My husband and I have been together for over six years now and lived together for four years prior to our wedding. While we're still in the early stages of merging our finances (a process that will no doubt speed up as we move toward buying a house), we do have a system that we have been using for several years now. It's called The Reckoning.
For us, the reckoning is a way of tracking who owes what to whom. We've perfected it now to the point that very rarely do we need to “settle” the reckoning. To give you an idea: He pays the rent, and I buy the groceries and pay the electric and internet bills. We more or less come out even at the end of the month. As long as the amount we owe each other remains under $100 or so, we let it ride. If it goes significantly above that, we settle up.
At this point, however, we're talking about a different type of reckoning. How much debt do we have? Because I've heard good things about Mint, this is the tool I decided to use to get us talking about our debt so we can begin to set and move toward mutual goals.
NoteArizona is a community property state. There are only nine of these, and they are almost all in the West, so many people aren't familiar with them.
Basically, it means that debts or assets belonging to an individual prior to the marriage remain the sole and separate property of that individual after the marriage unless you draw up paperwork saying otherwise. So legally, we cannot be held responsible for the other person's debts if they were incurred prior to our marriage.
Going forward, however, everything that we earn/buy/incur is jointly owned between us. This means that while obviously our debts affect each other in terms of the life we are building, I couldn't get sent to collections if he defaulted on one of his credit cards providing the balance was incurred pre-marriage. It is also possible for one spouse to declare bankruptcy while the other one doesn't. (I asked another attorney friend about this confidentially prior to the marriage.)
Without further ado, here is our reckoning. Please note that I've consolidated some separate accounts of the same type into one balance for simplicity's sake.
Honey's Reckoning: Debts and Assets
- Debt 1: BoA CC, $2,435.66 @ 7.9%. My share of the wedding expenses not covered in advance.
- Debt 2: USBank CC, $2,386.72 @ 9.9%. This is actually my husband's balance transfer (at the time it was the best rate he could get), so I don't pay it, but since his name's not on the card and the transfer occurred prior to our marriage, I'll count it here. He's had a balance on the card for over two years and paid off more than half the original balance.
- Debt 3: Federal Direct Loans, $94,295.99. None of this is from my BA; I have an MA and a PhD, so this covers 8 years of graduate school (I work at a university in an administrative role). I am in the process of consolidating one more loan into this balance, but it's in limbo at the moment and I'm not sure what the exact total will be. It's an additional $5,200 or so, though.
- Asset 1: Retirement, $12,240.41 in a 403(b).
- Asset 2: Emergency Fund, $4,500.
Hubby's Reckoning: Debts and Assets
- Debt 1: Pentagon Federal Credit Union CC, $12,935.83 @ 0%
- Debt 2: BoA CC, $8,311.35 @ 0%
- Debt 3: First National CC, $2,838.37 @ 0%
- Debt 4: Discover CC, $2,075 @ 0%
- Debt 5: Chase CC, $1,500 @ 9.9% (this is a loan to the business to cover his partner who was short, it should be repaid this month before any interest accrues)
- Debt 6: Student Loans, Various, $102,204.28. None of this is from his BA, either; it is all from law school. Law students have to pay graduate tuition and law school tuition, and they're not allowed to have jobs except during the summers. He went to a public, in-state, Tier 1 school and was on Law Review, aka, this is as good as it gets.
- Debt 7: Auto Loan, $5,452.02. The car is a 2008 and worth more than twice this.
- Asset 1: Retirement, $19,026.46.
- Asset 2: Emergency Fund, $2,194.77.
So that's where we stand. I think from here the next step is to do some goal-setting. Hubby has mentioned both buying a house (which to me only makes sense if we are going to stay here for at least 10 years, preferably more) and moving to another state (which to me is opposed to the previous goal), so I'm not sure what's more important to him. I have observed (and he has admitted, both to myself and our mutual best friend) that he finds prioritization — of anything — almost impossible, so this should be interesting.
When I mentioned that my purse was wearing out and I'd like a new one, he said something along the lines of, “We'll have to decide whether a new purse is more important than buying a house.”
Now, I probably will not buy a new purse even though I love my Dooney & Bourke handbag like it was a human being and have worn it almost every single day for over four years (bringing its daily use cost to 13.5 cents per day).
However, contrast his attitude towards my handbag with this: when he mentioned moving out of state, I said that if neither of us had a job lined up that we shouldn't move until we had $20,000 in savings and no credit card debt. He replied, “Well, obviously you don't want to move and you're using our debt as an excuse.” No. I would love to move to the northeast; I just want to be done making financial mistakes and instead make some headway.
Asking the Readers
If you are in a committed long-term relationship, are you the spender or the saver? Do you have trouble prioritizing, or know someone who does? If you do, what tips and tricks have you employed to help yourself (or the other person) along?
If you were me and anticipated paying off your credit card debt within three months, would you thereafter divert your extra cash toward a mutual savings goal (say, a downpayment fund) or would you help your significant other pay off their debt? I'm eager for other perspectives!
Honey Smith has been reading GRS since at least 2008, right when she got her first â€œrealâ€ job and started getting serious about finances. She and her husband Jake are in their mid-30s and recently bought a home together. Currently, she manages graduate programs at a large state institution, and he is an attorney at a mid-sized firm.
Between them, they have paid off approximately $30,000 in consumer debt since she started writing for GRS in 2012. However, they still have nearly $200,000 of student loan debt, so she will continue to chronicle their debt-paydown journey. In addition to personal finance, Honey is interested in vegetarianism and cooking, gardening (despite living in the desert and having a black thumb), issues in higher education (including the student loan bubble and the slow death of tenure), and animal rights; however, her heart lies with fantasy novels, trashy TV and Skyrim.