Archive for October 2016

Getting Hitched Doesn’t Need to Mean Marrying Finances

Marriage generally implies that two homes and lives become one. Should it also involve a complete merging of earnings, assets and expenses? With money arguments being one of the leading causes of failed marriages, combining finances can be scary. For some couples it’s the right approach, but there are several other options.

The traditional approach

Just a few generations ago, one spouse was generally the breadwinner who paid all the bills. Although today most marriages involve two people who work, the traditional approach isn’t entirely obsolete. It can be effective when one partner is a stay at home parent or full-time student, or one spouse earns much more than the other. It’s also appropriate for couples choosing to bank one income to save for shared goals, such as a down payment for a home. Single breadwinner couples may merge assets or maintain separate accounts.

This type of arrangement works best when both partners have similar financial styles so that no one ends up feeling like a child having to ask for spending money or resenting the other for spending too much.

The share-everything approach

With this option, couples completely merge financial assets and responsibilities. All investments and debts are in both names and bills are typically paid from one joint account. Sharing everything works particularly well for couples that enter marriage with similar incomes and limited assets. As with the traditional approach, it’s vital that spouses have compatible styles to avoid feelings of resentment or deprivation.

The four-accounts approach

Sharing is beautiful but sometimes it’s also nice to have a little something of your own. With this arrangement, both partners contribute equally to a joint checking account used to handle household expenses and joint savings to reach shared goals. Their remaining income is deposited to individual accounts to be saved or spent at each partner’s discretion. This approach makes sense for couples with comparable incomes and debts, or when one partner is much more frugal than the other, since it lets both manage money as they see fit without straining the relationship. In cases where one spouse earns substantially more than the other, couples may want to contribute a percentage of their income as opposed to a fixed monthly amount to the joint accounts.

The what’s-mine-is-mine approach

Some couples may simply be more comfortable maintaining totally separate assets and liabilities. With this approach responsibility for household expenses may be split equally, divided according to ability to pay, or each spouse may pick which bills to cover. Keeping finances separate may make sense if one partner has a much larger income, net worth or debt than the other. When entering into marriage with vastly different financial positions, it’s also a good idea to consider a prenuptial agreement, whether or not separate or joint accounts are maintained.

Which way is best?

Whether and how completely to merge finances is ultimately a matter of individual style. With honest communication and trust, any of these vastly different approaches can work, giving those who choose what feels right a good chance at avoiding the bitter money conflicts that plague so many married couples.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

How to Help Aging Parents Without Going Broke

The stress involved in being a care provider for your parents is twofold: You want to make sure they’re not in pain, while making sure that you don’t hurt yourself financially. The balance is a delicate one.

Almost a third of adults ages 40 to 59 have provided financial support to a parent in the previous year, according to a recent Pew Research report. If you’re in that situation, see what you can do to help without burning through your savings or going into debt.

Understand your parents’ finances 

If you’re not used to asking your parents about their money situation, this can be a hard topic to broach. But it’s necessary. You want to know upfront about how far their funds will take them, including retirement savings, pensions and Social Security payments. A more important question is: Can they afford assisted living or a nursing home, should that become necessary, and for how long? Also check their insurance coverage should they need expensive drugs or extended hospital care.

Evaluate health coverage

Make sure your parents will have a way to handle future health costs. Although Medicare can cover hospital, medical and prescription drug costs, there are limits, and some expenses may need to be paid out of pocket. Look into options like the Medicare Savings Program for your state, and also use the National Council on Aging’s free service, BenefitsCheckUp.org, to see what other help may be available to your parents.

Get professional advice

Once it’s clear that your parents will need more help soon, get a geriatric care manager to assess the situation. These professionals work with families to determine the best course of action for quality of life in terms of housing, legal services, home care and other assistance. Who is best fit to hold a power of attorney for your parents, for instance, is an issue they can help you sort out.

Get family involved

If you’re not an only child or if you have family members who can help, don’t try to do it all on your own. It can burn you out, and sharing the financial costs with other relatives can help ensure that it’s a family effort.

Consider hospice care

Sending your parents to a nursing home might not be the best option. If a parent has a terminal illness, hospice can be a good alternative, and Medicare or Medicaid may cover all the costs, including care, medicine and other supplies. You’ll have to make sure the arrangement is approved through your parent’s health coverage. Also note that any conditions unrelated to a covered illness may not come under hospice benefits.

By checking on programs and services that can help your parents, you can make supporting them financially a last resort instead of your first.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved