To say “I love you” to our HerMoney family this Valentine’s Day, we’re bringing you a special love and money-themed mailbag episode and we’re tackling all your questions on the topic.
Perhaps The Beatles said it best when they wrote that “money can’t buy me love.” While this is certainly true, money can improve your bargaining position, and having enough of it can absolutely make life easier. But when you mix love with money (which we all do in countless ways over the course of our lives) complications can arise. Sorting through our feelings and our financial data, joint accounts, mortgages, and more can be incredibly difficult, but diving in with both feet and coming up with answers is the only sure way to move forward.
In today’s episode, Jean advises a couple struggling to get on the same page with budgeting, even though they agree on their bigger life goals. The couple is unsure if they should ramp up their retirement savings, or spend more money enjoying their life now. They’re also dealing with a substantial amount of credit card and student loan debt, and are unsure how much they should eliminate before they start saving for other goals.
We also hear from a mom wondering if her daughter should put her boyfriend on the lease for her new apartment or not — her daughter could manage the monthly rent by herself if they broke up, but is it smarter to have him on the lease to start with?
Jean also guides a woman wondering how she can best support her sister-in-law who has spent years in an abusive relationship and faced homelessness. She’s hopeful she can help get her sister-in-law back on track financially and moving past her traumatic history. Lastly, Jean offers her thoughts to a woman debating a prenuptial agreement before she enters her second marriage and combines homes with her husband.
Thanks so much to all our HerMoney listeners for sharing their wonderful questions with us… We love to see your passion for the people in your life, as well as for your money!
Subscribe to the HerMoney Podcast today! Join us every week in the judgement-free zone for wonderful new content and interviews with our own Jean Chatzky.
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Jean Chatzky: (00:07)
HerMoney is supported by Fidelity Investments. We want to inspire you to demand more from your money by first knowing what you own, what you owe and what you want from your money. We’ll help to reach your financial goals faster at fidelity.com/demandmore. HerMoney comes to you through PRX.
Jean Chatzky: (00:27)
Hey everybody. It’s Jean Chatzky. Thank you so much for joining us today on a very special Valentine’s Day episode. We are going through all your mailbag questions and we’ve pulled those that revolve around yes, love and money. Maybe the Beatles said it best when they wrote “Money Can’t Buy Me Love.” Well, while this is certainly true, money can improve your bargaining position and having enough of it makes life, well, easier and when you mix love with money, something that over the course of our lives we do in countless ways, with spouses and kids and family, complications can arise. Sorting through our feelings, sorting through our financial data, but diving in with both feet and coming up with answers – that’s the best way to move forward. Kathryn and I are both here at the ready. We are hopeful that today’s bonus mailbag episode brings some of you at least the answers that you’re looking for. Hey, Kathryn. Happy Valentine’s Day.
Kathryn Tuggle: (01:37)
Happy Valentine’s Day.
Jean Chatzky: (01:37)
So you’re a Valentine’s Day hater or a Valentine’s Day lover?
Kathryn Tuggle: (01:42)
Both? I don’t know. I like any excuse to celebrate, but my husband and I don’t ever go out on Valentine’s Day.
Jean Chatzky: (01:50)
Yeah. We don’t go out either because the restaurants are crowded and often overcrowded.
Kathryn Tuggle: (01:57)
Jean Chatzky: (01:57)
Right. The service is not necessarily the best, it’s just one of those days. But I do like any day that gives me an excuse to eat chocolate.
Kathryn Tuggle: (02:06)
Exactly, and I think show gratitude.
Jean Chatzky: (02:08)
Kathryn Tuggle: (02:08)
Jean Chatzky: (02:09)
You’re a better person than I am.
Kathryn Tuggle: (02:13)
Jean Chatzky: (02:13)
Yes. I agree.
Kathryn Tuggle: (02:14)
I just think the love flows more freely on Valentine’s Day and who can argue with that?
Jean Chatzky: (02:18)
I think that’s right.
Kathryn Tuggle: (02:20)
Jean Chatzky: (02:20)
So, all good. Let’s take a look at what we’ve got.
