Newlywed Financial Advice
April 7, 2010 2:00 PM Subscribe
[FinancialAdviceFilter] I'm graduating college and getting married. Now what?
I am graduating from a small liberal arts college with a degree in religion this May, and marrying a fellow graduate (biology major) in July.
I have worked entry level jobs all through college, but pretty much lived paycheck to paycheck, with no savings to speak of. My parents covered all of my school bills (thank goodness!), so I have zero debt. Pretty much a blank slate financially. I have an internship lined up for May-July, that will pay pretty well, and I will be living with my parents then, so I plan on saving up 2-3k during that time.
My fiancee is in a pretty similar situation, but she has probably 10-20k worth of student debt. She is enrolling in Pharmacy school in the fall, so she is deferring her loans until she graduates. As far as Pharmacy school goes, we will be paying with more student loans, but she has a pretty large inheritance that we're planning on using to help pay off the loans when the time comes. Needless to say, in about 4-5 years, she should be banking 80-100k per year as a pharmacist, so that will help dramatically.
We are moving to Kansas City in August for her to start Pharmacy school, and I will find a job as a youth pastor. I hope to have one lined up by June or July, but we will see how that goes. I expect to make somewhere around 30-40k, maybe more, maybe (but hopefully not!) less. I am also enrolling in graduate school, an online/distance program, so I can take 5-10 hours of classes a semester, and not have to pay too much.
So, I want to ask the hive mind what things I can be doing now and setting up that will help us financially. Here are some specific things I am curious about:
-What kind of tax breaks/aid should we be looking for as newlywed grad students? Where can I learn more about this, and do I need to do to get it?
-We are planning on combining finances. I do not have a credit card, and will need a new bank account. Any advice on specific banks or credit cards to go for? What's the difference between a bank and a credit union, and which should I look for? Any other alternates I might consider?
-Investing. As a grad student with a very low salary, what kind of investments can I set up that I will be able to add substantially more to in the future (aka when my wife graduates and brings in the dough). Should I worry about this too much now, or just wait until we actually have money to invest?
-Insurance. Both of us are fully under our parents insurance until we graduate, so we need to find something for both health insurance and car insurance. Any suggestions for places to look? Also, with health insurance, any advice for someone in our situation? We're both very healthy, the only think I would really be concerned about would be maternity coverage, although children aren't planned for several, several years.
And, of course, any other tips from those who have gone through similar situations would be greatly appreciated!
Thanks in advance.
(also, btw, neither of us have any outstanding credit card debt, car payments, loans in our name, or anything like that.)
I am graduating from a small liberal arts college with a degree in religion this May, and marrying a fellow graduate (biology major) in July.
I have worked entry level jobs all through college, but pretty much lived paycheck to paycheck, with no savings to speak of. My parents covered all of my school bills (thank goodness!), so I have zero debt. Pretty much a blank slate financially. I have an internship lined up for May-July, that will pay pretty well, and I will be living with my parents then, so I plan on saving up 2-3k during that time.
My fiancee is in a pretty similar situation, but she has probably 10-20k worth of student debt. She is enrolling in Pharmacy school in the fall, so she is deferring her loans until she graduates. As far as Pharmacy school goes, we will be paying with more student loans, but she has a pretty large inheritance that we're planning on using to help pay off the loans when the time comes. Needless to say, in about 4-5 years, she should be banking 80-100k per year as a pharmacist, so that will help dramatically.
We are moving to Kansas City in August for her to start Pharmacy school, and I will find a job as a youth pastor. I hope to have one lined up by June or July, but we will see how that goes. I expect to make somewhere around 30-40k, maybe more, maybe (but hopefully not!) less. I am also enrolling in graduate school, an online/distance program, so I can take 5-10 hours of classes a semester, and not have to pay too much.
So, I want to ask the hive mind what things I can be doing now and setting up that will help us financially. Here are some specific things I am curious about:
-What kind of tax breaks/aid should we be looking for as newlywed grad students? Where can I learn more about this, and do I need to do to get it?
