A friend recently shocked me when she said: “Tope, can you tell me how an individual can declare bankruptcy?” That sentence began a long discussion about a marriage gone wrong leaving not just emotional scars but also a significant and an unfair amount of debt on the shoulders of one of parties. I am definitely not a bankruptcy lawyer/expert, but her story inspired me to share some tips on how to deal with money in a marriage so that your vows remain “Till ‘death’ and not ‘debt’ do us part” .

Read, Reflect and Restructure if necessary.

Understand your individual money colors: One of the biggest causes of marital conflicts is finance, so why should we turn a blind eye to it? It is not necessarily how much money a potential spouse has that should form the basis of making/accepting their proposal, it is how they spend however much or little they have. It is important to discover and understand each other’s money color (discover yours at: https://ourfinancialcoach.com/2012/05/15/what-is-your-money-color-3/). A union of an investor and a spender will ‘produce’ many conflicts if both parties don’t take the time to understand and utilize each other’s strengths to mitigate the risks associated with their individual weaknesses. Understanding each other’s money personality will help couples designate certain roles related to money: for instance, a spender may not be in charge of authorizing disbursements out of the emergency savings account, but may be good at planning vacations within a budgeted amount.

Declare your assets (and liabilities): People often say that love is blind, but there really is nothing blind about love and money. Just like politicians are asked to declare their assets when taking their oath of office, couples need to inform one another about the individual assets and more importantly debts,which they are bringing into the marriage. Although the discussion may be unromantic, it is necessary to understand how much the ‘honey’ owes, if and how they intend to pay it back (that is if you don’t want repo men knocking on your door every day after the honeymoon). It is deceitful to marry someone else without making full disclosures about your financial position thereby denying them the ability to make an informed decision.

Understand the law: Each party must understand local laws regarding responsibility for debts entered into by spouses prior to and during the marriage.  Situations where the individual who incurs the debt is solely responsible for its payment may not require joint approval of such debts as against situations where spouses are jointly liable for each other’s debts. If you are both responsible for the debts incurred by either party in the marriage or you co-sign your spouse’s debts, then you have indirectly taken responsibility for its payment, therefore both parties must consent to such obligations  prior to their assumption.

His, Hers and Ours: Regardless of the depth of your love for each other, I recommend that each party have absolute control over a portion, however little, of the money they earn. Throwing both parties’ earnings into one big commingled pot is a recipe for conflicts and resentment. I am not condemning joint accounts, I am simply saying each party should have some money which they control and can use to buy those things they wish to buy. For instance, Remi (the husband) can choose to buy a power bike from his personal account instead of taking money from the joint account he maintains with his wife, Mosun.

Do not sign if you disagree: There are a lot of compromises that couples have to make for marriage to be successful, however this should never involve jeopardizing the future or other prospects of one or both parties. For instance, Remi’s insistence on buying a glass house worth Two Million Dollars on a joint family income of $150,000 per annum makes no sense, therefore Mosun does not have to feel obligated or pressured to compromise and sign off on the associated loan.

Sound financial practices: Just as in the case of individuals, couples need to limit financial troubles by implementing sound financial practices;  Couples should endeavor to set clear financial goals, maintain budgets, minimize/avoid debt, appoint a money captain who  reviews bank and credit card statements regularly for errors, fraudulent activity or avoidable fees. Most of all, couples should learn to live within their means, lack of money is a major cause of stress and anxiety, so proper management of finances is essential for blissful unions.

Acquisition of big-ticket items: One half of the marriage should not make significant purchases either with cash or on credit without consulting the other. The definition of a significant purchase depends on the income level and other peculiar characteristics of each family. However cars, major investments or new home purchases are significant irrespective of income level and should not be made without the consent of both parties.

Build and maintain adequate reserves: It is not pessimistic but prudent to set money aside to take care of essential needs in case of future unemployment, other loss of income or even family expansion, it is also a good practise to limit debt obligations to such that can be covered on one instead of two salaries in case of unemployment.

