Marriage, Money, Togetherness and De$truction: Bank Accounts

Many people struggle to get their Finances in order. let's Discuss how you can avoid trouble in the future once you make the Big Step.

Sounds like a snarky book-circuit title huh? Sure, you may have heard that the number 1 seed for divorce is based on finances. Specifically, I would venture that its not the actual money, but rather conflict avoidance--the fear (or refusal) to talk about money by initiating a you-do-your thing-I-do-mine policy with the money brought in by the couple. Whether your married, living together, or dating seriously, ignoring or avoiding the discussion of sharing finances can be the foundation crack to your cause your relationship to fall, unless...

You take pre-emptive action. It is a serious threat. You should attack the problem while in infancy so that when times get tough, you can be prepared to defend your beautiful relationship against the wiles of financial destruction—the love of money.

Who Do You Love More?
Which brings us to the first rule—establish at the outset which is most important to you in your particular relationship: your money, or your commitment/trust to your significant other? Understand that commitment is stronger than love alone. If your relationship with money is so strong that it may cause doubt or apprehension in how you share it with your partner (if you do), then that will affect your decisions in a different way than two people who put their relationship above their finances. You have to be honest with yourself either way. Some deny that money is more important, but don’t hesitate to withhold spending decisions with their significant other.

The Banks Account(s)…
In today’s two-income world, this question is the paramount one. Once you get to the point where you are sharing bills (and you probably should if you’re married and you both work) this should have already been fleshed out. Your income becomes more than just “yours” when you say “I do.” I can appreciate the words of Dave Ramsey who said “When you get married, the pastor didn’t say ‘and now you are a joint venture,’ he said ‘and now you are one.’” But then again, Dave is a little old-school and that may be a little difficult for many in the New Age to accept that marriage is not just peaches and cream and happiness every day. Therefore, you should sit with your partner and determine early on how and when money will be split regardless of income.

Option 1: Joint-Main, Jr. Option
In my opinion the optimal setup would be to have a joint account to handle all expenses—and expenses include charitable contributions in addition to utilities, insurance, car payments, etc. This “main” account would be where the bulk of all you tracked spending would go. Generally its probably best to have separate retirement accounts--not only can you share your retirement money, but it offers an opportunity to diversify your retirement options.

Additionally, a second “separate” account would be used for separate personal and gift purchases. This account should probably be very small compared to the main account—the vast majority of your money should go towards building your financial future. However, purchases you make together come out of the main account—vacations, for instance, should be funded by both of you if you both work. If you want to treat your special lady to a pedicure, or if you want to spring for the big screen for your man (and you don’t want them to know how much you spent) then the “gift accounts” are also beneficial because it allows you to surprise each other without destroying the budget. This option also works if you have obligations to other areas that are not a part of the immediate family; paying loans not in your name, alimony, or helping out in-laws/family members.

Option 2: Main-Separate Option
The option that seems “the best” according to many would be the separate accounts for each partner. In this option bills may be split but each partner is responsible for their own portion. Many choose this path to reduce friction in discussing finances. Furthermore, it allows each partner to avoid any guilt because the money spent on any particular item is not questioned. (So if Jane buys 30 pairs or shoes, it’s not a problem because it didn’t come out of Joe’s pocket).

To me I think this option sows the seeds for trouble. If you get to the point where you’re hiding purchases form each other, it’s not a far walk to withhold a few other things down the road. Frank, open discussion for finances builds trust in one of the most challenging areas for a relationship—money. It’s a time to discuss what purchases are fair. Talking about money openly is almost like being in kindergarten again—you learn that there is no more “mine,” but it’s “ours” no matter how much money is made. You’re officially a family unit and not a family with subsidiaries. And if the two incomes fall to one, then there’s the added hassle of switching around billpay features,

Option 3: Joint, All-In
The hardest option, which many aspire to but few reach, is the single joint checking account. All purchases, including gifts, etc. are included. Every purchase is open for both you and your partner/spouse to view. Single-income families find that this one may fit the best. Dual-income families should aspire to this option, because at some point, the amount of money spent on a gift should not matter.

However, those my views and I’m interested in hearing yours. Comment below!