-We are planning on combining finances. I do not have a credit card, and will need a new bank account. Any advice on specific banks or credit cards to go for? What's the difference between a bank and a credit union, and which should I look for? Any other alternates I might consider?
-Investing. As a grad student with a very low salary, what kind of investments can I set up that I will be able to add substantially more to in the future (aka when my wife graduates and brings in the dough). Should I worry about this too much now, or just wait until we actually have money to invest?
-Insurance. Both of us are fully under our parents insurance until we graduate, so we need to find something for both health insurance and car insurance. Any suggestions for places to look? Also, with health insurance, any advice for someone in our situation? We're both very healthy, the only think I would really be concerned about would be maternity coverage, although children aren't planned for several, several years.
And, of course, any other tips from those who have gone through similar situations would be greatly appreciated!
Thanks in advance.
(also, btw, neither of us have any outstanding credit card debt, car payments, loans in our name, or anything like that.)
First of all, the most important piece of financial advice I can give you is to spend significantly less than you make. If you ignore everything else about personal finance and investing but still do that you should be okay. If you're able to pay your bills every month and get a raise, don't start spending more just because you have more money. And if you're looking to buy a house, don't buy the most expensive one you can possibly afford and assume you'll make enough money in a few years to justify it. And don't buy some expensive thing just because everyone else is. Basically spend less.
I do not have a credit card, and will need a new bank account. Any advice on specific banks or credit cards to go for? What's the difference between a bank and a credit union, and which should I look for? Any other alternates I might consider?
First of all, don't get into credit card debt. If you think there is any possible way that you will spend more than you can pay off in any given month, just get a debit card. If you are sure you are never going to carry a balance, get a credit card without any annual fee or inactivity fees and as good of a rewards program as you can find. It sounds like you don't have a credit history right now so you might not be able to get a good card, but the best ones are listed in this FatWallet thread. When you start to have real monthly expenses, keep several months of expenses in your savings account at all times for unexpected situations (like losing your job).
For bank accounts, look for one that will give you a decent rate on a savings account and free or cheap checking. You don't have to use one bank for everything either, I have a free checking account at a local credit union and an online savings account with a better rate than the credit union will give me. You can find the best accounts in terms of rates on the Bank Deals blog. A credit union is basically the same thing as a bank, but run as a non-profit coop. They may provide cheaper or better services than a large bank, or they might not, it depends on the credit union.
As a grad student with a very low salary, what kind of investments can I set up that I will be able to add substantially more to in the future (aka when my wife graduates and brings in the dough). Should I worry about this too much now, or just wait until we actually have money to invest?
People who want you to pay them money to manage your investments will make everything seem complicated, but really the key to investing is to just let your money sit for a long time in a type of investment that gives you a decent return. The usual advice is that for short term savings you should keep it in a savings account (which will give you a small but respectable return and is insured against your bank collapsing) and for long term investing (like 20+ years) you should invest in stocks and bonds. Personally I'm a fan of index funds, which give you diversification and low fees. Once you and your wife get jobs, you can start putting a percentage of each paycheck into Roth IRAs, 401(k) accounts or similar tax protected retirement accounts. Until then there's not really much you can do to get started without having the money yet, but when you do get the money opening a retirement account (or setting up contributions for your employer's 401(k)) is as simple as filling out a form.
posted by burnmp3s at 2:31 PM on April 7, 2010
I do not have a credit card, and will need a new bank account. Any advice on specific banks or credit cards to go for? What's the difference between a bank and a credit union, and which should I look for? Any other alternates I might consider?
First of all, don't get into credit card debt. If you think there is any possible way that you will spend more than you can pay off in any given month, just get a debit card. If you are sure you are never going to carry a balance, get a credit card without any annual fee or inactivity fees and as good of a rewards program as you can find. It sounds like you don't have a credit history right now so you might not be able to get a good card, but the best ones are listed in this FatWallet thread. When you start to have real monthly expenses, keep several months of expenses in your savings account at all times for unexpected situations (like losing your job).