Communication is key: Regardless of who makes the most or only family income, it is important for couples to discuss money matters in clear and concise language. It may not necessarily be a pleasant discussion all the time because money tends to bring out inadequacies and vulnerability in people more than other matters, however couples need to be open and honest about their financial affairs. Ease the discussion by avoiding blame and defensiveness but instead focus on common goals and your strength as one unit.

I hope these tips help you strengthen money management in your union!

My mother used to tell my siblings and I lots of folktales when we were young kids, but for some reason I never realized this particular tale was not a real life story until I was much older. Almost every time she scolded us for doing something bad, she would tell us about this young boy who was sentenced to several years in prison for theft. Just before the police could take him to his cell, he asked the judge for permission to whisper something in his mother’s ears, and the judge obliged. He then went over to his mother and bit her ears. The shocked judge asked him why he did that, and he said it was because his mother never taught him that stealing was bad.

Children are like sponges, they are eager to learn. If you fail to teach them, they will learn from other sources and may learn the wrong things. One of the key topics to discuss with your children this holiday is money, it is never too early to teach your children about money. The key to ensuring that you get your message across effectively is to make sure the discussions and lessons are ‘children’ friendly and creatively woven into normal family activities.

Here are a couple of tips that can help you during this holiday and all year round. Enjoy!

1. Piggy bank gift: One of the first gifts to give your children should be a piggy bank, encourage them to pick up coins within the house and to save part of their gifts in it. At the end of the year, you can break the bank and encourage savings and friendly competition by giving a nice gift to the child who saved the most during the year.
2. Exposure: Let your children know that they are among the fortunate ones by showing them children who do not have as much. Explain the concept of poverty, charity and volunteerism by taking them to orphanages and other places where they can help the less privileged. This is a priceless way to raise children who do not become entitled and wasteful.
3. Needs vs. wants: Adults who struggle to differentiate between wants and genuine needs most likely began the struggle as children. When your child ruins his/her toy and begins crying for a replacement, be sure to firmly say No and stay on course. Also firmly set a price and quantity limit for toys and gifts they can get based on their age (you can review this on a yearly basis to give them the feeling of being ‘promoted’).
4. Be a parent: I have talked to some friends who buy their children so many clothes and toys they don’t need in an attempt to cure the guilty conscience they (the parents) have from working long hours or to simply distract the children while they focus on other things, which may be valid tasks. However, you should know that no amount of gifts can take your place in your child’s life, so quit trying this strategy because it does not work.
5. Interesting stories: Apart from the story in the opening paragraph, my mother also used to tell an interesting tale about the sun and the moon, which I now know was to discourage greed and miserliness. The moral of this story was that the moon is cool and loved by people because she was not greedy and miserly while the sun is unloved and harsh because she was greedy and miserly. Pass on good values to your children through tales, feel free to make them up and add nice ‘spices’ too.
6. Set good examples: Children learn a lot by watching and copying the adult figures in their lives. If you want to raise prudent children, then you must set good examples. Don’t scold your children for wasting food and asking for frivolities when that is what you do while they are watching. Lead by example.
7. Don’t hide the bills: Let the children know about bills, financial obligations and even financial mistakes you have made. Let them hear you talk about financial plans and goals even when they are unable to contribute, the message will stay with them and come in handy when they become adults.
8. Let them chip in: Your 10-year-old son wants to buy a Nintendo DS that costs $100? Why not teach him the value of money by asking him to save half of the cost first? Make him pick up ‘extra shifts’ of chores in the house to earn tips towards his goal or tell him that if he can save $50, you will give him the balance on his next birthday. Apart from teaching your child to save, this is a way to challenge them early on in life.
9. Things money can’t buy: Teach your children great values and help them develop a healthy image of themselves. Do not buy your child a cell phone just because she says every other 8-year-old in her class has one, do not put your 10-year-old child in a first class seat just because that is where all her classmates are sitting. Teach your children that self-esteem cannot be bought by all the money in the world, and encourage them to live within their means early on in life.
10. Entrepreneurship: Teach your children the value of hard work and encourage them to be business minded early on in life. I remember my siblings and I putting up amateur musical shows for our uncles and aunts to earn small change when we were kids. When you visit your family or close friends, encourage them to hire your slightly older child as their baby sitter for the duration of the visit and pay for the service, and encourage your child to save that money towards an item you will allow him/her to buy but you will not pay for. Start a ‘bake and sell’ club with a small group of friends, where your kids take turns to bake and sell products to the adults during holiday gatherings.

