Michelle Singletary

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Love and Money
with Michelle Singletary
Post Business Columnist
Wednesday, Feb. 13, 2002; 2 p.m. EST

Charlie Parker once said, "Romance without finance is a nuisance." What does it take to make love and money compatable? How are you and your partner handling money? Who pays when you go out? How many bank accounts should marry folk have?

Whether you have been married for a while, engaged, living together or dating, money issues will come out. What strategies work for couples to help avoid some of the many money-related conflicts that come up in a relationship? The first thing is to have an honest discussion about your financial views and what each of you expect with regards to how you want to handle your money. The second thing may be to join me for a discussion to talk about it.

So, let's talk love and money. This week, Business columnist Michelle Singletary hosts a special Valentine's session on issues of love and money.

The transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

Michelle Singletary: Happy Valentine's Day. I hope many of you will read my column this coming Thurs. in which I address some love and money issues. Until then let's get started.

Fairfax, Va.: Michelle-

My boyfriend and I have been discussing our plans for the future, including our desire to buy a house in a couple years. (We plan to get married between now and then). However, we have different financial situations as individuals (He has a large 401K and makes enough $$ to start to save for a down payment; I make half as much, have less invested for retirement, and have $15,000 in student loans to pay off.) What would make the most sense for us? How should we prioritize saving for retirement, a home, and paying off loans? Seems to me that before we get married, I should focus on investing for retirement and paying my loans off, but I feel a need to contribute financially to the house that we will eventually buy. What do you say? Thanks!

Michelle Singletary: I think you are right that you need to focus on tackling your debt first then building up your retirement fund. Every dollar of debt might reduce your chances of getting a good deal on a home loan. Lenders look at your debt to equity ratio. Debt being your student loan and equity being yours and his retirement fund and any other savings. Listen, homes will always be there. Don't be in a rush to buy until you feel comfortable with your financial situation. I see a lot of couples barely squeak into a house with no savings left over to take care of the many things that come up when you buy a home. Make sure you have a nice cushion in savings in addition to the downpayment and closing costs for the house. So, pay off debt and save. But also keep in mind you are doing your part by reducing your debt. That will make your overall financial picture for your family look better and that is a major contribution.

Rosslyn, Va.: Michelle,

i am a huge fan of yours. you are my financial role model!

i got married last year and in that time, my husband and i have been able to live off one income (his) and save the other (mine). we are in such a terrific savings groove (yay!) b/c we want to sell our condo and buy a house this spring. we haven't lived too shabbily while saving either, we just don't splurge very often.

anyway, my question is this: once we buy a new house, and have all the expenses of upkeep and furnishings, will we still be "savers"? has it been your experience that people fall off the wagon once they meet their goal? we'd both like to keep this savings up, but fear it's a pipedream. what say you?

Michelle Singletary: Ah sucks thank you. I just love groupies! But based on your description of your finances I'm a fan of yours. My opinion is once you get into the groove of savings it becomes a way of life. You are right that the challenge is not to go house crazy. Many people buy a home and have to fill it up right away with stuff. Resist the urge. Take your time. It was six years before my husband and I got a dining room set. Of course, part of the reason was we couldn't agree on a style (but that's another discussion). Anyway, make sure you continue your automatic savings. Put that money in an account that you don't have access to readily. I suggest a credit union that doesn't have many branches and don't carry around the ATM for the account. You will find that owning a can be very expensive and it will take will power to continue to save for other goals like retirement and maybe even state a college fund (even if you don't have kids yet). I know this financial planner and his wife who started saving for a kid even before the kid was born. By the time their kid did get here they had $25,000 for the fund. Now that's discipline!

Rockville, Md.: I have a question about budgeting for a mortgage. What do you think a reasonable percentage of your net monthly income can be comfortably set aside for a mortgage payment? I am not talking about what one can qualify for -- it seems that calculators allow you to qualify for a bigger mortgage than one can reasonably afford.

Michelle Singletary: That is an excellent question. Far too many people really stretch themselves to get into a home. I've seen people put out as much as 50 percent of their net monthly pay toward their mortgage. I think it's better to stay in the 30 percent range. That way you will have room to wiggle if some unexpected financial crisis comes along.

Sterling, Va.: As a male, I always offer to pay for my date when it comes to tickets, food, drinks, etc. But I always look forward to my date insisting that she pay her way, though I try hard not to let her. It shows that she is responsible and that she was brought up respectful of others, in my opinion.

But dating many different woman (at different times, of course) really puts a dent in my wallet!! I actually know one guy who doesn’t date because he thinks it’s a costly intiative.

