professional financial adviser to help her dad sort out his finances, you aren't willing to simply send him money. You believe he needs to change his behavior going forward in order to clean up the underlying mess, and since neither you nor she have the background and experience to help him do that, sending him money only kicks the can down the road.

    Posted 1 year ago #
13. 

    chenda
    

    Master
    Joined: Jun '11
    Posts: 370

    I would definitely not pay off your wifes loan; as you say its your wife's liability and your life savings. Divoices are often messy, and you could end up in an expensive legal fight to get the money back in a divorce settlement(if indeed you can). Its always best to plan for the worst case senario. Whilst your effectively paying off the loan in part now by helping her with living expenses, its always best to have money in the bank to fall back on.

    Given the looming liability of her father's upcoming financial meltdown, I think its best for both of you to keep your finances as separate as possible. A clear vebal understanding between you and her, ideally backed up by a legal document, is best for you and your marriage.

    In terms of any children you may have, you might want to look at trust funds, so any money you have set aside for them is protected from any father-in-law bailouts. And ensuring you both have watertight wills so if you were to die suddenly, your assetts would go to where you wanted them to go.(Not nice to think about, but really important for any children you might have)

    Posted 1 year ago #
14. 

    JasonR
    

    Master
    Joined: Feb '11
    Posts: 334

    I will +17 GandK's 1st paragraph. Thinking like that is watering a bad seed ("if one day we..."). Of course it makes sense to consider likely outcomes, but in this particular instance for me that line of reasoning reinforces bad thoughts/behaviors and becomes a self-fulfilling prophecy. I like planning for things, but planning and prepping for that would make it so much easier to pull the trigger (the metaphorical one) so I wanted to avoid that.

    In my scenario, my wife has the 6 figure debt, but she also earns a ridiculously large salary. I came to the marriage with no debt and some properties, and a normal income. We both have boomer parents that seem to be financially holding out fairly well, but I don't know if it's a facade or not. When my wife and I first got married we had 1 joint account and each kept a separate personal account. Once we decided on walking a similar financial path (sort-of-ERE) the satellite accounts got merged and now we do everything as a team. She makes the money and I watch. Actually all "my" income is going toward reducing her debt and saving for a house/ERE. I think it's more fun (and less work) to combine and help each other out. Partnership and all that. Of course we have similar goals and outlooks. Getting on the same page was the key. If she was a Hermes and Prada girl we would definitely be financially separate. In fact we'd be completely not together.

    I'll have to see how she feels about economic outpatient support of family/in-laws. I'm only available for emergencies, like others have said...not subsidizing wanton debauchery.

    So to answer more directly:
    1. Yes if you're on the same page working toward the same goal.
    2. I think you can if you record it. Lawyers abound here but I remember an example where a gentleman put sweat equity into and ex's home and got it out during settlement.
    3. ????
    4. Profit. Sorry, yes, merged, if you're rowing the same way. Dovetails into 1 and 2 though since if you're working together there is no longer a "yours" and "mine" and all money/debt/problems become the magical "ours".

    @jennypenny - Which state school? My total college education cost $48k, although it was a few years ago...this is troubling news.

    Posted 1 year ago #
15. 

    jennypenny
    

    Expert
    Joined: Jul '11
    Posts: 1,338

    @Jason--our state! Temple is only about $20K, but Happy Valley is up to $25K/year for everything. There are lower PS colleges in satellite counties, so you can get it down to about $15K if you want. Check your alma mater. I went to Elizabethtown and it's about $44K/year now. FWIW, I think Temple is one of the best values in the country (but not for everyone).

    Posted 1 year ago #
16. 

    JasonR
    

    Master
    Joined: Feb '11
    Posts: 334

    E-Town is near where I grew up. Didn't know it was a state school. My turd college is now 16k per year. Dang.

    Posted 1 year ago #
17. 

    George the original one
    

    Expert
    Joined: Jul '10
    Posts: 1,938

    1) Should I pay off my wife’s debt?

    Yes. It's a drag on your family's finances, so it makes sense to remove that drag. Remember that you're pulling together in the harness now rather than trying to pull the burden by yourself.

    I paid off my wife's car when she moved in (year or two before marriage). It just makes too much financial sense not to do so. Yes, I tracked how much I spent, but really never expect to need to collect on that money.

    2) If I do, can I get credit for doing so in any future divorce settlement?

    You can do a legal arrangement even after the marriage (coworker did this with a house she inheirited), but doing so will put a strain on your relationship.

    3) Is there any way I can structure our finances to avoid having to bail out her dad?

    Yes, but it may not hold up in the future. Some countries already make the children responsible for retired parents and I can see certain US states doing likewise. As a couple you two need to set the limits of your aid for her father.

