Of starter homes and joint accounts
Financial advice for the newly married
By David Myers
Southwest Kansas Catholic
INTRODUCTION: When I recently began to study my financial responsibilities when it comes to retirement, I realized how much wiser I could have been with my finances starting much earlier in life. In light of this fact, I offered some questions to Eric Haselhorst, Director of Stewardship for the Catholic Diocese of Dodge City, designed primarily for young couples just starting out.
Southwest Kansas Catholic: Eric, I’d like to create a couple: Connie and Frank. They’ve been married for two months. Both graduated from college last June. They both have jobs, but with starter’s pay. What is the first thing Connie and Frank should consider, financially speaking, once they are married?
Eric Haselhorst: Ideally, Connie and Frank would create joint accounts, with the person who manages money naturally being the bill payer.
Obtain life insurance: I would suggest that each obtain a life insurance policy that is 10 times their annual income. Why? In the event of a death, that amount of money will help replace some of the activities the spouse provided, such as house cleaning, lawn care etc. A stay-at-home parent needs life insurance, too.
Obtain health insurance: Health insurance is a must, and is often provided by employers. As of this writing, health insurance outside of an employer is a moving target as far as affordable choices.
Create an emergency fund: An emergency fund should be a minimum of $1,000 to get started, $500 if the earner makes $20,000 or less, annually. Once financially stable and debts are paid off, the emergency fund should be three to six months of living expenses.
Southwest Kansas Catholic: What should their priorities be when creating a budget?
Eric Haselhorst: Depending on where Connie and Frank fall financially, the four walls are the first consideration: food, clothing, shelter, and transportation. Once those mandatory pieces are in place, other items can be considered.
Southwest Kansas Catholic: What is the smart thing to do when considering their first home/apartment?
Eric Haselhorst: Unless a person plans to be in area for five or more years, renting is a great option, as it buys time. Also, renters insurance is cheap and a smart buy when renting.
Southwest Kansas Catholic: When it comes time to purchase a home, what should they be careful of so that they don’t get in way over their head?
Eric Haselhorst: Most couples can afford more home on paper than they might want to afford when considering their lifestyle. A house payment should not exceed 25 percent of take home pay, including taxes and insurance. A 20 percent down payment on a 15-year fixed mortgage will help couples avoid being house poor, and will allow them to sleep well at night.
Southwest Kansas Catholic: Should they be putting money away even as they are paying off debt? Or should they pay off their debt before putting money away?
Eric Haselhorst: If Connie and Frank will aggressively pay off debt, saving money can be put on hold. The key is to try to be out of debt super fast, then to try to save 15 percent of your income while paying off the house.
Southwest Kansas Catholic: Considering the incredibly high cost of college, how best should parents save to help pay for their children’s tuition?
Eric Haselhorst: 529 plans in the state of Kansas have favorable tax implications. [The 529 Plan is operated by a state or educational institution, with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training for a designated beneficiary, such as a child or grandchild. See more at irs.gov/newsroom/529-plans-questions-and-answers.]
Southwest Kansas Catholic: Could you give Connie and Frank any advice on investing?
Eric Haselhorst: Outside advice from a qualified expert in retirement plans is a great asset. Choose one with the heart of a teacher. If you cannot explain your retirement plan to a 6th grader and have them understand it, don’t buy it.
Southwest Kansas Catholic: What are some of the unexpected financial struggles that married couples face? What is the best way to prepare/deal with them?
Eric Haselhorst: Our grandparents would often have a “Rainy Day” or “GOK” (God Only Knows) fund. This type of savings or emergency fund helped to soften the blow of the unknown financial troubles. Eventually, there will be a broken bone, bad transmission, flooded basement, or other type of short-term catastrophe. Having a good emergency fund, as well as health, auto, and home owners insurance, helps to insulate couples from the unexpected things of life.
Eric is the Director of Stewardship for the diocese, and has been a featured speaker at numerous financial seminars, as well as at the annual diocesan Stewardship Day. He is also an author and in his off hours is a small business owner. He is married to Christine, Dodge City Community College Foundation Director. She also portrays Miss Kitty at the Long Branch Saloon at Boot Hill Museum. The couple have three children, Matthew, Allison and Kara. They reside in Dodge City and attend the Cathedral of Our Lady of Guadalupe.