Kathryn Tuggle: (02:23)
Our first note comes to us from Mary Kate. She writes, hi Jean. My husband and I have been married a few years and we are 30 and 31. I make $70,000 a year and my husband makes it a little less than that and is self-employed. I’m really proud of him for striking out on his own, though it has come with a pay cut and some risk. We are very good at budgeting and are not extravagant. We talk about money often and have fully combined our money. We’re on the same page with all of our bigger life goals and enjoy dreaming of what our money may someday do for us. However, we both have significant health problems that may reduce our individual life expectancies. While I’d love to ramp up our retirement savings significantly, it’s really hard for us to not prioritize our other wants because we’d like to enjoy life now and not defer to an uncertain future. I know many can relate even without health problems. Our biggest goal is to own our own little home and have a garden and a dog. We have nothing saved for this goal and we also have significant debt. $25,000 in credit card debt, $200,000 in law school debt and a $17,000 car loan. When it comes to saving for retirement, I currently save 5% of my income and get an employer match, while my husband hasn’t saved anything. We’re at a bit of a crossroads in deciding where our money should go. Do we increase our savings to invest? Do we press pause on retirement to save for a house? How much of our debt should we eliminate before we even think about these other goals? Thanks so much.
Jean Chatzky: (03:46)
Mary Kate. Let me just say thanks for writing. I hope that you are having a happy and healthy Valentine’s Day. It’s a really tough question. And not knowing specifically the time frames that you’re dealing with or the interest rates on that debt – let me give you some general advice. I think that you should try saving a little bit starting now while emphasizing payment of those highest interest rate debts to hopefully put you in a position where you can ramp up that savings in future years. I often like to say that credit card debt is a savings killer and I think $25,000 in credit card debt is definitely a savings killer. I would look to, if your credit scores are good, to refinance that credit card debt at the lowest possible interest rate, maybe transferring some of it to 0% cards if you have the opportunity to do so. And then I’d really wail on that credit card debt and try to move it out of the way. Because if you think about it, $25,000 in credit card debt on which you’re paying interest is, once you’re free from it, money to save. So if you can clear that obstacle, you can take all of the money that you were flowing against that credit card debt and you can throw it against your savings. Same thing basically with the law school debt and the car loan. Refinance them as much as possible. If you haven’t refied that law school debt, then look to see if there’s a lender out there that’ll help you pay it off at a significantly lower interest rate, so that you can pay it off a little bit faster, so that you can pay it off a little bit less expensively and so that you can flow a little bit more of your money toward that savings cushion. Even if your husband is earning slightly less than you are now, he should be able to, the two of you together should be able to save something from his income. I’d probably open a Roth IRA for him because you can use that Roth IRA in order to buy your first house as well as for retirement, even though it has the advantages of being a retirement savings account. You can use it for other purposes. It’s that flexible. And I try to automatically make a Roth contribution on his behalf and maybe on your behalf if you can do it as well and use that as the cushion that you’re building for your home. Start small, you know, start with $25 every pay period, $50 every pay period,. The money will be there. The money will start to grow. And I hope that you’ll be able to get into your own home for little more than you’re actually paying in rent. It is possible, but you gotta clear that big significant obstacle out of your way. And I see that credit card debt being the biggest of those obstacles.
Kathryn Tuggle: (06:56)
I agree. And it sounds like they’re on the same page, so they should both be saving for retirement and keeping with their joint goals.
Jean Chatzky: (07:04)
Look, I think when retirement is an uncertainty, we look at ways to be able to access our money for other things. When retirement is not a certainty, we look at ways to be able to access our money for other things that are more of a priority for us. And the beauty of a Roth IRA is that it gives you that. You can pull out your contributions at any time. You can pull out your money for that first home, for education. It’s really, really flexible. So I would say give that a go.
Kathryn Tuggle: (07:44)
Fantastic. Our next question comes to us from Laura. She writes, hi Jean. My daughter will be graduating from college soon and will be looking for an apartment with her boyfriend in Iowa. She’ll be working full time making a decent paycheck and he’ll still be a student incurring debt from grad school. She asked me if she’s better off adding his name to the lease or leaving it off. I’m not sure how to answer this. If something were to happen and they broke up, she could manage the monthly rent by herself. Do you have any advice?
