Beating Broke

Personal Finance from the Broke Perspective

Archives for April 2011

Couples; To Combine Finances or Not?

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Life
Married couples have been doing it for centuries.  Combining their finances is just something they’ve always done.  Call it tradition if you want.  Call it necessity.  Recently, it’s a tradition that has come under fire as being old and outdated.  After all, the reason that the tradition exists is because it was rather usual for the woman in the marriage to stay home and be a homemaker while the husband went off to work and earned the money.  Since the woman wasn’t contributing to the financial inflow, there was no reason for her to have her own account.  What would she put in it?

But, with a new age, comes new standards.  Now, it’s expected that a woman will enter the workforce (or, at least, the contingent workforce).  And she’ll remain there even after marriage.  Not only will she remain in the workforce, but there is a chance that she’ll bring more to the table financially than her husband.  Suddenly, the decision to combine finances isn’t such an easy one.  In fact, combining finances can lead to more arguments than keeping them separated, unless both parties are on the same page financially.  The way I see it, there are three ways you can handle finances as a couple.

Combined accounts. (What we do.)

We came to the conclusion early on in our marriage that combining finances made the most sense for us.  Neither of us made much more than the other, and we both brought about an equal amount of debt to the marriage.  We combined and pay all of our bills and other expenses from one account.  It makes it easier to balance, easier to pay, and avoids having to figure out how much each owes to what bill, or when/how to transfer money from one account to the bill pay account.

Combined account hybrid.

If you want the convenience of combined accounts, but still have a bit of an issue with purchasing things for each other.  Or, just want a “me” account where you can purchase whatever you want, whenever, no questions asked, a combined hybrid set up might make the most sense.  Combine all of your accounts, but open a new account in each of your names.  Those accounts get a set (budgeted) amount deposited into them each month.  Each account is completely hands off to the other partner.  Spend it however you like, as long as the cash is in the account to cover what you spend.

Completely separate.

You don’t like the idea of combined accounts at all.  They should be separate.  Each of you keeps your own account and you either agree on who is paying which bill, or you create a third account that each of you deposits your share of the bills into and pay all bills from that account.

Which is right for you? I can’t say which is right, or which is wrong for you.  It’s something that you need to sit down and discuss with your spouse/partner and decide on.  I think that combined finances are easier, but with automated deposits and bill pay, the separate accounts could be made pretty easy as well.  And, just because you settle on one way, doesn’t mean you can’t change it down the road.  What I will say is that people are sometimes quick to judge based on the decision that you make.  Are you too trusting by combining?  Not trusting enough by leaving things separate?  Perhaps your relationship is doomed if you don’t combine?

The truth of it is this: a majority of divorces have some root in money issues.  Forcing yourselves into a money model that you don’t like won’t help with that statistic.  Be open with each other about money.  Be willing to discuss your finances, both separately and combined, and get yourselves on a path to a solid financial future.  If you do that, it won’t matter which option you choose, it’ll be the right one.

photo credit: Will Folsom

3 Ways to Save at the Grocery Store

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Are you shocked by the recent high price of groceries?  Have you noticed a jump in your grocery bill?  I have noticed a jump of about $20 a week that I am paying now for the same groceries I used to buy for much less.  Unfortunately, I am not much of a coupon diva, and I don’t see myself suddenly becoming one.

Regardless if you use coupons or not, there are ways to put the brakes on increased spending at the grocery store:

1.)     Once a week, consider having breakfast for dinner.  Eggs average out to .10 to .15 a piece.  If you have 5 in your family as I do and serve every one 2 eggs, you are looking at $1.00 to $1.50 for the main meal component.  Round it out with some toast and fruit and you have a light, frugal dinner.  Or, consider serving French toast or pancakes.  Quiche and breakfast casseroles also will work.  My kids love getting breakfast for dinner, and lately we have been doing this once a week to try to curb our grocery costs.

2.)    Have one meatless meal a week.  Meat often is very pricey.  Omit it for one meal and save yourself that expense.  You could try beans and rice, tuna noodle casserole, vegetable fajitas, spaghetti, pasta primavera, etc.

3.)    Buy produce when it is on sale and freeze it.  We love red peppers but often can’t afford them.  When I found them on sale for $1.00 a pound, I bought 10 of them and chopped them up and froze almost all of them.  Throughout the winter I pulled them out to use in stir-fries.  We have successfully done the same with bananas for smoothies (chop up, sprinkle with lemon juice and freeze individually on a pan and then place all of them on a freezer bag), green peppers, strawberries and blueberries.

With the recent high prices of both groceries and gas, many families are feeling the pinch as more money leaves their hands.  If you use coupons, you will see increased savings, but even if you don’t coupon, try implementing some of these strategies to lessen the pain you may be feeling at the grocery store.

Renting or Buying a Home?

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Which is the better way to go? There are several arguments for both sides with people arguing that the added costs of homeowner-ship making renting the more expensive or that rent paid is money lost that could have been going towards building equity in your home. I’m on the homeowner side of things. We own our home. And, we do have a mortgage.

There are several reasons that we own a home.  One of the biggest is cost.  Our mortgage, taxes, PMI, and insurance all come to only about $500 a month.  To rent a home of equal size, in our area, would cost at least $650, if not more.  It’s more cost effective for us to own, if you only take that into account.  There are added costs to owning a home.  Repairs and maintenance are an added cost that is unavoidable, but I look at it as another investment into the place I live.  And, many of the improvements that we’ve done (see kitchen for instance) would have never been done had the house been a rental, and they’ve greatly improved the livability of the house. When it comes down to it, buying a home just makes sense.

I can clearly see the argument, in some parts of the country (and world) for renting over buying.  I can also see situations where renting is just the smarter thing to do.  But, for most, I just don’t see how it can work out in your favor.  Why put money into someone elses pockets, when you could be putting it into yours?  Even if your house doesn’t appreciate in value at all (or, even depreciates) you’ll still be left with something of some value when you’re done with it.  Over those same 15-30 years of renting, what will you have?  Nothing but a good renter history.

The mathematics of the rent vs. buying can get a bit complicated when people start talking about lost gains on investments and throw in interest, appreciation/depreciation, and the like.  I found this cool calculator that does most of that for you.  Hit the deluxe tab to really throw in a ton of variables.  If you’re a homeowner, punch in your numbers and see if it is worth it for you to buy or to rent.  I put our numbers in (that’s them in the picture), and, as I suspected, it’s better for us to buy vs. rent.  I have played a bit with it, and I think it’s a bit skewed towards buying vs renting, but not so much so that it makes it not fairly accurate.

I think another good thing that the calculator does, is give you a better idea of what the different variables can do to the situation.  Try playing with the appreciation numbers, or the return on investment number, or the length of mortgage, and see what that does to your situation.

Where are you on the rent vs. buy spectrum?  Do you own?  Why, or, why not?