Michelle Singletary: Before I had my son I was all in favor of letter the poor sucker--oh, I mean guy---pay most of the time. But now. Please. My baby ain't going broke taking any girls out. He'll have me to thank when he's a millionaire by 30. Seriously, this is my take on the who should pay thing. It's a mix of tradition and financial common sense. The first date or two (maybe three) the guy pays. I think it's good for the guy to be the pursuer initially. After that I think the couple should agree that they share in the costs of dating. You pay one date, she pays the next and so on. Now that's assuming she or he last more than a couple of dates. If you are dating around then you've got a real problem. But I always maintain that you should stick to a budget and do what you can afford. So if you don't stick around to date someone enough for them to start picking up the tab you had better find some cheap--I mean--inexpensive ways to date. And, tell your friend he may end up rich but very alone.

Similar to the first question: My husband and I are currently being as aggressive as possible in paying down our debt. We hope to be rid of consumer debt by the end of the calendar year and then we're going to turn to our student debt. Problem is, we both have quite a bit - around $100K combined. We'd like to have a modest (fixer-upper) house at some point. Given that we're both maxing out our 401(k)s, when we finish paying off our consumer debt, would our best course be to save half of that money and use the other half to overpay our student loans? (We're overpaying them right now.) Or should we continue to overpay at our current rate and sock all that money away into savings? Or should we pay down as much student debt as we can, as quickly as we can? Both of us have near-perfect credit as it is.

Michelle Singletary: I think since you clearly have enough to pay down the non-student debt, student debt and still contribute to your 401 k that you should stay on that course. When you pay off the non-student debt take that flow of money and turn it toward paying off the student debt. Be as aggressive in paying off that debt as you can. Perhaps you can squeeze even more money out of your budget. But keep contribution to your 401 k as is. There are just too many benefits to stop doing that.

Portland, Ore.: My husband and I both have some personal debts from our (relatively recent) grad school days -- not education loans (well, we have those too, but they were unavoidable), but car loans and some credit card debt. We know, we know -- very bad. Won't do it again.

So here's my question: We're putting a couple hundred a month into savings and putting every other penny we can spare into paying off the debt. Our New Years Resolution was to pay off every debt except the (very low interest) student loans and the mortgage, and we have spent the last few months fine-tuning a budget that will allow us to do that by the end of the year. But soon, I will have been at my job long enough to qualify for matching 401(k) contributions. I know you've said that it's stupid not to max out that option -- but we're both SO excited about paying off all our debts in 2002.

So, is it still foolish not to be maxing out the 401(k) thing, in our situation? Our jobs are pretty much recession-proof, if that matters. Next year, we will have a bunch of money every month that we can apply towards 401(k)s and 3-6 months' worth of savings, and we promise to max out the 401(k) thing then and be diligent about saving.

Michelle Singletary: If you are SO excited about getting rid of your debt who am I do get in the way of your happiness. Keep doing what you are doing. I know that I preach about maxing out your 401 k but it's just as important to get rid of expensive debt. Put just enough in your 401 k to get whatever free matching money there is and take the rest of your money and pay down your debts as you have been doing. You just don't want to miss out on any free money.

Washington, D.C.: When you get married, do you become responsible for debt incurred by your new spouse before your marriage?

After your marriage, if your spouse is a charge-aholic, are you responsible for his or her debts, or can debt-holders only attach commonly-owned property?

Thank you.

Michelle Singletary: You are not responsible for debt that is in the name only of your intended. But as soon as you BOTH sign on the dotted line of any credit obligation (mortgage, credit cards etc.) you are both on the hook. But let's look at your question more carefully. I'm reading between the lines that your intended might have a serious credit card problem that concerns you enough that you are using language like "commonly-owned property" and "attach." Not good. If they don't address the problem he or she will take you down that dark debt road. Commonly-held finances will be needed to pay the "charge-aholic's debts and that's serious enough to mean that the two of you should be doing some serious talking about finances.

Dating finances: Hi there. I am dating a wonderful man who treats me very well. But here is the one problems: I make over twice as much as him, and he has just been laid-off to boot. I'm not the type who needs a guy to pay for _everything_, in fact I don't like it when he does - let alone if I make twice as much as him. He doesn't want to be seen as a lazy loser, and doesn't want me or our friends and family to think he is going to be an umemployed loser mooching off his high-earning girlfriend. So he insists on taking me out and offers to pay quite a bit. He does let me occasionally. With the layoff though, I feel I can't continue to accept his offers, but he in unhappy when I don't. Crazy isn't it? Maybe I should have asked Carolyn.