For bank accounts, look for one that will give you a decent rate on a savings account and free or cheap checking. You don't have to use one bank for everything either, I have a free checking account at a local credit union and an online savings account with a better rate than the credit union will give me. You can find the best accounts in terms of rates on the Bank Deals blog. A credit union is basically the same thing as a bank, but run as a non-profit coop. They may provide cheaper or better services than a large bank, or they might not, it depends on the credit union.
As a grad student with a very low salary, what kind of investments can I set up that I will be able to add substantially more to in the future (aka when my wife graduates and brings in the dough). Should I worry about this too much now, or just wait until we actually have money to invest?
People who want you to pay them money to manage your investments will make everything seem complicated, but really the key to investing is to just let your money sit for a long time in a type of investment that gives you a decent return. The usual advice is that for short term savings you should keep it in a savings account (which will give you a small but respectable return and is insured against your bank collapsing) and for long term investing (like 20+ years) you should invest in stocks and bonds. Personally I'm a fan of index funds, which give you diversification and low fees. Once you and your wife get jobs, you can start putting a percentage of each paycheck into Roth IRAs, 401(k) accounts or similar tax protected retirement accounts. Until then there's not really much you can do to get started without having the money yet, but when you do get the money opening a retirement account (or setting up contributions for your employer's 401(k)) is as simple as filling out a form.
posted by burnmp3s at 2:31 PM on April 7, 2010
You can start contributing to a ROTH IRA now. This would be the single best investment you can make. Period. Starting early is the key. If I could go back in time this is the one thing I would do.
http://www.getrichslowly.org/blog/2007/06/05/what-is-a-roth-ira-and-why-should-you-care/
my other advice is more personal and controversial. Buy a house early if at all possible. I've seen this pan out again and again and again for people I know. Some retired early off it. Unfortunately I never had the money to buy a place in NY in the 10 years I lived there. I refer to New York now as real estate regret city.
We recently bought a place and rent half. The renters have separate rooms and after tax deductions I am living mortgage free.
posted by xammerboy at 3:18 PM on April 7, 2010
http://www.getrichslowly.org/blog/2007/06/05/what-is-a-roth-ira-and-why-should-you-care/
my other advice is more personal and controversial. Buy a house early if at all possible. I've seen this pan out again and again and again for people I know. Some retired early off it. Unfortunately I never had the money to buy a place in NY in the 10 years I lived there. I refer to New York now as real estate regret city.
We recently bought a place and rent half. The renters have separate rooms and after tax deductions I am living mortgage free.
posted by xammerboy at 3:18 PM on April 7, 2010
I just read Financial Peace by Dave Ramsay. I read it about six years too late to save me from some really stupid decisions. Read it and follow his suggestions for savings and growing money.
posted by motsque at 4:15 PM on April 7, 2010 [1 favorite]
posted by motsque at 4:15 PM on April 7, 2010 [1 favorite]
First, always live below your means unless you are in absolute poverty. Ben Franklin said "$20 income, $19 expenses, happiness. $20 income, $21 expenses, misery" (Actually I think it was pounds but I don't know how to do a pound symbol.) Anyway, even a small but consistent savings will be a major improvement over accumulating debt. (Your wife's school debt is different, it is an investment)
Investing: I would open an account with Vangaurd or another low-cost mutual fund family. Start with just a money market account as a place to put cash for a rainy day. Once you have built up a cushion, you start putting some money in a stock index fund. If you can, do it through an automatic funds transfer so you are "paying yourself" every month.