    In my case, if my mother lives much longer (she's 92 next month), she will run out of money. I (which means my wife since I'm the breadwinner) will be picking up the slack, if it happens. Her parents live off of an officer's pension, so they'll likely not outlive their finances, but I expect we'd help pick up any shortfall.

    We have bailed out my sister and her brother when their financial situations were desperate. My sister lived with us for 6 months when she lost her home and we prepaid her brother's family electric bill after it was shut off in the winter.

    4) How should I think about merged vs. shared finances in this situation?

    Unless she has a strong independent streak, you should be sharing the money to put your family in the best financial position. That doesn't mean throwing all the bank accounts together, but it does mean abolishing debts that make no sense and agreeing when to spend money over the threshold of your combined sensibilities.

    Posted 1 year ago #
18. 

    palmera
    

    Journeyman
    Joined: Aug '11
    Posts: 270

    I still think it's crazy that *poof* just like that, you marry up, and suddenly you and your immediate family's debts go away!

    I hope your wife (all of your wives, the lot of you) realize how lucky she is.

    Also, as ugly, uncomfortable and gauche as it seems, all of you are asking yourselves and your partners the right questions now instead of going around with blinders on. I'm at the age now where divorces are popping up left, right and centre due to money issues (and failure to discuss it in time).

    Posted 1 year ago #
19. 

    chenda
    

    Master
    Joined: Jun '11
    Posts: 370

    @ Palmera - Totally agree, I think its a very archaic & unhealthy attitude that married couples somehow have a legal and moral obligation to merge their assetts and liabilities. Pre-nups should be the assumed legal norm rather than the exception. One reason while I'll never marry...

    Posted 1 year ago #
20. 

    teewonk
    

    Apprentice
    Joined: Jan '11
    Posts: 94

    FYI
    http://en.wikipedia.org/wiki/Postnuptial_agreement

    What incentive does she have to sign an agreement after you're already married? It seems like bringing it up would only cause hard feelings.

    At that interest rate, I wouldn't save. I would just pay it off. Can you consolidate to a lower interest rate?

    Would she be eligible for Income-Based Repayment and/or Public Service Loan Forgiveness if you filed taxes separately? If that's the case, it might not benefit either of you to pay down her loan faster than her IBR payment, given that the loan would be forgiven after 10 or 25 years. The downside is uncertainties in future income and the penalty for filing taxes separately rather than jointly. If you do IBR, be careful if you consolidate to do it right.

    In the best case, you could pull a MikeBOS. Consolidate to get a lower interest rate, just in case. Make the minimum payment while saving enough for both of you to retire. Retire, switch to IBR, and let the monthly payment drop to zero. After 25 years, the debt is forgiven. This depends on it being the right kind of loan, though. See ibrinfo.org.

    @GandK
    I like the idea of contributing to an errant relative's welfare by hiring a (fee-only) financial adviser rather than helping directly. It might help more to do it now rather than wait for when the SHTF.

    My wife brought a similar debt into our marriage, and I don't expect her to help much to pay it off. It bugs me from time to time, but I've come to peace with it. Her interest rates are lower, though, and I don't have prodigal relatives, at least that I know of.

    Posted 1 year ago #
21. 

    bigato
    

    Master
    Joined: Mar '11
    Posts: 915

    I'm on the same page as palmera on this. If you wanna be a provider, you provide board and room. And make sure the full of her income goes to pay the debt. Make a plan to pay it of ASAP. Not indulging on her part until she pays it off. That's real EDUCATION.

    About providing to a relative in need, it's the same: you provide board and room in your house and in your (ERE) terms. That's humanitarian act. Now if you provide the basics only to see the person splurging, you should ask to have control over the person's income (not using a cent of it to you, and documenting everything). If the person doesn't agree, he must get out.

    LS said that she doesn't like to see someone she loves struggling. But it should be the very opposite. If someone is sincerely struggling, you should be very happy. That's the only way someone can grow out of bad habits. That's the only education that works. Only when someone is required to correct his own faults, he will learn to have responsability and start to understand the real size of the consequences of his habits. Real love should be hard at times, not indulgent.

    Of course we always have to be able to live together and not everyone is ready to go cold turkey since the beginning. Then the advice is, talk, talk, talk and talk more. Talk and be an example of what you are talking.

    Posted 1 year ago #
22. 

    Mo
    

    Master
    Joined: Jul '10
    Posts: 442

    I was the one with the 6 figure student debt. My wife was the one with the 6 figure bank account.

    We didn't immediately merge all assets and accounts on the day of marriage. It was a process that happened slowly.

