Are You Two Financially Compatible?

relationships financial planning The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

It was about 6 years ago now that my fiancé and I attended a class and took a test to see if we were compatible. Basically, the test told us that we were not all that compatible and should reconsider our marriage to one another. I brushed off the test as a faulty result because we were most certainly in love and there was nothing that was going to break us apart.

After getting married, I soon realized that the test may have had more validity than I thought. We constantly had arguments about trust, respect, and of course, money. She was a spender and I was a saver, and the difference in our financial personalities was driving us apart. And, indeed, it did end up killing our relationship. We should have seen the signs and taken them more seriously.

 

How Do You Know If You Are Financially Compatible?

So how do you know if you and your girlfriend/boyfriend are financially compatible? What questions should you be asking yourself as you try to objectively study your relationship? Start out with the basics. Ask yourself these questions:

  1. Would I rather have money in the bank or would I rather spend my money as I receive it?
  2. Does my partner tend to buy things for short term happiness or do they like to stock money away for emergencies or investments?
  3. When talking about money with your partner, are you typically talking about what you can buy today, or how you should handle the money for the long-term?
  4. Do either of you typically have money in your bank accounts? Or do you tend to spend everything you make?

When I started college, I had $6,000 in the bank, owned my own vehicle, and already covered all of my own expenses like insurance, food, my cell phone bill, and gas for my car. My partner often had about $10 (or less) in her bank account, drove a car given to her by her mom and dad, and basically had no expenses because they were covered by her parents. She enjoyed eating out, buying clothes, and having fun at the bar. I enjoyed earning money through my side business, learning how to invest, and dreamt about how compound interest would grow my money in the future years. I don’t think we could have been any different financially, and it hurt us dearly. I thought my way of handling money was right, she thought her way of handling money was right, and we often fought about it. Don’t let this happen to you.

Are you a saver, but your partner is a spender? Before making that life-long commitment, talk with him/her about money and review how you both tend to save and spend. As awkward as it may be, look at each other’s bank accounts together and go over different transactions. If you think your partner is wasting money, talk with them about it. It’s better that you discuss these differences now than when it’s too late.

My friend Kevin was engaged to a beautiful woman a few years ago and she was fed up with her old car. She wanted a new one and was willing to finance it. Kevin believed that vehicles should never be financed and told her that if she went through with this purchase, he would likely break up with her (since it basically meant that they were financially incompatible). She did not take him seriously and went ahead with her $25,000 purchase, even though she only had about $500 to her name. He was disappointed because he liked her very much, but still went through with the break-up. As difficult as that was, I was proud of Kevin and very impressed with his decision. Today, Kevin is married to a woman that shares many of his beliefs (including financial) and they are incredibly happy together.

If you are in a situation where your partner is your financial opposite, you have a difficult decision to make. Either you believe that they will change (which often doesn’t happen – not for the long term anyway), or you should make a clean break because your future is destined to have a lifetime of financial arguments. Choose your mate carefully and be sure that many of your major beliefs align. If they do, you will likely have a very happy and rewarding life together.

How about you all? Are you and your partner financial opposites? Do you plan on continuing the relationship?

Share your experiences by commenting below.

***Photo courtesy of http://www.flickr.com/photos/26023255@N03/8612002388/

Setting Goals for Financial Success

money financial planning financial goals The following post is by Kevin Fullerton. Enjoy!

America is a country in debt. More than 160 million Americans have credit cards, and the average cardholder is $15,000 in debt. Fortunately, it’s never too late to turn around and start making wise financial decisions. Follow these five tips to start getting out of debt, find ways to save for the future, and get on the path to financial success.

 

Start With Small Changes

You don’t have to completely give up your way of life in order achieve financial stability. Set a goal to save $100 a month on groceries or stay in one night a week instead of going out. You really only need to save $20-$25 per grocery trip to reach $100, and staying in instead of eating out or going to the bar will save at least $10-20 per instance.

Time crunched the numbers found that bringing lunch to work at least one day a week instead of buying can save you $500 annually, and bringing food three days a week instead of buying saves $2,500. The same financial gains come with replacing a Starbucks latte with home-brewed or office coffee. Start small by bringing your own coffee and lunch once a week, and then challenge yourself to do it twice a week next month. Soon the savings will add up.

