Love, Relationships and Finance: LIVING TOGETHER vs. MARRIAGE ... vs. MONEY pt. 2

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Why do you advise against putting our partner’s name on my accounts?

If your partner ever filed a palimony lawsuit against you, a joint account or joint ownership of property could be viewed by the court as powerful evidence of an understanding between the two of you to share everything. In some states, including California, the courts make decisions on the validity of cohabitation agreements if there seems to be an “implied” agreement between the two partners. (I’ll say more about this later.) In other states, a written agreement is required.

My girlfriend/boyfriend and I are about to move in together and probably will get married. Should we merge our expense money or keep it in separate accounts?

You may want to merge the money you earmark for common expenses that you fund on a monthly basis. Otherwise, we advise you to keep separate accounts for your individual personal expenses, savings, and investments. We recommend this for legal reasons, but we also suggest that married couples keep personal discretionary money in individual accounts. The reason: You two are individuals with separate identities. Your money is an integral part of who you are. When you marry or live together, you’re creating a new, third entity—a partnership—that deserves a bank account of its own. Apart from the financial obligations you assume together, you each have a right to decide how and when to spend the money you’ve earned.

Should we have joint credit cards?

No. Keep separate credit cards, so as to establish your own credit record, now and for the future.

What sort of account do you suggest my fiancé and I open jointly?

For as little as $1, you and your fiancé can open a money market account with a good mutual fund company and tap into it every month for your joint expenses. Alger Money Market Fund, allows you to open an account with a $1 deposit; Monetta Government Money- Market Fund allows you to start with $2.50.

How should we determine who contributes what to cover our monthly expenses?

We recommend making your respective contributions in proportion to your current wages, salary, and other income. Here’s how to do this:

Let’s say that your joint expenses, including rent, utilities, food and other household goods, entertainment, and maintenance will come to about $3,500 a month. (When estimating your monthly costs, always add an extra 10 percent for unexpected expenses, now and down the line.) Add together the monthly income that you and your partner each bring home, after taxes and retirement savings. Let’s say that figure is $7,000. Now divide the total of your joint expenses, $3,500, by the total of your joint take-home pay ($7,000). This gives you the percentage (50 percent) of your take-home pay that each of you should contribute to your joint account—that might be $3,000 for you, and $500 for your partner. Of that $3,500, you’ll use $3,000 to pay your bills and $500 for emergencies.

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Sunday, May 4, 2008 9:41