    She offered to pay off my student loans, and we discussed drafting a legal agreement that credit her with the loan repayment in the event of separation. We ultimately decided not to use her money to pay off my loans. A big part of it was that I wanted to know for myself what it took to pay off such a loan. I wanted to feel the burden and know exactly how much work it took me to pay off my education. I felt that if I didn't do that, I wouldn't really be able to answer the question: "Was it worth it?"-- I get asked that question a lot. Most importantly, I wanted to answer that question to myself.

    George says that it makes sense for you to pay of the loan, and to an extent he is right. I think it also makes sense for an individual to pay of his or her own educational loans, regardless of who he or she is married to. Why is it okay to pay $100k for an education-- to learn science, math, literature, etc..., but not okay to allow your spouse to pay off a $100k loan so that she learns the value of a $100k debt? In both instances it seems that one is paying for valuable knowledge.

    We didn't have a pre-nup, but we should have. We are still happily married, but I now know a lot more about legal realities, business, and wealth to know that we should have.

    What seems most notable to me from bigjimslade's OP is that I get the impression that he doesn't fully think that his wife values money in exactly the same way he does. This isn't an end-of-the-world/marriage type problem, but it will take some working on. I think that there are probably oodles of happily married, successful couples who don't value money/debt the same way, but I think that in order to be happy and successful in that situation both members of the couple have to know and understand that they value money differently.

    I wouldn't pay off her debt. Not yet, at least. Not without the understanding that seems to be missing. A "post-nup" could lead to resentment, and so could paying off a large loan when the beneficiary of your actions doesn't seem to understand how much that action meant to you.

    Posted 1 year ago #
23. 

    dot_com_vet
    

    Master
    Joined: Jan '11
    Posts: 376

    While we had zero debt going into our marriage, we decided to keep separate finances. It very easy, very fair.

    It's a bit like being FI in the marriage. We have zero arguments regarding money, we can buy whatever we want. We're both very frugal too, so that helps.

    Most people think we're abnormal doing this, but I think more should try it.

    Posted 1 year ago #
24. 

    SkaraBrae
    

    Apprentice
    Joined: Mar '11
    Posts: 30

    Hi Big Jim,

    *warning, long post ahead. scroll to bottom for TL;DR*

    1. Should you pay off her debt? Not before talking to her and making sure you're both on the same page about it. Would she even want you to do this? Would she feel like a mooch and disrespect herself and her abilities if she accepted such a thing? Would you feel like you were just a sugar daddy if you did? Note that if you two have a big difference of opinion about it, you two are going to need to have some long discussions about the nature of personal responsibility and the roles of partners in marriage.

    1a. Having her in debt makes you feel more secure that she can't spend money you don't have on her dad. Step back as much as possible and ask yourself: is this fear justified? I say this as a partner who has used similar twisted logic to hold us back financially in the past. I am more frugal than my husband, and when I start thinking things like this, I know I need to untense my shoulders a bit. Learning to trust other people is really hard...especially when they aren't perfect...but making it clear you're willing to grow and learn with them (because you aren't perfect either), and treating them like and trusting them to be mature adults (and explicitly letting them know that) can go a very long way to helping them act more like it.

    2. Can you get it back if you divorce? Depends on your local laws. How worried are you about divorce, exactly?

    3. The best way to avoid having to bail out her dad is to have a discussion with her about your concerns down this avenue and come to an agreement now, before it happens. This is a very emotionally charged issue for most people, and if you can bring it up calmly, it will actually be really reassuring to her that you are thinking about and planning for the future.

    If you're not good at talking, you can also write a letter. One method that has really helped my marriage is "Marriage Encounter". Essentially you both pick a question/sentence/thing you want to talk about, sit down, and write each other a loving letter about it. Then you read each others' letters silently twice, once with your head and once with your heart. And /then/ you discuss.

    It is especially useful if one of you has difficulties articulating your thoughts and emotions quickly or verbally. It "evens out" the lines of communication, as it were. The spouse who's verbally "quicker" may find the exercise a little dorky, but if they respect you (and why wouldn't they, since they decided to spend the rest of their life with you?) they will understand it's important to help you discuss things thoroughly. Any spouse with a little world experience will realize the wisdom of making sure your partner is fully on board with something you want to do -- or making sure you and they understand all their objections to it.

    (Marriage Encounter itself is a workshop put on by the church; I don't believe you need to be religious nor even attend the live program to get vast benefit out of the practice. There is a fair amount of material about it free online, mostly relating to good ways of communicating with each other. Active listening and I statement techniques, lists of emotions for those who have issues articulating them, lists of questions you can try, etc.)