 

Cut Unnecessary Spending

Track your spending to get a clear picture of where your money is going. You would be surprised how many hidden charges and “convenience fees,” are added to Internet purchases and other bills. There are plenty of ways to cut back on these unnecessary fees. You could consider switching banks to one with better locations if you’re hit with ATM fees, and you can start using Ria Money Transfer as a cheap option to send money.

Spenders looking to cut back on their budgets might also need to make some tough cuts in order to save in the short run. Consider breaking up with your cable provider if you already subscribe to Hulu, Netflix, and Amazon Prime. Also, cutting just one of those streaming services can save you $100 annually, so end your service with the one you use the least often.

 

Start Paying With Cash

Psychologists have identified an occurrence called “coupling,” where consumers feel both happiness and loss when they make a purchase. The brain feels happy about the new item, but it also feels bad about losing money. Unfortunately, “de-coupling” occurs when we pay with credit cards, meaning the brain experiences the pleasure of a purchase without any of the pain. De-coupling also occurs with one-click and in-app purchases, where people buy items online without having to think about it.

To avoid credit card debt, pay in cash as often as possible. This way you only buy what you can afford at the moment, and you experience the pain and pleasure that comes with coupling.

 

Save to Make Purchases in Full

It may be tempting to buy a new car or finance furniture to redecorate your new home, especially when stores and car lots offer seemingly cheap deals. They may say you won’t pay interest for the first couple of years, but you’ll make up for it after the interest kicks in. Buying upfront will keep you out of debt and save you hundreds, or even thousands, in the long run when you don’t have to pay interest. Yes, it means you’re not driving a nice car for a while, but your credit and bank accounts will thank you.

 

Saving is a Marathon, Not a Sprint

One thing to remember as you start out on this journey to financial stability is that saving and climbing out of debt is a process. Bringing your lunch once a week adds up over time, not overnight. Saving to avoid financing your furniture will take months, and you might not see the results for years. Instead of following a couple quick tips to save, change your spending habits to make better decisions in the long run.

Different saving tips work for different people. Some can’t live without their lattes, while others need Netflix. Find what works for you and get on the path to financial stability today.

***Image via Flickr by 401(K) 2013

Five Reasons to Buy Less House Than You Can Afford

home buying The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

The American Way to buy a house seems to be to buy as much house as your income and financial circumstances will allow. We are nothing if not a nation of optimists! The assumption is always that income will rise in the future, enabling us to more easily afford that which we can barely cover right now.

I’m going to suggest something that may be downright anti-American – that you resist the predominant trend, and buy less house than you can afford. Here are five reasons why you should consider doing exactly that.

 

1. To Allow Breathing Room So You Can Enjoy Life

The idea of buying a house at the upper limits of your ability to afford one, then making up for it by furnishing it with wooden boxes and eating canned beans for food every night to make up for the difference, is a romantic hoax. It’s the equivalent of living like a homeless person so that you can afford a house.

Rest assured, that once you buy a house, you will still have most of the same preferences that you did before you were a happy homeowner. You must leave room in your budget to accommodate those preferences!

Most people overestimate their ability to go on a financial diet, particularly after buying a house. And even somewhat ironically, buying a house usually triggers a series of major non-housing purchases. This could include new furniture, window treatments, minor (and not so minor) improvements to the property, landscaping, and often a new car to go in the driveway of the new house. None of that is conducive to successful budget.

The point is, don’t overestimate your ability to live on less money once you buy a house. You’ll still want an occasional dinner out, a shopping spree, and a night out on the town. You need to be prepared for all of that.

 

2. To Take a Step Back – If That’s What You Need to Go Forward

If you’re looking to change jobs, or to make a career change, that often involves taking a reduction in salary. If your budget is already tightly stretched by an outsized house payment, you probably won’t be able to give up the extra income to pursue what could ultimately be a better opportunity.

And that’s an important point. There’s a saying – sometimes you have to take a step back to go forward – that applies to a lot of career situations. In order to take a position that will ultimately prepare you for a major advance, you sometimes have to first accept a lower paying job. It is there that you will gain the experience necessary, or even transition over to a more successful organization.