Michelle Singletary: Is he dragging you out to the restaurants by your hair? If not don't agree to go out if you are so worried about his finances and he won't let you pay. Somebody has to be the adult in this relationship. He has to face the music that he's got no job. But maybe he has a stash of cash and he can afford to pay. Find out. However, this is a good test on what might happen if you get married. If he spends even when he doesn't have that's something you should know and take into consideration.

Washington, D.C.: I talked with a friend of mine who recommended that I contribute $7000 per year for my wife and myself to a roth IRA. We currently have about $12000 in credit card debt and another $10000 in student loans.

If we are conservative with our spending, we can have about $3000 extra per month to put towards any of the about things.

Also, we are going to need to buy a new car soon, as our current one is slowly dying, and I am concerned that we may be too far in debt to the credit cards to qualify for a loan.

Any advice?

Thanks

Michelle Singletary: Who is this friend? And don't listen to him or her. Let's do some math. You have $22,000 in students, over half of which is credit card debt. You have extra $3,000 a month to play with (so why are you racking up credit card debt like that?) In four months you could pay off the credit card debt. In three and half months you can pay off your student loans. Buy some duck tape keep the car running until you at least pay off the credit card debt. See where I'm going. Higher interest rate debt gone. Safe reliable car then $7,000 for retirement. In that order.

Virginia: What is the largest debt amount you've ever heard of, incurred either by one person or a couple/family?

Michelle Singletary: I use to cover bankruptcy so I'm seen some real mess. I've seen someone making $25,000 with $50,000 in credit card debt. I've seen people with six-figure incomes with millions in debt. I've seen it all. And it still never ceases to amaze me.

Out from under a pile of debt: Michelle, I think it is possible to pay off debt and contribute to a 401. I managed to pay off $15,000 of credit card debit, while accumulating almost $30,000 in my 401 account. It can be done. It might take longer, but it is worth it.

Michelle Singletary: That's what I've been saying. But you can only do that if you have the money to do both. If you don't and you have to make a choice. I would pay off the high interest debt first.

Richmond, Va.: I am currently single, never been married. I am ashamed of my current financial condition. I want to "clean up" my financial house. One day, I would like to own a home and be able to look my spouse in the eye without feeling like a fiancial burden. I have several garnishments and I am considering filing for bankruptcy. What impact will that have on my long term financial rehabilitation? Is it a smart move?

Michelle Singletary: I would seriously suggest you take to a financial counselor or check in with a group that can take a look at your picture and help you determine which route is best. Might I suggest you contact myvesta.org. This group does a lot of counsels people in situations like yours and might be able to help. But the long term effects is that a bankruptcy will ruin your credit. For some funny reason lenders don't want to give money to people who have filed for bankruptcy. On the other hand if you really can't handle it any more bankrupty is an option that is there to help people get a fresh start. But even people who file for bankruptcy can get a home later in life. It just might be much later than they had planned.

He LETS you pay? : Come on . . . makes it seem like he's a grown up and you are a child. why not simply say HEY, I feel more comfortable when I pay half of the time.

TALK to each other people. the number one cause of divorce in this country is lack of communication over financial issues.

Michelle Singletary: Everybody's trying to do my job. Isn't this what I said?

Washington, D.C.: Is it better to pay extra on a student loan (4.5%) or invest the money? I max out my 401K and already invest an additional 10% of my tax home pay.

Michelle Singletary: I don't like debt so if I were you and I were maxing out 401 k and investing an additional 10 percent I would pay off the student loan. Why have the debt hanging over your head if you don't have to.

Check your credit report!: This is just a reminder to everyone reading this to CHECK YOUR CREDIT REPORT on a regular basis. My wife and I just checked ours and holy moly were we surprised. She had a bunch of marks against her for no real reason - when she called the agency, they said, "We have no idea why those items were entered that way," and removed them. Easy to fix, but it would have been ugly had we waited until applying for a mortgage to check it out.

For my part, I've got the same name as my dad. My report included a whole bunch of his stuff - including a Sears card taken out a year before I was born and a different card taken out when I was twelve. Again, easy to fix, but still a pain.

These agencies don't always check things they way they should. Make sure you keep an eye on them.

Michelle Singletary: Good advice.

Cheap date: Make dinner. This goes for men "and" women. Italian food is easy, delicious, and sexy. Linguine with tomato-butter sauce, bread, a salad, a bottle of wine, and some fancy-pants cheese for dessert is delicious, cheap, and incredibly easy.

