The Importance of Managing your Finances in Marriage

Relationships are a pivotal part of society. From a young age we go looking for a soul mate to spend our hearts, our dreams and our futures. We think about sharing our homes and our day-to-day lives; we think about having children and pets together, but many people forget to think about sharing their wallets.

We often think that love conquers all, but money is the leading cause of relationship divorce and breakdown. While love is powerful, the hip pocket is mightier than the heart.

Love and Money, Where to Start?

While dating is a whirlwind and falling in love can be intoxicating, it is important to consider money early on in your relationship. While entering a relationship with equal finance is not necessary, entering a relationship with shared ideals is important.

In a relationship money can quickly become a taboo conversation if it’s not handled from the beginning. Once you have been living together for a while patterns become established whether you had agreed on them or not. It is important to set up structure around who is paying for what before the bills hit your doorstep, otherwise you may find an inequality in who pays for what.

What’s Mine Is Yours

Different countries and states have different laws about when couples are merely dating and when they are in a relationship for finances sake. After moving in together, you can start claiming the benefits of marriage such a shared tax returns and shared health insurance.

While there are many benefits, that are also risks. Once you are in a relationship, sharing a home, bills and supporting one another then your things become shared. Challenges are shared, furniture is shared, victories are shared and assets are shared. Both in your eyes, and possibly in the eyes of the law. Even if you aren’t married, if your relationship falls apart you may have to split your assets with your ex-partner, even without a wedding ring.

Developing Goals as a Couple

The strongest way to keep your finances on track and to protect your relationship is to make shared goals. Sharing money goals and discussing them regularly can be the quickest way to ensure that you and your partner are open about your spending habits.

Without shared targets it can be easy to start spending ‘your’ money without considering how it affects the relationship. At first this can be okay – after all no relationship ever broke down because of one extra beer at happy hour, or a new pair of shoes. However, when couples don’t have shared goals and one is saving heavily while the other is bulking out their wardrobe.

While relationship breakdown isn’t likely from a slight mismatch in spending habits, hiding those habits can become an issue. Especially when one partner is in debt, or brings debt to a relationship.

Without shared finance goals, and open communication money can tear apart even the most loving relationship.

What Are the Benefits of Student Loan Refinancing?

After years of studying you’ve finally made it, you’ve graduated. Now you have a massive debt hanging over your head with just a few short months to find a job and get your finances in order before you have to start paying back your loans. Maybe you’ve just started paying back your loans, maybe you’ve been paying them forever. Whatever your situation, student loans are a burden everyone would like to be rid of sooner rather than later.

Typical repayments

Depending on the size of your loan and the length of it, your payments may vary wildly. Many people have multiple loans with different organizations. Different types of loans with different organizations will have different rates and repayment terms, but there are a few things you should now.

If your required monthly repayments are more than you can handle, you can apply for an income-based repayment plan to ease your budget. In the case of federal loans you may be able to suspend payments for a short-time, say if you are between jobs or on medical leave. In both cases your loans will keep accruing interest, so delaying payments may mean you end up owing more.

Refinancing your student loans

You can refinance your student loans with a new lender to improve your situation. While you might lose access to income-driven repayment plans and various federal loan forgiveness programs, you can dramatically lower the interest rates on your loans.

As a student many people sign up for a loan without reading the fine print. Even if you did you may have noticed that the rates on a student loan are often quite high. Rates on student loans reflect the market at the time the loan was taken out, so if you took out a loan in 2007 you would be paying 6.8% interest. SoFi is currently quoting their highest rate for student loans as 6.54%, with a low of 2.615%.

Switching a 10 year loan to a private lender like SoFi could save you almost $3,500 on a $25,000, while also lowering your monthly repayments $30. Refinancing to a shorter term (e.g. 5 years) would increase your monthly payments, but save you over $7,000 on the life of the loan.

Think before you switch

While refinancing can lower your overall payments, as well as month to month payments there are risks involved. You will no longer have access to any income based repayment plans, meaning if you take a pay cut or are without income for a period of time, you will still have to pay your loans.

There are also programs in place such as the Public Service Loan Forgiveness Program, which will allow you to wipe the slate clean of any remaining debt after working for a qualifying public service for 10 years. Switching to a private lender removes this option.

However, if you want to pay off your loans quickly, and have no concerns about future income, switching to a private lender could be your savior. The shorter term you set, the lower the rate you can expect to be offered. Once you are free of your student loans you’ll have plenty of breathing room, and spare cash, to consider your next adventure.

Navigating the Confusing World of Student Loans

In today’s post-secondary education climate, student loans are becoming a necessity for a large number of students. While scholarships and money from jobs are enough for some, the cost of four or more years of college education continues to rise. Luckily, student loans are available through both government-subsidized programs and from private lenders. Of the two, government loans are much more attractive than private loans. Because they are funded by the government, these loans accrue interest at much lower rates than private (for-profit) loans. It is generally advised that an individual only use government loans to pay for school and that private loans only be taken after all other avenues have been exhausted. Government-backed loans are taken much more often than private loans due to the better terms, and this post will be focusing on the types of government loans.

