Your Money Questions, Answered

September 15, 2010 | By | Comments (1)

During the month of September, our Real Simple Family financial expert, Farnoosh Torabi will be answering a few of your family financial questions. If you have questions for Farnoosh, share them in the comments of this post: Your Money Problems, Solved with Farnoosh Torabi. And you can read more of Farnoosh’s advice for Real Simple readers in the article from our 2010 issue of Real Simple Family: What Does It Cost to Raise Your Family?

 

Here’s the second set of questions and Farnoosh’s suggestions:

 

Hi Farnoosh,
My husband and I have been married for 8 months and we have decided to combine our finances, ie. have one checking account for both of us. Do you have any tips for making the transition smooth? We’ve also discussed the possibility of having guidelines, like if a purchase is over $50, let’s discuss before purchasing, or if it’s not in the monthly budget, let’s discuss. Any other information you have would be greatly appreciated!
 
Thank you,
Jade

Posted by: Jade Wednesday, September 01, 2010 at 01:41 PM

Dear Jade,
 
While I think having one checking account for the both of you can simplify your joint savings and expenses, I still think you should each maintain separate personal accounts. I don’t mean to make things more complicated. Really, this will help you both maintain some financial independence in the marriage. Whether it’s so you can buy yourself a pair of boots and not dip into the community jar to do so or your husband wants to buy you a pearl necklace for your birthday and keep it a secret – having your own savings accounts will come in handy. As women, it’s particularly important that we have our own savings accounts since we live longer and earn less than men.
 
As for your joint checking account, I think you should create guidelines on what that money will be used for. In other words, what bills and expenses will this money be used for? Your list may include: any and all family-related purchases, the mortgage, the utilities, car payments, etc. I think it’s smart that you decided to discuss purchases beyond a certain price-point and budget. The key to making this transition work is communication and open dialogue.   

 

My husband and I bought a house 6 years ago. Its value has done nothing but depreciate since then, due to the economy. We also have IRAs that have lost a lot of money in the last several years. Our question is: would it be wise to take our retirement money out of the IRAs and pay down our mortgage as quickly as possible, or should we leave it where it is? We do not plan to move… EVER.
 
-Erica

Posted by: Erica Wednesday, September 01, 2010 at 01:57 PM

Dear Erica,
 
I wouldn’t advise dipping into your retirement account to pay down your mortgage. You will regret this big time! The fact is – 50% of baby boomers will run out of money at some point during retirement. As savers, we don’t do enough to prepare for retirement. While you may have lost money in your IRAs, remember that the market will bounce back. It’s important that you hang in there and if you still have more than 10 years to go before retiring, it’s OK to still be in the stock market. You can ride out the fluctuations.

And since you don’t plan to move, paying off your mortgage ahead of schedule is not a necessity. As long as you can make the monthly payments on the mortgage and stay on schedule, that’s ok in my book. After all, you’re not looking to sell this house any time soon and cash in. I’d rather you pocket that extra money and put it in a rainy day savings or your retirement accounts.

 

My husband and I are both teachers with side jobs. We make about $150k per year combined and own our home. Besides our mortgage, our only debt is my student loan. We pay off our credit cards each month and paid cash for our cars. We have about 6 months of (current) living expenses saved and we contribute to our teacher’s pensions as well as a 403(b) retirement account. We are expecting our first child in April, and I would like to know how much money we should be saving between now and then so that we are able to continue to be fiscally responsible.

Posted by: Stacey O.  Wednesday, September 01, 2010 at 12:52 PM
 
Dear Stacey,
 
Congratulations! Keep up the good work. Avoid falling into debt and continue to save in your retirement and rainy day savings accounts. Make sure you are also contributing to a savings account for your baby’s first year of expenses (separate from your other accounts).  I find keeping savings accounts separated by goals can help you keep track of how much further you need to go. To calculate approximately how much you’ll need check out BabyCenter.com’s online calculator.

 

About Farnoosh Torabi

Farnoosh’s financial advice has been featured in the pages of Real Simple, People, Money Magazine, The Wall Street Journal, The New York Times, Glamour, and The New York Post, as well as on The Today Show, CNN, MSNBC, and Thew View. Her second book Psych Yourself Rich comes out in September 2010. Find out more about Farnoosh on her website Farnoosh.tv.

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