Anyone who insists that you buy them dinner in a pricey restaurant instead of making it for them at home isn't someone you should be dating, anyway.

Michelle Singletary: Okay, people. Are you trying to steal food from my children's mouth? They pay me to give advice here. But I have to say me and my honey ate many dinners at home when we were dating. And, now. Well with three kids McDonald's is a big night out.

Rockville, Md.: I really hope you will answer this question in your discussion today. My boyfriend and I have just moved in together. I have owned the house for five years, we have been dating for four. He has no debt. None. Zilch. I, on the other hand, have lots of debt. We're starting to buy things for home improvement and he has all these ideas which I think are great but I can't afford to do them now. He said he would pay for them because he wanted the place to look nice. I'm not comfortable with this yet because we're not engaged (although we have plans on marrying some day) and its my house and I get all the tax benefits. I guess I don't want him to put all the money and work into it and not get any financial gain out of it. On the other hand, I just don't have any extra money to put into the house right now. He gives me a monthly "rent" (which I loath to call it because he is not a renter) and that helps but I'll be digging myself out of debt for at least another two years. Should I let him go ahead and pay for the improvements? Are there any tax benefits he could receive from doing this if we're not married? Thanks!

Michelle Singletary: Okay, this is rather complicated but I'm giving it a try. First, let me just be quite up front. I think this situation is prime example of why moving in together is a mistake. I know. I'm old fashioned but that's cuz I was raised by my grandmother. If you were married this wouldn't or shouldn't be an issue. It would be "your" house so not a problem if he fixed it up. But since you're not. He is entitled to get nothing back unless you have a written agreement. So, if he can't wait for you to have the money to fix it up let him know up front that it's his choice and if you break up the next guy will have a nicer place to call home. You are right. Pay off your debts first. Now about this rent thing. He is paying RENT. Call it that. He may be your pooh bear but he is also a RENTER. He should be paying RENT.

Alexandria, Va.: Michelle, I know you don't like debt, but what about mortgage debt? My husband and I still owe about $100,000, have no other debts at all, paid cash for a new car last year, and have about $500,000 saved for retirement, which will happen in the near (but indefinite) future. The mortgage is at 6.3% for another 13 years. We max out my 401 (k) and a Roth for both (he's stay at home hubby). What do you say, pay down mortgage or let it ride?

Michelle Singletary: Ride baby, ride!

Herndon, Va.: Happy (early) Valentine’s Day!

I am having some serious new car envy. What’s a guideline for how much you should spend on a car as a percentage of your income? Should I lump together the costs of ownership (upkeep, insurance, taxes) when I budget?

Thanks!

Michelle Singletary: I say pay as little of your income on a car as possible. I buy used cars and keep my car until my mechanic is on speed dial. Keep your eyes on your growing bank account not someone else's car.

Washington, D.C.: Re the couple buying the house. You advised her to pay down her own debt rather than contributing to the down payment. But it looks like they might buy the house before they get married. If the relationship or subsequent marriage falls apart, it may cut against her that she didn't contribute to the down payment. Hence, I think I would contribute at least something or consult a laywer.

Michelle Singletary: Hence I wouldn't shack up at all! Problem solved.

Washington, D.C.: Good afternoon, Ms. Singletary. My partner of 10 years has not filed taxes in 5 years. I vaguely recall it having to do with fraudulent student exemptions. We are in the same tax bracket: I pull in about 30K, him, 36k. I think that not filing for the last five years has tipped the scales in his favor, especially considering what he makes annually and the fact that it was not an Audit or anything. A rapid refund would be great this weekend. I've already gotten mine. Any suggestions?

Michelle Singletary: Keep all your money separate. Keep records of that fact and have a back up place to live when the IRS comes to get your partner! .

Reston, Va.: Hi Michelle,

My fiance and I are getting married in September. I own a condo and have a rent-paying roommate. He rents, and his lease ends in a couple months and his roommate is moving out. He could probably extend his lease month-to-month (for more money, of course) and find another roommate for a couple months. But he wants to move in with me before the wedding to save money. However, once you factor in the rent money I'll "lose" with the rent money he saves, it would be about $150 per month (unless he can't find a roommate, then it would be more). But I'd like to have something be "different" after the wedding and wait to move in together.

Am I crazy? Or should I jump at this chance for us to save money a couple months early?

Michelle Singletary: Shack up or save money? If you were my daughter I would say save it for marriage.

Washington, D.C.: This may be a Carolyn Hax question but what do you do when the woman makes more money than the man, does the woman contribute more to the "us" money? What if the man builds up resentment over time?