Insurance: do not ever allow yourself to go with some kind of reasonable medical coverage. Consider a high deductible policy - put part of your money in a health saving account to pay for mid-sized medical expenses. My husband, at age 21, had an appendectomy on our honeymoon. We were between graduating college and him starting his first job. Fortunately my father had gotten a short term policy for each of us and my in-laws covered the large deductible. Even minor things can be expensive these days, particularly if they happen after hours. Two weeks ago I was in urgent care with a friend who had severe abdominal pain. The urgent care doctors, after getting an x-ray, referred her to ER for a CT scan. Just the scan alone cost $13,000 plus another $4,000 for just being in the ER and still more for the doctors. Plus when you have insurance you get billed at the negotiated rate, even if you are the one paying it. In some cases, this will be half the "retail" rate.
posted by metahawk at 4:44 PM on April 7, 2010 [1 favorite]
Investing: I would open an account with Vangaurd or another low-cost mutual fund family. Start with just a money market account as a place to put cash for a rainy day. Once you have built up a cushion, you start putting some money in a stock index fund. If you can, do it through an automatic funds transfer so you are "paying yourself" every month.
Insurance: do not ever allow yourself to go with some kind of reasonable medical coverage. Consider a high deductible policy - put part of your money in a health saving account to pay for mid-sized medical expenses. My husband, at age 21, had an appendectomy on our honeymoon. We were between graduating college and him starting his first job. Fortunately my father had gotten a short term policy for each of us and my in-laws covered the large deductible. Even minor things can be expensive these days, particularly if they happen after hours. Two weeks ago I was in urgent care with a friend who had severe abdominal pain. The urgent care doctors, after getting an x-ray, referred her to ER for a CT scan. Just the scan alone cost $13,000 plus another $4,000 for just being in the ER and still more for the doctors. Plus when you have insurance you get billed at the negotiated rate, even if you are the one paying it. In some cases, this will be half the "retail" rate.
posted by metahawk at 4:44 PM on April 7, 2010 [1 favorite]
Your future wife's pharmacy school should provide her with the option for health insurance (if they don't actively require it, which most schools do in my experience). That's probably the cheapest plan you'll be able to find, unless you get a job with benefits.
Evaluate car insurance companies carefully; shop around and compare rates. Consider whether you need full coverage or just liability if your cars are paid off.
Don't go into debt. Do live well below your means. Create an emergency fund (a couple months' of expenses). Don't worry too much about investing until after that emergency fund is set up, but once it is, contribute to a Roth IRA or, when you get a job, a 401(k) or 403(b), especially if you are offered a match by your employer.
Read the blogs Get Rich Slowly and The Simple Dollar, and a couple of books like Financial Peace and Smart Couples Finish Rich. Don't take any of the advice in any of those publications as gospel fact, but learn about your options and figure out what works for you.
The single biggest recommendation I have is to track your spending. Every single dollar. It will change the way you think about money, help you budget, help you save. It changed my financial life.
posted by peanut_mcgillicuty at 7:32 PM on April 7, 2010
Evaluate car insurance companies carefully; shop around and compare rates. Consider whether you need full coverage or just liability if your cars are paid off.
Don't go into debt. Do live well below your means. Create an emergency fund (a couple months' of expenses). Don't worry too much about investing until after that emergency fund is set up, but once it is, contribute to a Roth IRA or, when you get a job, a 401(k) or 403(b), especially if you are offered a match by your employer.
Read the blogs Get Rich Slowly and The Simple Dollar, and a couple of books like Financial Peace and Smart Couples Finish Rich. Don't take any of the advice in any of those publications as gospel fact, but learn about your options and figure out what works for you.
The single biggest recommendation I have is to track your spending. Every single dollar. It will change the way you think about money, help you budget, help you save. It changed my financial life.
posted by peanut_mcgillicuty at 7:32 PM on April 7, 2010
1. Tax breaks you can get: if you pay student loan interest, mortgage payments, and make charitable contributions, those are some of the things that will allow you to itemize deductions. If you don't itemize your deductions, you just take the standard deduction, which is something like $10,500 and is the best thing for most people. I paid a lot of student loan interest and the other items, and got a nice fat tax refund this year. Take a look in TurboTax in the deductions category and you'll see what sorts of things are in there, it's free and pretty simple.
2. I say you should get a credit card, as long as you always pay it off in full. Get one that gives you at least some kind of rewards and of course no annual fee. This will help you build a credit history which you currently don't sound like you have much of. A credit union is run and owned by its members, and you can get some really good deals on interest there. I currently get 3.83% interest at my credit union on my checking account which is 'rewards checking'.