The situation will be magnified the event that you want to start your own business. A high house payment will be a major obstacle to starting a business. Becoming an entrepreneur often means starting out with little or no income. But that’s a step you may never be able to take because of your high house payment.

Make sure any house you buy affords you some level of economic flexibility, just in case you decide to make a major career change. Your house should be an asset, not an obstacle to your progress.

 

 

3. To Leave Yourself More Money For Savings and Investments

While most people think of owning a home as being an investment, we also know that it’s important to have non-housing type investments. This includes not just tax-sheltered retirement plans, but also investments in mutual funds, certificates of deposit, and stocks that are held outside of a retirement plan. In addition, life is always better, easier, and more secure if you have a well-stocked emergency fund.

But if too much of your income is being eaten up by your house payment – and by other expenses related to your home – you’ll have little if any money available for any of these investments.

Savings and investments should be a line-item in your household budget, even and especially when you’re planning to buy a house. Owning a home and paying down the mortgage is one type of investment, but you also must have financial investments in order to achieve any level of financial independence. Buying too much house will close the door on the independence.

 

4. To Enable You to Better Withstand Financial Crisis

When you buy a home at the maximum level of your affordability, you’ll be effectively removing any flexibility in the event that you will face a financial crisis.

What might that financial crisis involve? It could be the loss of a job, a medical catastrophe, or the sudden need to take care of an extended family member. In all of our plans, including the purchase of a home, we need to leave room in the budget to cover such a contingency.

 

5. To Give Yourself More Room to Payoff Your Mortgage Early

Now that real estate appreciation is no longer a given, the pay down and payoff of your mortgage becomes a critical component of the success of your housing investment. But if your budget is too tightly stretched by your basic house payment, it will be very difficult to come up with extra money to accelerate the payoff of your loan.

By buying less house than you can afford, your basic house payment will be well below your income, and that will allow you extra funds to pay the mortgage off more quickly.

In today’s housing market, that can be more critical than ever. By paying your mortgage down ahead of schedule, you’re creating more equity in your home. That will make it much easier for you to sell the property in the event that you need to take a job in another city, or to move for some other reason.

If you’re facing the decision to buy a home, take the unconventional approach, and buy less house than you can afford. Though it may be a blow to your ego, it will be a boon to your financial situation. Having more money will give you far more options than owning the nicest house you can possibly afford.

How about you all? When you purchased a home, what % of your pre-tax income did the mortgage payment represent? Did it allow you to meet your various other savings/investing/retirement goals?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/usdagov/6383550119/in/

Can I Buy Property Without Conducting a Title Search?

The following is a guest post. Enjoy! 

Performing a title search on a property before you make an offer on it reveals if anyone else has any claims to the property. Neglecting to ensure that the title is free and clear could cause problems for you later. In effect, any claims against the property that were the responsibility of the former owner will be transferred to you.

This is a huge risk to be assuming as a new property owner, and one that is wholly unnecessary, as well. Real estate professionals make it simple to perform a thorough title search before the settlement, so there is simply no reason to forgo a title search.

Establishing that the property is free and clear of any liens or title disputes might be more complicated than it seems. It’s not necessarily the case that the former owner is “pulling one over” on the new property buyer. In fact, the previous owner might be completely unaware of any liens against the property.

Liens against the property can include current taxes as well as delinquent past taxes, strata fees, utility bills such as sewer and water bills, and outstanding interest, just to name a few. And these liens can go back several owners, so it might be be possible that the current owner has no idea that there are any liens on the property.

Nearly one-third of all title searches reveal some type of problem that needs to be resolved. Things as simple as unpaid bills to contractors and repairmen can crop up during these title searches and it’s important to reveal them before you have committed to purchasing the property.

The potential problems with the title might not even be as malicious as the current owner trying to skip out on a contractor bill, either. Problems with the title could be as simple as errors in the previous deeds or undetected forgery from the past.

This is why conducting a title search on a property isn’t just recommended, it’s essential. If you’re using a real estate practitioner to complete your settlement, they will almost certainly insist on performing a title search beforehand.