Michelle Singletary: Man and woman have problems. Man and woman should be talking to each other and not to me.

Washington, D.C.: My husband and I have been saving U.S. savings bonds for our child's college education (enters college next year) and our retirement (10+ yrs from now). We have credit card debt and wonder if we should use some of the bonds now to lower our debt or keep the bonds for our child's college expenses and continue paying down our credit card debt by paying more than the minimum asked for.

Michelle Singletary: Stop. You didn't say you were paying the minimum did you? Shame on you. Pay off those credit cards that's the best investment you could make for you and your children.

Did I miss something?: Since when could you contribute $7,000 to a Roth IRA in one year?

Michelle Singletary: You can't. Sorry I missed that.

Fairfax, Va. followup: Thanks for your response, Michelle. I am a new reader of your column and am curious what sources of info. you recommend for couples like us who are just starting to combine finances, save for a house, etc. Thanks again.

Michelle Singletary: Thanks for reading. You might want to get "Smart Couples Finish Rich." It's a nice primer for couples.

Want to buy a place: Michelle, I love your "real" advice. Please help!

Will be getting married in October. My boyfriend and I live separately now, and our rents total $1600 (his is about $1000, mine is about $550) It seems like buying something would be a natural move, but we don't have much money saved for a down payment. We both have emergency savings, and both have a great credit rating (no debt at all)--just not much available for a down payment. I will probably move in with him in October, saving over $500 a month, but his place will get very cramped, very quickly with me there. I guess my question is, where do we go to find out about super-low-down payment options? I've heard about 2 and 3% down--are those for real? Thanks!

Michelle Singletary: Congrats. Now take it easy. Why the rush to buy? Get settled even if it is cramped. Save some money not just for the downpayment. But yes there are plenty of programs for first-time home buyers. Just check with a number of banks in your area.

Divorce and money: Hi Michelle! I was the Carolyn Hax wannabe from a while back, but now I need advice. It's not exactly a cheery topic for Valentine's, and it may be out of your jurisdiction, but here goes:

My parents are splitting after 35 years. My dad, 60, has cut Mom off from any money and has told her he's retiring this year (which is stupid when you think of the pension money he's losing by doing that). She's afraid he will then take off for another state and she'll never get alimony. I say he doesn't have a legal leg to stand on. What do you and your readers think?

Mom has a minimum-wage job, but not nearly enough to get by on without alimony. (If nothing else, this should be a warning to anyone who puts her financial future entirely in someone else's hands!)

Thanks.

Michelle Singletary: Get mom a lawyer and real fast. Seriously, go right now. Sign off and get her some good legal help.

Bowie, Md.: My husband and I have decided to separate, partly over financial issues. We recently bought a house. My name is on the mortgage and both names are on the title. We've agreed, orally, that I will keep the house because I'm the primary caretaker of our toddler. I want to have the house go to my child if something happens to me, as well as the life insurance. My question is twofold: 1. what are the various options for setting up the will so the house ends up going to my minor child, and 2. at what time should my husband's name be taken off the house title (he's amenable to that thus far)? Oh, and one more -- should we put our agreements so far in writing while things are mostly amenable?

Michelle Singletary: This is similar to the last question. And, I'm really sorry about your situation. But I really encourage you to get legal help. Things might be nice now but they can quickly go bad. You should get everything in writing now! And the attorney can help you with the legalities of keeping your home etc.

Washington, D.C.: My fiancee and I have lived together for almost two years now. Up until a few months ago we split our expensive rent in Bethesda 50/50. Now, in the midst of her planning a lavish $35k wedding, she feels that I should be paying the bulk of our $2000/month rent. I personally, couldn't care less about the wedding. I would be fine going to Vegas or the the local courthouse. Should I give in and pay the rent eventhough we both make about the same amount of money? Obviously her extra money is going towards her ridiculously expensive "Royal Wedding".

Michelle Singletary: Wow. Her wedding? $35,000? You seem fine letting her run things. So why ask me? But since you asked. I think you to have some real communication problems going on. You sound resentful. Talk. Now. Before you marry her royalness.

Springfield, Va.: I don't love the guy, but he does make a good salary. Maybe I could learn to really love him. Is it OK to have money as a motivation for marriage?

Michelle Singletary: Is it okay to beat your head with a bat? You know better.

Michelle Singletary: Well, I've got to run. It's been fun. Here's hoping you have a nice Valentine's Day. You lovers out there read me on Thursday. And remember real love doesn't cost a dime. Meet me back here in two weeks.

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