Being Online No Longer a Secret

(Edited 29 Aug 2006 at 6:45 pm)

OK, so you have a savings account. How much interest is it gaining? If you’ve decided to go against the grain of the American instant gratification system and opt for the ability to save your way to wealth or park your 3-6 month emergency fund, shouldn’t you be rewarded with more than 0.75% interest? The online banks think you do. Read on…

Perhaps you’ve heard of the concept of the online bank to store savings. I’ve written about it before. These banks are gaining more popularity as people begin to shift their savings into these crown jewels of low risk "investing." The main banks out there are ING Direct, Emigrant Direct, and HSBC Direct, and there are many others—you can check them out at http://www.bankrate.com/. It’s not a good idea to hold large amounts of money in your checking account if it won’t gain interest (which we will address later). Here are a few reasons why you should consider the online banks:

1. The Interest Rates – With inflation eating into your money at about 3% per year, you need to put your money in a place that returns values higher than that. Otherwise, saving a dollar this year would give you a buying power of about 0.96 two years from now. Imagine if you set a goal to save to make a purchase of an item in two years (or maybe even a down payment on a home) and you come to find that inflation leaves you a couple thousand dollars short of your goal at buying time.

So you need a bank that will reward you for saving by keep your interest rate high. Online banks generally have very few (if any) brick-and-mortar locations so their overhead is low. Currently the highest published interest rates for savings accounts in the industry, according to Bankrate are shown below:

Top 5+1 Online Banking Rates (among no fee, $1 minimum banks)

Rank - National Institution	Rate (APY)	Website
1 - UFB Direct Savings	5.26%	www.UFBdirect.com
2 - Emigrant Direct Savings	5.15%	www.EmigrantDirect.com
3 - HSBC Direct Savings	5.05%	www.HSBCdirect.com
4 - Citibank Direct Savings 5 - WaMu Statement Savings	5.00% 5.00%	http://direct.citibank.com Google "5% WaMu"
6 - ING Direct Savings	4.35%	www.INGdirect.com

Moving forward, the Wealth Weekly blog will keep the top 5 (+1) savings rates on the front page, so when you’re ready to jump in, you’ll know the best places to put your money. We don’t advocate rate-chasing (it’s a hassle), but your money should be safely stashed among one of the top 5 performers. For a low-risk “investment,” these accounts provide a pretty significant return.

2. Safety – Tracking your money online is a turn off for many savers who fear that their account information being compromised. However, many of these types don’t think twice about making purchases online (airline tickets, for example), or banking online at their local bank. However, one should take comfort that the big boy online banks have as good or better security than most online banks—in addition they are FDIC insured—meaning that you have a layer of protection of up to 100,000 per bank!

3. No fees – No fees! That may sound weird—the way banks charge fees these days is outrageous. You’re charged money for not having enough money. You’re charged for walking in the door and talking to the human teller. You’re charged for withdrawing your money. (Washington Mutual, excluded of course.) Even the mighty WaMu has jumped into the game, offering 5% APY for accounts opened online (though not advertised heavily). Most of the online banks have no minimums or fees charged for the account. So if you have $1, or $1000, you can open an account and not worry about low balance fees, and you can still get the high interest rates they publish.

4. Account Access. For these banks, once the money has posted to the account, you can usually get it transferred to you in two business days’ tops—if you need it. Its transferred directly into your checking account with no need to eliminate with whom you currently bank. However, it’s best to place only your long-term savings (longer than a month) there to get the superior interest. Therefore, be aware that if you need $1000 by tomorrow for some reason, its best to have that $1000 sitting in checking for immediate access. Depending on which online bank you choose, this may not be a problem either. Some of the banks, including HSBC Direct, Citibank Direct, and provide an ATM card that you can use to withdraw money from any STAR/PLUS ATM instantly, and many reimburse you for fees incurred for withdrawing from a owner’s ATM.

5. Few Downsides

For all the great features of a money-market savings account (that’s what most of these online savings accounts are) there are risks. If you need money for an immediate emergency, it will be difficult to get the money before two-days’ notice. If your “emergency” can wait that long, then you’re in good shape. These banks offer the best return for a low-risk investment like savings. If you’re afraid that your money will disappear or that the dollar will become useless, then this is not the account for you.

Interest Checking?

In addition to high-interest savings accounts, some banks do offer interest checking above a certain amount. The most popular, Presidential Bank, Bank of Internet and Evergreen (also know as Everbank Freenet) offer pretty sound rates, all well above inflation (most banks have 0% interest on checking for most accounts). Careful, there are only about 5 of these banks in existence, and they do come with NSF fees, and some charge monthly fees. You can find more info on Presidential here and the other four banks here.