I hope you will try these tips, then sit back relax and watch your children blossom into financially responsible adults.

So you opened a savings account immediately you got that dream job five years ago and you have been putting money into the account religiously, so why do you keep getting a statement that shows that you barely have anything but crumbs in your savings account when the bank isn’t stealing from you? The answer is because you are probably saving your coins in a piggy bank that has a huge hole at the bottom!

Here are some reasons why your savings account makes it seem as if you have been storing water in a basket:

You started too late: People who delay saving till they get their ‘dream job’ are more likely to put off saving for ever because the ‘dream job’ may just be an illussion, even when they do save, they eat up their savings without thinking too hard about it. The truth is that if you cannot save when you earn $100, you reduce your chances of doing so when you earn $100,000. So start small and start early.

Lack of self discipline: Your biggest barrier to maintaining healthy cash reserves for the rainy day is your own self. Your ability to prioritize, delay self gratification and most importantly separate your wants from your actual needs can make or mar you financially. So make sure you think about expenses carefully before making them otherwise you will continually struggle to keep up with your bills with nothing extra to save. Expenses that need to be funded from cash in your savings account require extra and more careful consideration on your part.

Savings is not included in your budget: You should try to maintain a personal budget no matter how much or how little you earn, and savings must be a prominent line item on that budget just like your other bills such as rent, car expenses etc. The first and most important person that should be paid every month should be yourself, afterall you are the one who works for the income, the best way to pay yourself first is to save for the rainy day.

Debts: How can you maintain your savings when you owe far more than you own? Keeping money in your savings accounts when creditors keep knocking on your door is almost impossible. Although there are unfortunate life events that cause some good people to be in huge debts, many of us land in hot water because of our inability to maintain self discipline (as discussed above). So you need to pay attention to this and cut your coats according to the size of your fabric.

No ‘savings controls’: When it comes to money, we need to understand that all of us have the ability to stray far from our goals, therefore it is important to establish strong savings controls. Savings controls are those conditions that force you to save. Examples include: establishment of payroll direct deposit for the desired savings amount, maintaining a savings account in a separate bank apart from the one you frequent, and keeping your savings bank card and account access documents at home instead of in your wallet so you don’t have ready access to it during your moment of weakness.

So how much should you save every month?
How much you save depends on many factors including your income level, monthly obligations, future aspirations and plans (e.g. Entrepreneurship plans, retirement, marriage), age, family structure etc. However, once you have established the optimal amount you need to save, ensure that you are consistent and diligent. Also ensure that you pass any extra income or windfall through your savings account while you are making a decision on the best way to spend it.

I hope these tips help you plug the hole at the bottom of your piggy bank!

Our love of warm weather, the need to take a break from hectic work schedules to recharge our batteries or our children’s holiday from school are some of the valid reasons many of us give for taking vacations during summer months. However many individuals and families return from vacation completely broke and/or in debt, and therefore spend the subsequent months or even years in some cases dealing with the resulting crisis. The goal of this article is to suggest tips to help ensure that your upcoming summer vacation is a financially fun one, and that the memories will continue to create smiles and not tears afterwards.