Subsidized Stafford Loans

Stafford loans are loans that are funded directly by the Federal Direct Student Loan Program, but can vary significantly depending on whether they are subsidized or unsubsidized. Subsidized loans are preferable because they do not begin accruing interest (that you are responsible for) until after you graduate. However, the subsidy is not available to everyone. Generally, it is reserved for those that demonstrate financial need (reported via the required FAFSA form) and not available to those coming from incomes in excess of the $50,000-60,000 range. While your school is ultimately responsible for determining the amount you are awarded, the program caps freshmen at $3,500 for the year, sophomores at $4,500, and each year of undergraduate studies after that at $5,500. The total amount that a borrower can take in Subsidized Stafford Loans is capped at $23,000. Interest rates on Stafford Loans are subject to change, but those loans issued between July 1, 2016 and July 1, 2017 typically carry a rate of 3.76%.

Unsubsidized Stafford Loans

Unsubsidized Stafford Loans are much like their subsidized counterparts, except that the borrower is responsible for paying interest that accrues while they are still in school. However, the payments are usually deferred until the student graduates. Additionally, all students are eligible for the unsubsidized Stafford, regardless of income. The loan availability amount ranges between $5,500 and $20,500 depending on income status, dependent status, student grade classification, and whether or not the student is a graduate student. Graduate students and financially independent students are eligible for larger dollar amounts per year, usually increasing slightly as their grade classification progresses. While these usually loans carry the same stated rate of 3.76% for undergraduate students, the actual amount owed will often be higher than subsidized due to the accrual of interest during the student’s tenure in school.

Stafford Loans – Grace Period

One of the most important features of federal (public) loans is the grace period. For Stafford loans, this period is six months after graduation, dropping out, or after going below half-time enrollment. Institutions may vary widely on what they consider half-time, so it is best to check at your individual institution to see what restrictions may apply. During this six-month grace period, a borrower is not required to make payments on their student loans. This allows students to find a source of income before becoming swamped with debt.

Perkins Loans

Although the Perkins Loan program will come to its end on October 1, 2017, it is still possible for a student to be awarded a Perkins loan before that date, though unlikely. Perkins Loans offered fixed interest at 5% and, like Subsidized Stafford Loans, deferred interest until leaving school. Another major feature of Perkins loans is the 9 month grace period usually attached to them.

Parent PLUS Loans

PLUS loans are loans to graduate students or to parents helping their children pay for college. The most noteworthy feature of PLUS loans is that there is no hard cap to the amount a borrower can take. Instead the cap is effectively the cost of attendance at the student’s school, if no others factors are present. PLUS loans are less preferable than Stafford loans because they have a higher interest rate. For 2017, the rate is 6.31%.

In summary, public loans are far less predatory and costly than private loans. Along these lines, the more subsidized, the better. Subsidized Stafford loans offer the lowest interest rates and deferred interest, but have income restrictions on eligibility. Unsubsidized Stafford loans have the same low rate, but do not defer interest and have no income restrictions. Perkins loans, though on the brink of extinction, offer the next lowest interest rate and a grace period of nine months (three months longer than Stafford). PLUS loans are only available to assisting parents and graduate students and are effectively capped at the cost of attendance for a given school, however they carry the highest interest rate of public loans.

The Easiest Budget Known to Man: the 80/20 Budget

Budgeting can suck.

I have tried budget and budget and end up just abandoning most of them. Usually, they are just too damn complicated.

This is why I moved onto the 80/20 Budget – what I believe is the simplest budget known to man (aside from no budget, of course).

How the 80/20 Budget Works

The 80/20 Budget is almost too simple. It only includes 2 categories. Here is how it works:

20

The 20 part of the budget is what put towards savings. You should automatically take this money out of your paycheck and other forms of income so you know that this money is hitting savings. 20% really isn’t that much but if you don’t make absolutely sure that you are putting this money aside, there is a good chance you might end up dipping into it when you’re not supposed to.

Note: 20% is only a guideline. You don’t have to only save 20%. Feel free to save as much as you want – this is just a general recommendation.

80

So what’s left for the remaining 80%?

Well…everything else!

That’s what makes the 80/20 Budget so great – you only have 2 categories that are both very simple.

The 80% includes rent, food, clothes, utilities, and everything else you can spend that hard earned money on.

If you aren’t too big on tracking where every dollar goes, you may find that this budget works for you. As long as you aren’t late on rent, miss your credit card payments, or anything like that, then you should be fine.

Just take out the amount you have designated as savings from your checking account and leave the rest. If you can keep it positive, then you are doing alright! If not, you may want to set up a few more categories (such as necessities and luxuries) to track your spending a bit better.

Last Word

I really love the 80/20 Budget. It is the first budget that I have been able to stick to and don’t feel restricted by.

How about you? What kind of budget do you like to use?