    4. Regarding merged finances, do you have any idea as to her opinions on the matter? My husband and I have always had joint (we came into the marriage with nothing and dug ourselves into the hole together, and we'll dig out of it together too), but other couples work better with things separate. I could handle separate finances, but it just wouldn't work for my husband.

    ***

    TL;DR version: talk to your wife, and listen closely to what she says.

    Posted 1 year ago #
25. 

    billc
    

    Novice
    Joined: Dec '11
    Posts: 20

    Big Jim,

    Sorry for the long post that follows.

    My wife also has six figure student loans. Due to the fact she will likely go to very part time once we have children it is unlikely that she will ever earn enough to support herself and pay down the debt. My situation does not sound dissimilar from yours, except for the father in law. My salary is just about twice hers. I am also much more frugal.

    We've been married less than a year and I have had to come to terms that if I were not with my wife I would be much closer to FI. BUT I remind myself that I would be alone. Being single works for some people - but I would rather learn to accept we will not always make the most optimal financial decision and be with her than to achieve FI in record time and be without. Not to say there aren't couples that make it together, but my life didn't work out that way.

    My wife is very sensitive about money, so she is already somewhat uncomfortable with me contributing to her student loans - but recognizes it is going to happen when she becomes a stay at home mom, so it makes sense to start working on the debt now. One thing that is working well: By paying off two of her small loans ($3,500/ea) and taking over the payment on another ($11,000) she took the payments she was making to those loans and started paying it toward the principle on the larger ones. I will have the $11,000 paid off by the Spring and will take over the next highest interest rate ($18,000) and she will fold those payments into the final loan ($64,000).

    I haven't run the numbers yet, but we will probably be filing taxes (US) separately for 2011, as we were not married until May and she will be able to deduct the student loan interest. If we filed jointly we would be phased out of the deduction due to my income level.

    I expect that I will end up paying about 75-80k in her student loans, maybe more. For me personally, if we end up divorced I don't think I would fight for the money back. I would not consider that money wasted. That's my personal feeling though.

    Like many others have said - you need to communicate with your wife, but my recommendation is to do some serious soul searching first. I knew my wife had the debt when we married - but it took me 6 months after the wedding to really accept the fact we were in a $100k hole and I had to start digging out of it.

    As for the father in law, I'm not sure I'd spend the "life energy" arguing that now. It might be good to take things a little bit at a time(maybe make a student loan pay off plan now and address the father in law in a year or two). But you do need to find some kind of mental peace over this and the student loan situation. If you're like me, the more you think and think about it the more you will resent your wife and her dad.

    Posted 1 year ago #
26. 

    palmera
    

    Journeyman
    Joined: Aug '11
    Posts: 270

    chenda - we're on the same page. I certainly wouldn't expect my bf to pay off my credit cards when I move in with him/marry next year. I have an education and my health, this isn't the 1950s, I can do it my d*mn self.

    bigato - we are also on the same page. This is tough love but can help. An anecdote:

    my cousin grew up affluent with a father who, yeah, paid off her mother's massive student loans and who indulged the women of the household financially, always bailing them out.

    father is no longer around, and my cousin, a grown woman with no student debt (thanks to father) racks up $50k in consumer debt in a few short years. why? because she grew up her whole life used to someone being there to bail her out.

    Posted 1 year ago #
27. 

    TLV
    

    Novice
    Joined: Nov '11
    Posts: 23

    My wife and I got married while still in college (just before senior year), but neither of us had student loans so that was never an issue. (I had scholarships, and she worked 30+ hours a week all through school).

    I am a bit worried about her relatives' financial situations spilling over onto us, though. I don't think her parents have any debt besides their mortgage, but they also don't have hardly anything saved for retirement. I've tried to talk her into discussing their finances with them, but she's the youngest of 3 and doesn't feel it's her place to do so. Her older siblings are both responsible and supporting themselves, but neither is in a position to support anyone else, while we have a 6 figure income. If my wife's parents are in financial straits (which could come any time - her father works for USPS), we'd probably be the ones they'd look to for help.

    Regarding the original post - I agree with GandK that you should hold off on paying her loan if you're having thoughts of "if we ever got divorced." But I'd also encourage you to try to move past that stage - fretting about a possible future divorce (which would be a miserable experience no matter what you do now) is reducing your life satisfaction now.

    Posted 1 year ago #
28. 

    George the original one
    

    Expert
    Joined: Jul '10
    Posts: 1,938

    @TLV - If her father has been working for USPS for a couple decades, then he'll have a decent pension.

    Posted 1 year ago #
29. 