So, interested?

If this piques your interest, you have several options to choose from. Different banks have different rates (in both Savings and Checking) so make an educated choice. Choose a bank that has returns greater than inflation, which means the return on your money should be at least above 3% (at the minimum). Most online banks start above 4%. Next, make sure the bank you choose fits you. Some banks have high rates but charge fees or minimums/tiers—for instance while one bank may return 5.15% with no fees or minimums, others may return 5.25% but require your balance to stay above $1000.

This site at BankRate provides an excellent table to get you started with the online banking:

Pay attention if you venture into the world of online checking. If you feel safer having a neighborhood brick-and-mortar bank, leave some money there—pare it down to a few bucks above the minimum (if there are minimums). Keeping some money with your bank can build loyalty if you ever need them for a loan. Hopefully, the only thing you’ll need a loan is for a purchase that goes up in value (a home) and not down (a car).Otherwise, don’t feel obligated to your bank. Remember whose money it is!

Kiyosaki: No Doom and Gloom, Please

I think Robert Kiyoskai has done a great deal for many Americans by getting them interested in the world of investing. He is a smart businessman and is quite a wealthy guy, touting his real-estate ownership principles to millions worldwide. However (and you knew it was coming)...

However, I think the popularity has gone to his head just a little when he wrote his book in 2002: Rich Dad’s Prophecy. The book pretty much predicts that the stock market will experience a significant crash in 2016, causing worldwide depression, screaming in the streets, and moms and dads, grandmas and grandpas everywhere will be on the street because of the economic recession caused by the stock market crash. His solution to survive the crash (of course) is to generate cash from rental properties.

Yeah…

Well, to each is own. I have history on my side, which, contrary to popular belief, can be fairly indicative of future results when predicting market performance as a whole.

Rest assured readers – the stock market is dependent not only on IRA/401(k) contributions, but also by American spending and American confidence in its economy. I bet that’s not going away. Consider some of the following points as you examine Kiyosaki’s idea closely:

- The Sky is still up there. Kiyosaki has not been the first guy to claim that the economy is going to hell in a nicely-bowed handbasket. A cursory review of the reviewers even find that they predicted (in 2003) a “major” stock crash in 2006. Well…maybe they’ll have a shot–there’s 4 months left! There was once a common belief in the 80’s and 90’s that the stock market was going to decline as the best source to keep your funds. However, the stock market still stands as the superior place for long-term funds, even when you consider the crashes of 1929, 1987, and 2000.

- The Housing Market is not Bulletproof, either. Kiyosaki suggests, as he does in several of his works, that the real-estate market is the best solution to “ride out” the coming stock market crash in 2016. But you have to realize that owning real estate is much harder than owning stock over a long-term period. Real estate is a fabulous investment, but it’s not something you could cash out whenever you want. Know that when you own real estate, especially as rental property, you have to take into account that tenants don’t always pay on time and sometimes will abandon property if they cannot pay.

If the stock market falls in on individual investors because older people are forced to take out money from their IRAs, what would stop these investors from using their real estate investments as leverage to cover their losses from the stock market? The housing/real estate market will most likely follow closely behind the stock market if a major crash is on the horizon.

So ignore the fearmongering. Bottom line—no one knows what life will present ten years from now. Back in 1996, few people actually believed that we would be where we are now—financially or politically. After the crash in 1987, few believed that the stock market would come roaring back to some of the highest returns ever. Maybe some did, but really, its at best educated guesswork. After all, you’d probably find just as many people who “predicted” the 1990’s bull market as those who “predicted” it wouldn’t happen. Political changes to ERISA may happen in 10 years to prevent such a catastrophic fall, and then again maybe it won’t need to. History tells us that we’ll be OK.

The American economy—and by extension, the stock market—is largely driven by American consumer confidence. It’s what keeps us afloat even in struggling times. Investors who are on board for the “long-haul” will laugh all the way to the bank—and chances are strong that the only thing that will hit them from the sky is a little rain.

As usual, I don’t claim to be right on issues like these, but I like to spark discussion. Leave a comment or two, and let’s talk about it.

Next Week: Online Banks—Revisited!

Summer Break

Readers,

Sorry about the lack in posts, but its been very busy for us here at WW. We will begin a fresh new set of posts on developing and increasing your wealth and improving your finances--join me back in late August as we develop more articles for your viewing and learning pleasure.

Thanks!