Jean Chatzky: (08:11)
So, I am not a lawyer. I’m not an expert in landlord tenant law, but that’s basically the area that we are talking about here. I’d put his name on the lease. The landlord wants to know who is living in that apartment and if the landlord’s not aware that another person is actually living in that apartment, it could get your daughter in trouble if not evicted. So, I would just say come clean. And it’s great that she has the ability to pay the rent on her own if something were to happen, but in order to really protect her right to live there, I would say just sure that they both apply to do that. They will probably want to let the landlord know that she could pay the full rent if she needed to because the landlord, in looking at her boyfriend, may be wary since he will have no income and he may need some sort of a guarantor. As a parent, I’ve co-signed on a lot of apartments lately for my son and for my daughter because they often don’t have the income requirements that landlords like to see. And your daughter’s boyfriend, his parents should probably be his guarantor, not your daughter, just to keep it nice and clean and simple since they’re not married. That’s what I would say.
Kathryn Tuggle: (09:37)
Right, and in my experience, oftentimes the landlord only needs to run the credit on one person, but then both of their names can be on the lease.
Jean Chatzky: (09:45)
Yeah, and you know, it depends on the landlord, right? If you’re talking about renting from a mom and pop who are living downstairs, it may be a very different procedure than living in a big building that has people moving in and out all the time. But I’d say keep it clean, keep it honest and good luck to both of them and congratulations on their graduation.
Kathryn Tuggle: (10:08)
Jean Chatzky: (10:09)
Kathryn, before we move on, let’s take a quick pause here to remind everybody that HerMoney is brought to you by Fidelity Investments. You don’t have to know all the answers when it comes to your financial future, but an important question to ask yourself is what do you want from your money? What are your financial goals? No matter where we’re meeting you on your financial journey, Fidelity is here to help you reach your goals faster. It all starts with a financial checkup and an understanding of what you own and what you owe. From there, the folks at Fidelity will work with you to evaluate your investment options and different ways to grow your savings. You can talk about your goals, you can see where you stand and you can get help taking the next steps at Fidelity.com/demandmore. Kathryn and I are back with your mailbag show on love and money. What else we got?
Kathryn Tuggle: (11:00)
Our next notice from an anonymous listener. She writes, hi Jean and Kathryn. I discovered the HerMoney podcast a few months ago and you are now my constant companions on my daily walks with my dog. I feel like I’m walking with my girlfriends each day. I would very much like to hear your recommendations for how I can best help my sister-in-law – my husband’s sister. She’s been in a longterm relationship with a verbally and physically abusive boyfriend, which has left her with some pretty severe mental health issues including anxiety and PTSD that prevent her from being able to function well in a work environment. She’s in therapy and is working hard towards moving past her traumatic history, but it’s a long process with lots of ups and downs. After several years of living paycheck to paycheck, being unemployed and even homeless for a time, she has a low credit score, an unknown amount of debt, including student loans and personal debts and has no emergency or retirement savings. She’s 38 years old, is living with us and is currently unable to work due to some health issues. She’s on Medi-Cal and food stamps, which helps out a lot, but my husband and I pay for her dental care and all of her other expenses. When she starts working again, what are some steps I can take to encourage her to pay off her debt and start saving for the future? Since my husband and I have excellent credit, I thought about adding her as an authorized user on our credit card to help her improve her score, but I want to be absolutely sure that doing that would not make us liable for her debt. How do we even go about finding out how much she owes? I don’t even think she knows what all of her debts are. Should we look into a credit counseling service and/or debt consolidation company? All she wants is to live a simple life without worrying about past debt coming back to haunt her in the future and I want to help her achieve that goal. I’m afraid for her future and want her to be able to catch up and have enough to support herself in her old age. I’m so glad we’re able to help her get back on her feet after several years of homelessness and poverty, but we can’t afford to support her forever.
Jean Chatzky: (12:52)
Well, first of all, I mean this letter in and of itself shows so much love, right? I mean, we’re talking about love and money in relationships, but this is, she’s very, very lucky to have you and your husband.
