Couples and Money- Work Together To Make The Most Of Your Money (Part 2)
Last week, I introduced Andy and Sarah, a couple in their mid thirties, with a good life and big dreams (click here to read last week’s post).
Today, we’ll explore the couple’s banking and credit habits and what they plan to change for the future.
Like most young couples, Andy and Sarah do most of their banking on-line. “Can’t remember the last time I visited my bank branch. I like it that way” Andy says. Sarah agrees. Each use different banks and have their own savings/checking accounts and credit cards. While there is nothing wrong with this strategy, it’s important to check in with each other periodically.
Both Andy and Sarah are surprised to discover how much they’re paying in monthly fees between them. Because their money is spread out among many accounts with little thought of maintaining minimum balances, their transaction and overdraft fees are substantial. “This is wasted money” Andy declares. “When you total it up over the course of a year, it’s significant”.
Sarah works hard and likes having her own money. She does not want to feel accountable to Andy for every penny she spends. “I get that” offers Andy, “but we need to find a better solution”. The couple also learns that each has a “legacy” account from their university days. Andy’s is with yet another bank. “Could we reduce our fees if we banked with one institution rather than three?” asks Andy. “This is definitely worth investigating”.
There’s a lot to be said for simplifying your financial life. Do you really want to spend more time than necessary managing your money? After listing all their bank accounts (7 in total) and cash balances spread out among them, Sarah is thrilled. “It’s like new-found money”, she exclaims. “We’re richer than I thought”.
Their discovery is a double-edged sword. The couple now realizes that they can be doing much more with their collective money. With some effort up front, they can eliminate unnecessary fees and use their cash more efficiently.
Their credit cards tell a similar story. While Andy has always been diligent about paying his credit card balance in full each month, Sarah has not. Several months ago, they bought some much needed furniture for their new house on Sarah’s credit card. Because Sarah pays most of the bills each month, she has been unable to pay off the credit card balance. “It’s shocking how the interest adds up”, she declares, after reviewing her statements for the last six months. “Why didn’t you tell me this sooner!” Andy speaks up. Turns out Andy has built up a sizeable cash balance in one of his accounts that is sitting idle. He’s known he needs to do something with the money, but couldn’t decide what. If Andy had known about Sarah’s unpaid credit card balance, he would happily have paid it off 6 months ago!
A New Solution
After analysis and discussions with their respective banks, Andy and Sarah have decided to consolidate their accounts and credit cards with one bank. They will establish a joint account and have their respective pay checks automatically deposited. While Andy doesn’t care to, Sarah will keep a separate savings account for “fun” money where a set amount is transferred each month. By reducing and restructuring their accounts, they will eliminate all fees including overdraft protection, transactions and yearly credit card fees. They’ve been offered free cheques and a safety deposit box rental and suspect that they’re now a more preferred customer of their chosen bank. Because the ATM of their new bank is so handy, Sarah will no longer pay for frequent withdrawals from an different ATM; an added bonus. Sarah even has a better credit card rewards program now at no cost.
“The extra effort to revise our banking arrangements will be well worth it” says Andy. “We’ll save almost $1000/yr, have a better handle on our cash and will make sure it’s used more efficiently.” “Maybe we can pay off our mortgage sooner than we think?” offers Sarah. A great goal to shoot for!
Next week: Andy and Sarah get smarter with debt
Photo courtesy of mainstreet.com