This leaves them free of any liability and provides you with the peace of mind you should have when purchasing a new property. If you’re going to invest in a new piece of real estate, it just makes sense to perform a simple routine title check It’s a small expense that can prevent a huge liability later.

The great news is that real estate practitioners are excellent at doing property title searches. Not only do they know what to look for and where to look, many companies provide search services that make it simple for the real estate professionals to do their jobs quickly and efficiently. With one simple click of a button, they can order many land title searches at once, meaning that it’s possible to verify the title on many properties at the same time. With a process this simple that can save you so much hassle later, why not be safe rather than sorry?

Divorce and Your Finances

relationships financial planning divorce The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Divorce is running rampant throughout the U.S. and in other parts of the world as well. It no doubt affects us emotionally, and we struggle with the fact that our young love is now an adult hatred. But, divorce can also have a terrible impact on our finances.

I should know, since my wife divorced me two years ago.

 

The Hurt, the Pain, and the Debt

There is no such thing as a clean and neat break. Divorce is hardly ever mutual and it is hurtful for both the divorcer and the divorcee. There is often a lasting pain and scarring from these terrible relationships, but the scars do begin to heal after a while.

The pain that hardly anyone talks about after a divorce is the financial difficulty. Without a doubt, there is typically one person that benefits greatly from the divorce, and one person that suffers (and may even lead them into bankruptcy). I, unfortunately, did not benefit emotionally or financially from my divorce. I didn’t want to separate, and I certainly didn’t want to owe my ex money after the split. But, that wasn’t for me to decide.

 

My Divorce Experience

When my ex-wife said the words, “I just want out – I want a divorce,” I knew she meant it. There was no going back. After meeting with the mediation agency, I learned that she expected to receive half of our net worth. Since she was the spender and had nothing to do with the money we had saved up (I practically had to hide it in order to keep anything in our account) this really burned me up inside. But, if I would have tried to fight it, I would have spent just as much money paying a lawyer to fight on my behalf, so the even split was agreed on.

At the time, our estate basically comprised of two paid-for vehicles and some equity in the house, which gave us a net worth of approximately $60,000. Not too shabby for a 27 year old and a 24 year old. Since she was going to keep the $10,000 VW Beetle, this meant that I still owed her $20,000, and she wanted it in six months. Yikes!

I didn’t necessarily have to agree to her short time-frame, but I honestly didn’t want to think about this divorce any longer than I had to. The sooner I could get this payment over with the better.

To earn the necessary funds, I did nothing fun, cut back on my expenses, and did everything possible to earn more money. I flipped two cars, wrote hundreds of articles, worked hard at my job, and accepted many advertisements on my website to earn the short-term dollars. To make a long story short, I made it. I scrounged up $20,000 in six short months and was completely free from my venomous ex.

 

Divorce and the Financial Impact

If you are currently going through a divorce, I am terrible sorry. It is probably one of the worst things I have ever encountered and it still messes with my emotional decisions today. If your finances are negatively impacted, then I am doubly sorry. Not only do you have to suffer through the emotional heartache of losing someone you once loved so dearly, but you also have to live like hermit to have any chance of paying your ex half of your estate. Or, worse yet, you might have to sell your home in order to divide the assets evenly. Your world will be flipped upside-down in every way imaginable, and it will seem like hell for quite some time. But, there is a light at the end of the tunnel.

After I got through paying that $20,000, I realized just how quickly I could earn a substantial amount of money. And, I now knew of many ways that I could earn even more! This allowed me to boldly set a goal for myself in 2014. I wanted to pay off my mortgage completely within the year – all $54,500 of it. So far, I have paid off about $28,000 and I’m actually still on pace to pay off the remaining balance by December 31st.

Once the mortgage is paid off, I have a goal to buy a rental property with cash in 2015. From there, financial success is certain to come my way!

If you are currently struggling through the financial sorrows that come with divorce, pick your head up and try to look at the bright side. It may leave you happier and more wealthy than ever before!

How about you all? Have you gone through or are you currently going through a divorce? What sort of financial impact did it have on you?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/superstrikertwo/4079339001/in/