1. Save, don’t spend for the rainy day: Want to take a trip to Disney, Paris or Dubai? Why not start putting money aside at least 6 months prior to your anticipated travel date? A vacation package that costs as much as one pay check is one you need to plan and save for well in advance. You should fund vacation and leisure trips from your savings and not by increasing your debt.
2. Book in advance: You can get great deals on airfares and hotels if you book your trip early.
3. Shop around: Don’t take the first deal you get, shop around for ‘value’. Many of us erroneously think shopping around means we are being cheap, that is far from the truth, you have worked hard for your money and should get value for it. Several travel websites offer great deals especially if you add hotel stays or cars to your flight booking. You should also take advantage of employee, AAA, student, military, airline/hotel reward program and other types of discounts.
4. The more the merrier: Instead of going on vacation by yourself or with just your family, why not go with other solo travelers,  couples, friends or families? Going with a nice group can be fun especially when traveling to places you are not really familiar with, it also offers many opportunities to save money. For instance, you may be able to rent a house at a cheaper rate than a hotel or rent a van instead of taking taxi cabs. Don’t know anyone who wants to travel when you are planning to? The solution is simple, there are many good websites that organize trips for select groups like solo travelers, couples, ladies etc.
5. Be true to yourself: I seriously cringe when I hear parents say ‘we are going to London this summer because everyone in our children’s school is going’, apart from this being a bad way to raise your children, you can land in unbelievable financial problems by trying to keep up with the Joneses. Be creative, vacation is about relaxation, so anything that will bring stress at a later date does not qualify to be in this category, always cut your coat according to your size. If your finances cannot accommodate options that include expensive airfares, explore local options or places that you can take long road trips to.
6. Timing: You can save a lot of money by traveling off-season. For instance, since the whole world seems to visit Washington DC in May, why not consider spending your vacation in Atlanta, which is one of the cities listed by cheaptickets.com as the cheapest places to visit in May? Or instead of going to New York City in June, why not go in January, when the crowd is less and vacation packages are far cheaper?
7. Set a budget: Make sure you establish a simple budget for each category of expenditure before reaching your destination. Determine how much you want to spend on food, local transportation, attractions etc. Don’t be a ‘pay as you go traveler’, spending money without a plan is like boarding a flight without a destination in mind, this will only land you in trouble. You must however be flexible and leave room for overages and unforseen expenses.
8. Tune in to the purpose: Trips abroad definitely afford us the opportunity to shop for clothes, shoes and many other things we need. However, we need to really pay attention to the reason for the trip. It is okay if the original purpose of your trip is to shop, then you can spend every waking moment in the mall, but if you traveled to relax and recharge your batteries, shopping should not be number one on each day’s agenda. Budget conscious and smart travelers must remember that ‘it is not an investment if you are wearing it’, so go easy on the clothes, focus on relaxation.
9. What not to pack: Try not to pack your credit card. I know many people need credit cards to check into hotels or retrieve other reservations at vacation destinations, so it may be important to take at least one credit card with you. In cases like this, credit cards should be securely kept in the same safe place your passports are kept. Taking credit cards along for shopping  trips and excursions can land you in a lot of trouble. Even the most disciplined person may end of buying things that are wasteful and unnecessary. Try paying for items using cash or debit cards so as to stay within your preset budget. Remember if you don’t have it, you can’t swipe it.
10. What to pack: Lots of discipline, creativity and willingness to have fun!

Hope these tips help you have a fun summer vacation this year and in the future. Bon Voyage!

My last post (https://ourfinancialcoach.com/2012/02/16/women-employment-and-money-101/) has ‘landed’ me in a few long conversations with a number of my friends; after one of these conversations last night, I thought I’d write a few words that can perhaps help people, particularly women, immigrants and people of the Muslim faith (who are concerned about the issue of interest) navigate this complicated path. I have been quite shocked by the number of ‘normal’ people around me who are practically thrashing their valid employment wages by not participating in employer retirement benefits such as 401k plans in the USA. 

