How did we get here? Part 3, Joint Financial Lives

Previously, I’ve talked about our families’ financial positions and attitudes, and our individual financial lives. This time, I’ll tell you about our experience of merging finances when we moved in together, and our choices between then and now.

Since we’ve known each other, there’s always been a large disparity in our incomes. I was able to easily cover my expenses as a student with the income I had – but not the cost of the regular meals out, movies and other things H1Worker could afford on his $60,000 salary. And to be honest, I’d never really had much desire to – I was already amazed at how many resources I had access to at college. Free movies every weekend, interesting speakers, free gym equipment, lots of free food… why spend money to get things I could get for free?

But I was also getting mighty sick of never leaving the 2 blocks of our campus. It was nice to get a glimpse into what i thought of as ‘the corporate lifestyle’, and H1Worker was happy to cover my share so we could do things together. He didn’t have a financial plan to speak of, and very few expenses – in fact, when we met the only furniture in his 1 bedroom apartment was a futon mattress on the bedroom floor, a TV, an Xbox, a table for the TV to stand on, and 2 chenille cushions! He also didn’t own a car, and walked to work most days.

8 months later, we prepared to move in together. We had decided to share our financial records, and I was astonished to discover H1Worker had accumulated around $3000 in credit card debt. There was really no reason to have this debt, given how low our expenses were – it was a result of having paid absolutely no attention to his finances! He had enough in his checking account to pay off about a quarter of it immediately, and we got rid of most of the rest within a few months, using our tax return checks and a lump-sum fellowship payment I received.

As preparation for moving in, we calculated the disparity in our incomes and discovered H1Worker’s was approximately ten times mine (not counting the cost of my tuition). So we agreed that I would pay half of the rent – around $400 – and cover my own transportation costs. We tried to balance the disparity in salary through the distribution of chores, but in practice it didn’t work out because of the long hours I was spending at school. Still, in general it was an arrangement we were both comfortable with.

After we’d been living together for about 4 months, we decided it was time to buy a car. I’ll write more about the car-selection process in another post – to make a long story short, we decided on a late-model used Mazda , which we purchased for around $15k (with a variety of upgrades from the standard model). H1Worker’s credit history was good, but short, as student visa holders don’t generally qualify for credit cards. As a result we were only able to qualify for a rate of 10.99%.

The more I thought about this, the more it bothered me. I don’t think my parents have ever borrowed money to purchase a car, so it wasn’t something I considered a ‘normal’ expense. I added up the interest we’d pay over time – just under $5,000 over a 5 year loan, 1/3 of our car’s value! This realization spurred me into action, and H1Worker was no less motivated. Together, we made a budget and began to manage our expenditure more aggressively.

In the past year, we’ve developed what I think is a solid budget that allows us to save, pay off that car and still do the things we enjoy. We didn’t make much headway with savings until last September, as we’ve had international travel, an interstate move and a few other large expenses to deal with in the meantime. But now we’re on track to pay off the remainder of the car loan (about $11,000) by mid-2007, while continuing to save to meet our other goals.

We also plan to begin contributing to a retirement fund in the coming months. This is something of a tricky business for visa holders, and I’m sure I’ll be writing about this often – but H1Worker’s 401k match will kick in midyear, and we want to take advantage of that, at least.

I hope you’ve enjoyed this 3-part overview of our financial history to this point. I plan to explore several of the issues I’ve raised in more depth, and will come back and add links to this post as I do. You can also find all related posts in the ‘History’ category in the sidebar.

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