    TLV
    

    Novice
    Joined: Nov '11
    Posts: 23

    @George - Thanks, I hadn't considered that. Looking at the FERS overview, I don't think he's been there long enough (10-15 years?) to qualify for regular pension benefits if he is laid off with the cutbacks the USPS is proposing in the next few months, but if he makes it another 10 years to traditional retirement age that will help them a lot.

    Posted 1 year ago #
30. 

    LiquidSapphire
    

    Master
    Joined: Jul '11
    Posts: 434

    My experience with federal benefits is not with USPS; USPS is a different animal in a lot of ways and I haven't cross checked this info with USPS directly. For example, they have SWEET health benefits compared to us. However...

    Under FERS you quality for a pension once you have 5 years of service. When you can draw it depends on a LOT - mainly, a combination of how old you are vs how many years of service he has. Basically, once you turn 62, you get 1% of the average of your highest three salaries times the number of years served. (15 years = 15% of your high 3). You can take it before 62 with penalty. Retirement is COMPLICATED, the rules are insane - if he is possibly within 5 years he owes it to himself to get a retirement estimate.

    If he quits today, if he has 15 years of service, he is eligible for 15% of his high 3, TODAY.... but he can't draw it until 62 without penalty.

    Posted 1 year ago #
31. 

    billc
    

    Novice
    Joined: Dec '11
    Posts: 20

    Not sure how I can correct this information from a post last month. I stated

    "I haven't run the numbers yet, but we will probably be filing taxes (US) separately for 2011, as we were not married until May and she will be able to deduct the student loan interest. If we filed jointly we would be phased out of the deduction due to my income level."

    This is way wrong. First, if married filing separate then student loan interest is NOT deductible. Second, the tax rates make filing jointly preferable in most situations.

    Sorry I posted bad info.

    Posted 1 year ago #
32. 

    Marg
    

    Novice
    Joined: Oct '11
    Posts: 24

    My husband and I were both debt free going into our marriage, but if you consider potential in-laws to take care of and wanting to stay home with kids liabilities then I guess I had them.

    To me the kids are a non-issue. We decided to have kids and we decided that we didn't want the day care route. We could have each worked part time, but instead decided that it suited us better for DH to work and me to be with the kids (he loved his job and work caused me a lot stress). After we had kids we also decided to homeschool so I won't be generating an income at any point. Even though I don't bring in money, the kids are our kids and we're doing this together. This is how we decided to split things up in our family and both of us view the money as ours together, not his that he shares with me. Honestly, I'd be pretty ticked off if he did view it that way.

    For the inlaws, I think my parents may need some help at some point. I don't, and never have, felt comfortable giving people money but I think it's likely that they will end up living with us at some point. I'm very fond of them so that is a nice thing. DH is fine with it, though he would be more comfortable if we built a separate cottage for them or something like that.

    Maybe for your FIL you and your wife could consider buying a house with a MIL apartment or a duplex or something like that when you buy a house. You could rent it out initially to help you achieve FI and if your FIL ever needed your help, well, you could help him by letting him live there. Giving money to people who are bad with money is just a disaster waiting to happen. I would much rather give someone a place to live in a situation like that.

    I can't say what you should do about the debt. I know my husband and I would have just paid it off while we were both working, regardless of who had the debt. 8% interest is very high.

    For me sharing finances is just a part of being married but I know not everyone is like that. Maybe separate finances would prevent a lot of fights that many people have over money in marriage. Sharing finances seems very natural with my husband, but I dated some people that would have made me go gray in a year if I had shared finances with them.

    I hope you and your wife can work out a solution that seems right to you both. Having the same financial goals (and habits) really makes things a lot smoother... and FI is something that's easy to get excited about. Live more modestly so you can spend more time with your family and doing whatever interests you. I've always been more frugal than DH and he has sort of met me halfway, but once we started looking at it as FI, he was fine with dropping his Starbucks habit and other expenses. We cut expenses back all around, very severely, as he quit his job and I wanted to be able to live off the stipend he now gets as a grad student. We had a fair bit saved up but b/c we were able to cut our expenses so much we hit FI last fall. We're both very happy about it and it makes it a lot easier to keep our expenses at our new lower level.

    Oh, if you two do decide to keep finances separate, you could consider going FI on your own and being a SAHD (contributing your half of expenses from investment income) and your wife can still work and spend more (including the debt), if she isn't interested in FI herself. If you do that and get a property with an apt., I think you will be safe from the 3 liabilites that worry you. It may mean living very modestly now so she can service her debt and pay her portion of expenses, but that is in line with your FI goals so that seems like a plus :)

    Posted 1 year ago #

RSS feed for this topic

Reply

You must log in to post.