Relationship Chronicles: Planning for the Future (With Debt)

BF and I were talking about our finances....when are we not? If you missed my last relationship chronicles post - here it is!

It's been awhile but we still talk about finances and our future almost everyday. At one point though, you have to step back and just calm down and stop letting the stress rule your feelings and life. It's come to the point where we are getting frustrated because we are in limbo and we don't know what will happen next. It's scary.

Put It All Out There

As you all know I'm planning (hoping) to go to law school. Right now it looks like I won't be starting until Fall 2013. I'm hoping for some merit scholarship money but if not, then need-based aid. It's stressful because we are not married and so we have to treat our finances separately (but combined in our minds).

You guys also know that we are trying to buy a condo together and so we will be adding more debt to his school loan debt, and then when I start law school, we'll be adding more debt. It's pretty scary to think of how much debt we will be swimming in, but together we discuss this and know that we have to work with each other to figure out the best way to approach this.

BF has a lot of school loan debt right now which he is trying to pay off and also trying to lower his income by trying to max out his roth IRA, 401k and make use of other tax deductions so that his monthly payments won't be astronomical. The IBR program says that if you don't pay it off the school loan within 25 years (I think) then the loan is forgiven, but you also have to show that you can't afford it each year. I'm not too familiar with it since I do not have any school loans.

He brought up the fact that we should not get married before I go to law school so that I can qualify for need-based aid. I agree with this so that's not a big issue. But we also have to think of the future when we will get married, and we still have to show that our combined income is still low enough so that the monthly payments for his loans won't be $1,300/month. That's more than our potential mortgage payment and that doesn't include my monthly payment for my future school loans. I'm crying inside.

Listen to Each Other

can't find a source from pinterest :(
He suggested that he max out all of his accounts (which would cover mine) and I pay for all the daily expenses. If I have to, I'd have to stop contributing to my 401k and roth IRA, etc. I almost died when he said this. What?! Stop saving for retirement?! Compound interest? But time is on my side! I wanted to scream and yell and fight him on it but I had to keep calm and stay composed. I don't know if this is the best plan but it was just his suggestion so that we could minimize the amount of interest we pay. I can't jump to conclusions if he was looking out for the both of us and bringing up a suggestion.

It's important to listen to your partner and make sure that you understand their intentions before blowing up, which is something I have to work on, but I'm glad I was able to stay cool and calm when he said this, although I felt myself getting angry.

My first thoughts were selfish thoughts, such as "Why does he get to save for retirement and not me?" and "Why do I have to pay for the daily expenses?", but I also remembered that we are a team and we have to work on this together. I can't just continue on my merry little way and plan my future without him because let's face it, he IS part of my future and his debt will be my debt, his money is my money and vice versa.

Formulate and Strategize

As we discussed it more, we agreed that yes, we can't make any decisions right now but we will sit down and formulate a strategy to make sure we are maximizing our money and not just paying a ton of interest while saving a lot for retirement and stocks. You have to look at the whole picture and see where you can save money the most. Money is money, and you have to make it work for you. You can't expect it to just grow on it's own while paying down debt as fast as you want (unless you have unlimited amount of funds but sadly we don't). That would of course be the best option.

Our whole perspective on this comes from the fact that we are looking at the worst possible situation. We are basing this plan off the scenario that we will stay at our current salaries with no raises and we even thought of the scenario of living on just one salary (his). It's better to think of the worst possible situation so you are ready for whatever comes your way. We want a house (but it doesn't have to be huge) and we want kids. We want them to enjoy their lives and we want them to go to college with as much help as possible from us. We want to go on vacations and we want to buy lots of property. We want to retire comfortably. As long as we are on the same page for the future, then there is no reason to get angry or frustrated. I think that was the most important part of this for me.

Sorry for the long post but it's nice to just vent about relationship financial issues. When I was talking with the BF, I remembered Erika and her husband over at Newlyweds on a Budget and how they deal with their money fights. They're a team and they inspire me, because they are so similar to us! I hope this inspires you if you are having any relationship issues relating to money.