Kathryn Tuggle: (13:05)
Jean Chatzky: (13:05)
In her life. I would not add her as an authorized user to your credit card. Any charges that she runs up on that credit card are yours to pay off and it sounds like a situation where you aren’t certain that you can trust her not to do that, although she has gotten herself moving in the right direction. I would find a credit counselor in the area. Not-for-profit credit counseling is a wonderful way to have a third party trained counselor sit down with you and your sister-in-law. Go through what she owes, who she owes it to, at what interest rates. Line that up with whatever money she has coming in and figure out if it’s doable. If it’s not doable, she may need to file bankruptcy to get a clean slate. But the credit counselor is a mandatory first step before you go there. So go to debtadvice.org. That is the website of the National Foundation for Credit Counseling. Find a not-for-profit credit counselor in your area. I would recommend finding one that you can see in person. Sit down with her. If she’ll allow you to go to the meeting with her I think that’s great. And if she can handle it, what will happen very likely is that she’ll go on something called a debt management plan where they’ll reduce the interest rates on her debt to about 6% – they have the ability to get fees, late payments, all that kind of stuff wiped away – and will put her on a plan where she’ll write one check a month to them. They’ll pay her debts and over the next few years she’ll rebuild her credit and along with it she’ll rebuild her financial future. So that’s exactly where I would go and I was happy to see that you raised it yourself. Thanks so much.
Kathryn Tuggle: (14:59)
Yes, and that’s true love, right? To support somebody in this way.
Jean Chatzky: (15:04)
Absolutely. But also to recognize that there’s an element of self-care here. You know, you can’t afford to do this forever, so you’re putting in some steps to help her help herself.
Kathryn Tuggle: (15:14)
Jean Chatzky: (15:15)
We’ve got one more?
Kathryn Tuggle: (15:16)
We do. Our last note is from an anonymous listener. She writes, hi Jean. I’m 52 years old and from New Jersey. I’m a new listener to your podcast and have been enjoying catching up with all of your wonderful conversations. My question has to do with entering a second marriage and combining homes. I currently own my townhome in New Jersey without a mortgage. My plan is to move to Pennsylvania with my fiancé into his house, which is in desperate need of renovating as we try to make it our home and create a welcoming space for our combined six adult children. We’re trying to decide if we should rent my home or sell it. The going rate for rentals in my neighborhood is $2,200 a month and we figured we would net around a thousand dollars after taxes, association fees, et cetera. I think I can sell it for around $275,000. Is it better to rent, put that $12,000 a year in an investment account and then hope the real estate market improves over the next decade so we can sell it at a higher price?Or should we sell it, use some of the proceeds for home improvements, and invest the balance. If we rent the townhome, we’d need to take out loans in order to renovate, whereas the sale would give us the cash we need upfront. And a follow-up question. Do you think prenuptial agreements are always advisable in a second marriage? Thank you.
Jean Chatzky: (16:27)
Let me answer your second question first. I don’t think a prenup is necessary in a second marriage where both of you are coming in with no assets and no kids, but you’re coming in with both assets and kids, which makes a prenup mandatory. It is, I say, having put one together myself, or actually I didn’t put it together myself, a lawyer put it together for me and my husband, and then we signed it and then we moved on. It is no big deal. You both need a lawyer to look at it in your own interests. But people who say, oh I can’t do this cause it’s not romantic or oh I can’t do this because it is going to cost too much, don’t know what they’re talking about. It is no big deal and you absolutely must have one. As for the other question, I would sell the house. I think that entering a new marriage, doing some renovations on his house, unless you really, really want to be a landlord, unless that is something that is just been a goal of yours for a long time – owning rental properties, it’s something you’re thinking of building – I would not really trouble yourself. I ran the numbers. The amount that you can count on earning on the money that you get if you sell the house is pretty much a wash with the $12,000 a year that you’d get from renting it out. It may be a little less depending on how much you are going to put into renovations on your fiancé’s house, but I just think you are entering a new life with lots of new responsibilities with six adult children combined, all of whom I’m sure will be asking things of you, and I would give yourself time to breathe in this new relationship and this new marriage. So that’s my 2 cents. I wish you all the luck in the world and I hope that you are very, very happy in this new marriage.
Kathryn Tuggle: (18:36)
Yes, it sounds like a Brady bunch special.
Jean Chatzky: (18:38)
It does sound like a Brady bunch special. Let us know how it goes.
Kathryn Tuggle: (18:43)
Jean Chatzky: (18:44)
Thank you for all these great questions. Thank all of you for joining us today on HerMoney to all of our listeners for their wonderful questions. We’re going to keep these special mailbags going throughout the year on a variety of topics so if you’ve got a question, drop us a line at [email protected] Also, if you like what you hear, please share our podcast with a friend. Please subscribe to the show yourself at Apple podcasts. Leave us a review because we love hearing what you think. We also want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper and our show comes to you through PRX. Thanks so much for listening and we’ll talk soon.