As Fiances' Finances Become One

By Martha M. Hamilton
Sunday, July 8, 2007

When I was 19, I left Texas and flew to New York to get married. My 22-year-old husband and I didn't have to think long and hard about what to do with our assets, because we didn't have any.

But for couples marrying in their late 20s, or in their 30s or 40s, it's a little more complicated. Making the transition from dealing with your finances alone to dealing with them as a couple raises all kinds of questions, including whether marriage should change the way you save for retirement.

"Should we save together for retirement or separately?" asked Jeffrey Lutz.

Lutz, 27, is engaged to 25-year-old Loretta Gray, and they plan to get married in a year. He works for an insurance agency, and she is in property management.

They went to the same high school but didn't meet until Lutz was out of college. Last August they were engaged, and in September they moved into an apartment in the old downtown of Warrenton. Now they're trying to plan their finances as a couple.

In addition to deciding about saving for retirement, they face other challenges, including saving for their wedding and paying off student loan and credit card debt. It's a struggle to allocate enough money to all the goals they have, said Lutz. It reminds him of seven-day pillboxes. "It's like you're supposed to put a quarter in each one every day, except it's more like $500."

Laura Barnett Lion, founder and president of Barnett Financial in Austin, agreed to take a look at Lutz and Gray's situation and make some suggestions. Barnett has served on the board of the National Association of Personal Finance Advisors and as president and chairwoman of its southern region.

The couple are putting away 8 percent of their salary into their own workplace retirement savings accounts. Lion said she recommends saving equally unless it results in one person missing out on matching money. "I like the fact that both parties are involved in saving for their financial futures together," she said. "The shared sense of sacrifice and contribution to their future is crucial here."

But while Lion recommends saving separately and equally, she said couples should think of the two accounts as one when it comes to asset allocation -- that is, choosing the right balance of investments. Many 401(k) and other workplace plans don't offer a wide array of investment choices, she said. Generally for couples in their 20s, Lion would recommend putting about 50 percent of equity investments in a larger company stock fund, 25 percent in an international fund and 25 percent in a smaller company fund. They should find the best choice of each in either of the two workplace plans and invest in those funds, she suggested.

Together the couple make about $90,000, plus annual bonuses. Now a lot of that money is going to repay debt -- about $22,000 in student loans and roughly another $10,000 in credit card bills. Recently they opened a joint checking account, which they are using to try to keep up with their bills and reduce their combined debt.

They've both stopped using their credit cards for the most part, and they recently transferred a balance of Gray's credit card, which carried an interest rate of 19 percent, to a new card with a rate of a little less than 4 percent. Lutz wondered whether it was better to concentrate on paying off that credit card with its $4,000 balance, or to reduce the $5,900 balance on a credit card that charges 12 percent interest.

Lion came up with a third approach: transfer Lutz's balance to another card offering a low rate on balance transfers; lock both cards in a drawer to eliminate the temptation to charge anything on them, which would be paid back at a higher rate than the balance-transfer teasers; and open a third charge account to use for occasional credit card needs such as paying for gas when they don't have cash.

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