Newlyweds on a Budget said...Best Blogger Tips[Reply to comment]Best Blogger Templates

aww thank you for the shout out!
I don't think I'll be the only discerning voice though in saying I think you guys still have a lot of financial things to work out. I know you PLAN on getting married and spending the rest of your lives together, but risking your financial security to stabilize your future spouse's just doesn't sound like the right move. Even if you WERE married, risking your financial security for your spouse's is not something I would do. Right now I have a 401K through work which is matched upto 3%, so I contribute the full 3%. Eric and I also have Roth IRA's, and whatever I contribute to my account, I contribute to his too. If I can only afford $50 a month, then his account gets $25 and mine gets $25. It's only fair.
I understand him wanting to pay down his debts, and perhaps your plan is on the right track, but I think you should definitely reconsider so that the division of bills stops at the point to where you can no longer contribute to your retirement : )

The Happy Homeowner said...Best Blogger Tips[Reply to comment]Best Blogger Templates

I love the last part where you highlight looking at the worst-case scenario in order to set your strategy/goals---so smart! It's also great that you realize you should be looking at the overall big picture instead of getting bogged down by every single detail. Great post!

shopping2saving said...Best Blogger Tips[Reply to comment]Best Blogger Templates

@Newlyweds on a Budget Oops I forgot to mention that. Yes, yes I told him I would NOT stop contributing to my 401k and whatever other stocks/investments I am doing right now. If I do stop, it will be because I can't afford to and because I want to, but the point was that his suggestion sounded bad but in reality it wasn't an ultimatum and it wasn't the only solution out there. We came to an agreement that we can't make decisions right now, we just have to play it by ear and make sure the other person is on the same page!

Newlyweds on a Budget said...Best Blogger Tips[Reply to comment]Best Blogger Templates

@shopping2saving ah, okay i missed that. Then good for you! glad it's a work in progress and not the end all be all.

eschaff said...Best Blogger Tips[Reply to comment]Best Blogger Templates

Grate post! I totally understand how it feels to have tough conversations about money with your partner. BF and I have had combined finances for 3 years now mainly due to the fact that we've purchased a couple of properties together and it just made things easier that way. It took a while to get into the mind set of "our money" vs. "my money" but now I can't imagine it being the other way. I think it takes a lot of trust in your partner to be successful especially before marriage. We're lucky in that in Canada there's common-law status which is very easy to claim so if (heaven forbid) we broke up there are rules behind us that will split things fairly and no one would be screwed, or at least the wrong person won't get screwed. I think it's very unfortunate that it's so difficult in the US to claim a common-law status. Long comment but I just wanted to chime in since I've been where you're at in a number of ways so I can relate!

shopping2saving said...Best Blogger Tips[Reply to comment]Best Blogger Templates

@eschaff Thanks for your insight! I definitely think combining accounts would be the easier thing to do, esp if we buy property together. I'm not sure how it will be once we do so. I will also look into what California says about common-law status. My attorney friend mentioned that to me before, but also... I asked my BF if he would sign a contract and he said YES haha. But he also said it's sad that I don't trust him. It's not that I don't trust him, it's just making sure we are BOTH safe in case something happens (and you never know what could happen).

Michelle P said...Best Blogger Tips[Reply to comment]Best Blogger Templates

We also don't want to get married until the BF is done with school so that we can save money with need-based aid. It's great that you guys are so very open!

{[Jessica]} said...Best Blogger Tips[Reply to comment]Best Blogger Templates

this is very interesting!! I am trying to learn more about a roth IRA account for the fiance & I just because we are NOT sure what the military will offer once he is out considering right now that is the BIG cut in the country. so I was thinking that we are both 22 & basically live off his income while trying to plan a wedding and having a 4 year old.. starting a roth IRA would be great.. I just don't know anything about them!!!

but just like you. The future scares me about money with the future hubby & what we will have. I want to be able to provide for my kids just as my parents did for me.


inbudgetswetrust said...Best Blogger Tips[Reply to comment]Best Blogger Templates

I'm so happy that you and your BF are able to talk so comfortably and logically about your long-term finances as a couple, and even happier that you decided NOT to stop contributions to your retirement accounts! My fiance and I struggle with discussing PF all the time but we seem to be getting on the same page the more we discuss and hear each other out.

I know that if you get married before you start law school, he will have to share your student loan debt but if you wait to marry until after you've stopped accumulating the debt, then it will only belong to you and not him.

Frugal Fries said...Best Blogger Tips[Reply to comment]Best Blogger Templates

I am glad to hear your 401k will keep going, because you still need to look out for yourself (just in case).

I did the grad school thing while my fiance worked, but we both lived at home during this time--so it wasn't a huge deal or number crunch for us. I still have a lot of student debt and we live on our own now, but that helped a lot.

Good on your for making the necessary plans though. It's really important to have your ducks in a row when you make life-changing decisions like that.

Rafiki said...Best Blogger Tips[Reply to comment]Best Blogger Templates

So much I had to take from this post, and I should be sleeping. Right now I am really afraid of some expenses I have coming up this year school related and other wise and the overall situation seems pretty similar to yours. I think once I find the time I will write a post about it.

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