3. If you have any money for savings, I advise you to save a 3 to 6 month emergency fund of living expenses first and keep that in your high interest checking account. Then, start the Roth IRA as xammerboy suggested, and go read the Get Rich Slowly blog for lots more wonderful information.
4. For health insurance, at the least, purchase catastrophic coverage. Never allow yourself to be uncovered. This is the same concept to high deductible insurance. It should be OK for if you are healthy but as others have pointed out, you never know what's going to happen. You should allow for the health insurance deductible in your emergency fund so that you never have to worry you will be bankrupted by this if something bad happens. Usually for students such as your wife in pharmacy school, there will be some sort of insurance offered through the school. Check on this and you could get on her plan if this is available.
posted by treehorn+bunny at 7:58 PM on April 7, 2010
2. I say you should get a credit card, as long as you always pay it off in full. Get one that gives you at least some kind of rewards and of course no annual fee. This will help you build a credit history which you currently don't sound like you have much of. A credit union is run and owned by its members, and you can get some really good deals on interest there. I currently get 3.83% interest at my credit union on my checking account which is 'rewards checking'.
3. If you have any money for savings, I advise you to save a 3 to 6 month emergency fund of living expenses first and keep that in your high interest checking account. Then, start the Roth IRA as xammerboy suggested, and go read the Get Rich Slowly blog for lots more wonderful information.
4. For health insurance, at the least, purchase catastrophic coverage. Never allow yourself to be uncovered. This is the same concept to high deductible insurance. It should be OK for if you are healthy but as others have pointed out, you never know what's going to happen. You should allow for the health insurance deductible in your emergency fund so that you never have to worry you will be bankrupted by this if something bad happens. Usually for students such as your wife in pharmacy school, there will be some sort of insurance offered through the school. Check on this and you could get on her plan if this is available.
posted by treehorn+bunny at 7:58 PM on April 7, 2010
You can start contributing to a ROTH IRA now. This would be the single best investment you can make. Period. Starting early is the key. If I could go back in time this is the one thing I would do.
It's actually illegal to fund a Roth IRA with anything but taxable compensation (as in the number that shows up in the first box on your W2 form). That's why parents can't open a Roth IRA for their kids and deposit birthday checks from Grandma in there. I am not a tax expert but personally I would say hold off on any Roth IRA contributions until you start getting paychecks of some sort.
posted by burnmp3s at 6:44 AM on April 8, 2010
It's actually illegal to fund a Roth IRA with anything but taxable compensation (as in the number that shows up in the first box on your W2 form). That's why parents can't open a Roth IRA for their kids and deposit birthday checks from Grandma in there. I am not a tax expert but personally I would say hold off on any Roth IRA contributions until you start getting paychecks of some sort.
posted by burnmp3s at 6:44 AM on April 8, 2010
Spend less than you make.
Pay down whatever debts you have.
Pay off your credit card each month. And treat your credit card like a wad of cash: generally speaking, if you can't afford something by the end of month, you can't afford it. The bankrate.com site has a tool for comparing credit cards -- it's what we used to choose our last one.
Know anyone in the armed forces? I hear their credit union is sweet. If you don't use a credit union instead of a bank for your day-to-day banking, since they're usually smaller and more humane.
posted by wenestvedt at 8:34 AM on April 8, 2010
Pay down whatever debts you have.
Pay off your credit card each month. And treat your credit card like a wad of cash: generally speaking, if you can't afford something by the end of month, you can't afford it. The bankrate.com site has a tool for comparing credit cards -- it's what we used to choose our last one.
Know anyone in the armed forces? I hear their credit union is sweet. If you don't use a credit union instead of a bank for your day-to-day banking, since they're usually smaller and more humane.
posted by wenestvedt at 8:34 AM on April 8, 2010
This thread is closed to new comments.
Won't your wife have insurance through her pharmacy job?
As for investments: hold off on those until you pay off your debts.
posted by dfriedman at 2:04 PM on April 7, 2010