Here are the frequently expressed concerns (FECs) and my responses:

1.       I am still young; I don’t have to think about retirement now.

It is never too early to start putting money aside for retirement. The best time to save for retirement is when we are young and healthy enough to work long hours, the future is quite uncertain.

2.       I don’t make enough money yet, and the last company I worked for did not allow me take my 401k with me, I am better off saving what I can on my own.

If you don’t build a savings culture when you earn little, you probably won’t build one if/when you get richer. Savings go against our natural DNA, which is to spend and live well now, therefore it is not a factor of how much we earn but how disciplined we are.

When signing up for your company’s 401k or other retirement benefits, one of the issues to consider is when you will be vested in your contributions and your employer’s match. Most plans have a provision that makes employees immediately vested in their own contributions, which you can easily roll over to your next employer or financial institutions of your choice upon your exit from the company.

As for opting to save on your own, there are two drawbacks here: you will be saving ‘after tax’ dollars unless you buy an IRA, which is exempt from tax. Even when you can buy an IRA, you may still be cheating yourself if your employer matches your contributions. Let us consider the example of Tito who earns $1,000 every month and is in the 20% tax bracket, Tito’s employer will match 50% of employee 401k contributions up to 6%. If Tito participates in his employer’s 401k plan, he will save $60 and his employer will add $30, which is a total savings of $90 per month. If Tito elects to save on his own, 6% of his after tax income will only amount to $48 and there will be no employer match, so he gets an additional $42 per month ($504 per year) on his principal alone by participating in the employer plan. 

3.       I am a foreigner and I really don’t plan to be living in America when I am 60 years old.

Whether you live in America or not, the money invested in your retirement account is yours as long as you are vested in it. Your vested retirement account balance is just like any other investment or money you have in a bank, the fact that you don’t live in the US does not mean you won’t have access to your money.

4.       I am a Muslim and I cannot invest in companies that conflict with my faith and don’t want to earn interest income.

This is a valid concern; however there are ways around this. If your employer’s retirement plan allows you to make your own investment elections, then you may opt to stay away from bonds and invest your money in non interest bearing instruments such as stocks of the companies you like and mutual funds that are compatible with your faith. In fact Amana funds (http://www.amanafunds.com/), which may be available through your employer plan caters to Muslims in particular.

5.       The stock market is really bad, why put my money in a market that’s going to crash anyway.

Quite a few friends who know that I lost a significant amount during the stock market crash in 2007-2008 may be surprised that I am advising younger people to still invest in stocks. In spite of the doom and gloom on the news every day, this is still a very solid way to get long term growth. If you don’t have to retire in 5 years or less, then you can grow your money in the stock market. It is volatile, so you should do your research, but don’t be reactive and defensive by running away from such a big opportunity.

So go to your HR officer, get the plan document and read it, do your research and take a deep breath because it’s not that complicated!

Feel free to contact me privately for questions you don’t want to ask openly: https://ourfinancialcoach.com/contact/

Did you know that?

Women are less likely to get retirement benefits from their employers? This is because women are more likely to work for employers who do not offer a retirement plan.

Women often earn less than men, therefore women in the USA receive less Social Security income than men due to the fact that they earn lower income during their career.

So what does all these mean for the woman reading this? Should you just sit back and resign yourself to the fate today’s society has decreed? No. There is a lot you can do about it starting today. Here are a few tips:

1. Save more: no matter how little you earn, make sure you put a little aside for the future, it will add up.

2. Invest wisely: educate yourself about the different investment options available with your employer and outside your employment. Seek the counsel of smart and knowledgeable financial planners to help you invest your money carefully and profitably. You don’t have to be a millionaire to be an investor. Enroll in your employer’s 401k or other deferred compensation program especially if there is an employer match. Pay attention to your investment elections.

3. Save, not spend for the rainy day. Shred the credit cards. Differentiate your wants from your needs and live within your means.

4. Consider starting your own business. Find your talent and passion, and explore ways to make a living from it. You would be surprised what you will find by looking inwards.