Baker's Dirty Dozen (eBook)

BAKER’$ DIRTY DOZEN PRINCIPLE #2

Make sure you and your significant other have the same financial goals

IMAGINE THE FOLLOWING scenario. You are having a wonderful time dating a person that you very likely met on a dating app.13 Everything seems perfect. You enjoy all kinds of fun things together like hiking, sporting events, disc golf, and late-night Netflix binges. Love is in the air. So why not go ahead and pop the question? You know, the most important question that anyone can ask in order to spend the rest of your lives together: “Are you in debt and what are your spending habits like?”

Not exactly the question you were thinking, right?

This may all sound quite coarse, but spotlighting the way someone else handles money before popping the ultimate question could save you a lot of grief down the road. There is a reason why financial problems are often cited as the main contributing factor to divorces in the United States. 14There is more to it than just understanding how someone else views money. This concept involves their philosophy on how they may approach life. It highlights what they value, their goals, how much risk they are willing to take, and even how they manage stress, especially financial stress. If you happen to be at the other end of the spectrum and in the process of a divorce, I would advise you to see Baker’s Principle #11 on how to protect your ASSets during this time.

If you are not married yet, you have the ability to grow and match your financial and life goals with those of the other person. Discussing these matters on the first date, however, might lower your chances of having a second, so make sure your timing is right! When discussing financial goal setting, ask questions like, “Does one partner eventually want to stay home with the kids?” or “Do you want to rent or buy a house?” A good idea might be to both write down these questions and answers (see list of questions in Appendix B) and then to talk them through together. Premarital counseling that addresses financial stability and spending habits (ouch!) can be a marriage saver down the road. Many counseling centers offer premarital counseling that will include financial compatibility.

One helpful strategy is for you and your prospective spouse to sign up for Dave Ramsey’s Financial Peace University (www.daveramsey.com /fpu). During the 13-week course (once a week), you will learn how to manage your money by paying off debt, budgeting, and saving money. You can join a group or take their online course. I encourage you to join the group since it helps with accountability to maintain and complete the course.

Another great relationship prerequisite is to come clean on any financial obligations by identifying all debt, including student loan debt, credit card debt, auto loans, etc. The burden will be shared regardless, but this way there are no surprises and you can tackle it together. I know, I know. You are marrying for love, not money, but whoever thought up that line must have been a Hallmark movie script writer. This is not a knock on the Hallmark Channel because I do watch most of their Christmas movies each year (yes, I have a soft side that was not disclosed before marriage). Before you get married, watch the movie The Heartbreak Kid (warning: rated R for many reasons). Ben Stiller plays a newlywed who believes he just married the perfect woman but finds out differently during their honeymoon. It is a hilarious scenario but worryingly has a lot of truth to it. If Ben Stiller’s character had gone through premarital counseling that included financial goal setting, this marriage or the troubles that arose from it, might never have occurred—and of course the movie wouldn’t have had such an amusing storyline.

As you can see, I am only addressing financial compatibility. If you want to know if you are compatible in other areas, such as emotionally, mentally, spiritually, or psychologically, plan a two-day canoe trip down a challenging river. If your relationship survives this fun-filled, action-packed two days, you are probably meant to be together. This is, of course, from personal experience. Snow skiing trips work also, especially if you or your significant other does not know how to ski.

TOO LATE, I AM ALREADY MARRIED. NOW WHAT?

If you are already married, make sure you are on the same financial page with your spouse regarding your financial goals. According to a study conducted by Dave Ramsey titled “Money, Marriage, and Communication”:

• Money is the number one issue that married couples argue about.
• 86% of couples who got married in the last 5 years started out in debt.
• The higher the couple’s debt burden, the more likely they are to argue about money.
• Couples in healthy marriages are much more likely to talk about their money, dreams, and to make long-term money goals.15

So what is the number one thing you can do to combat this? Communication!

Remember the classic 1967 movie Cool Hand Luke? OK probably not, so let me give you a quick recap. It was about a man (played by Paul Newman) who was sentenced to a chain gang at a rural prison in the south. One of the great lines in the movie was made by Strother Martin, who played the prison warden: “What we have here is a failure to communicate.” We all know that a healthy relationship requires good communication. For some reason, discussions about money tend to be taboo. If you don’t want to discuss finances one-on-one, consider a financial workshop to open the lines of communication with one another.

On the second date with my future wife, she was entertaining some friends over at her condominium in Little Rock. As the evening progressed, most of the guests were mingling in the kitchen area, and I noticed one of them using the end of the paper towel roll. The guest threw away the inner cardboard core, along with one paper towel still on it, you know, the one that is actually glued to it. I then observed my future wife go over to the trash, pull out the paper towel core, and literally pull off the last paper towel that was glued to the cylinder, all in an effort to save a few pennies.

At that moment, I knew that we were a match, and I fell in financial love! Fortunately, the other categories of love fell into place as well.

FINANCIAL ADVICE FOR COHABITATION

A new U.S. Census Bureau report says the number of unmarried partners living together has tripled in the past two decades due to greater social acceptance.

The report released this week says the number went from nearly 6 million in 1996 to 19.1 million in 2018.

The report says unmarried partners are older, better educated, more likely to earn higher wages and more racially diverse than in the past.16

Much of what was mentioned previously regarding married couples will hold true with co-habitating couples. Communication is the first item of business. Talk about how the expenses will be divided up and which person is responsible for making sure the bills are paid. An important question is this: How will common household expenses be handled? Flat amount or percent of income?

For example: Lucy N. Sky makes $100,000 as a physical therapist and her partner, Buford Murford makes $25,000 as a convenience store assistant manager. If the total for household expenses are $1,000 per month (rent, utilities, internet, etc.), do they each pay $500 or should it be based on a percentage of income: Lucy pays 75% ($750) and Buford pays 25% ($250)? Pretty good question, right?

What about preexisting debt payments? Using the same example as above, assume Lucy has $50,000 in student loan debt and Buford has credit card debt of $15,000 and a car note that is $700 per month. How are these debts being handled?

Probably the best solution is to have a joint checking for housing expenses only. You can decide how you want to contribute toward the housing expenses, either a flat amount for each or a percentage of income.

I would suggest that any prior debt before moving in together would be the...