Really Dumb Things to Do when Dating with Money


Unlike 80 years ago a large number, if not the majority, of couples now live together before they get married.  For some the idea is that it makes sense to “try things out” before getting married.  Perhaps if a couple lives together, they will find out if they are right for each other before getting married, or so the thinking goes.  The high divorce rate, despite living together becoming commonplace, indicates that this is probably not the case.  The difference is that things are different once married, mostly tied to the difficulty in leaving once married.  There are all kinds of costs and procedures that must be done to get divorced.  All kinds of rights that each spouse has.  If living together, one person just needs to pack up and go.

When it comes to handling money, there are good reasons to wait for marriage before doing a lot of things. With money, it is this difficulty in leaving and legal protections that come with a marriage that are important.  They make a lot of things to make sense to do as a married couple that are really bad ideas to do as an unmarried couple.  A few of these are as follows:

1.  Buying a house together.  Many couples who are living together decide to buy a house.  After all, why spend all that money on rent if you can buy?  The trouble is that if the relationship doesn’t work out, there are all kinds of issues.  If one person puts in more money for the down payment, will the ex-boyfriend/girlfriend be willing to refund the extra money?  Who gets the house if you break up?  What if one person wants to sell but the other doesn’t?  What if one person decides to get back at the other by not making the payments but also not allowing the other to sell the house?  What if both incomes are needed to make the payments – do you really want to be making payments on a house in which you are not living.  What if one spouse dies – suddenly you would own a house with his/her parents or siblings!

Buying a house together if you are not married is a sure recipe for owning a house with someone you hate.  With a marriage there are legal procedures for dividing assets like houses if the marriage doesn’t work.  Also, when getting married everything because “ours”, not “yours” and “mine”.

If you really can’t stand continuing to rent, but aren’t ready to get married, consider having one person buy the house and have the other contribute to the payments in a rental agreement.  If things don’t work out, it would then be nothing more than having one person move out of a rented apartment.  If you do get married, ownership of the house transfers to both people.

2.  Buying a timeshare together.  This isn’t quite as bad as buying a house together – at least you could take the timeshare on different years.  Then again, it is almost impossible to sell a timeshare, so you would probably end up owning the timeshare with your ex forever, so it may be just as bad.  Most of the above issues with buying a house apply equally to buying a timeshare.  Buying a timeshare for any reason is a bad idea.  Go to some rental condos and bed-and-breakfasts while dating.  Once you are married, then buy a condo at the beach.

3.  Paying off the other’s debt.  While getting out of debt is a noble goal, if you pay off the debt for your boyfriend/girlfriend, he/she won’t learn to handle money and it can lead to bitter feelings if the partner goes out and runs up debt again.  If you get married, his debt becomes your debt.  While dating, however, keep it separate.

While living together is like being married, and you may believe you will be together forever, it is not the same thing as being married.  Avoid tying yourselves financially until you actually tie the knot.

If you have investing questions, please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Will Privatization of Social Security Work? Here’s a Chance to Find Out.


Ask SmallIvy:  Please send investing questions to vtsioriginal@yahoo.com or leave in a comment.

You may have heard various candidates talk about privatizing some or all of your Social Security savings.  They say that instead of sending all of the money into the government to distribute, a portion or the whole sum should be put into private accounts that workers control.  Proponents (myself included) claim that this would result in significant increases in the amount people receive when they retire.  The mere mention of privatization, however, immediately results in dire warnings of the risk of putting worker’s retirement funds in the stock market.  The campaign letters then go out to seniors warning that their Social Security is in peril, ads are broadcast of reformers pushing old ladies in wheel chairs over cliffs, and the issue goes away in favor of the status quo.

Because such scare tactics are so effective, and therefore there has never been enough political stomach to actually privatize any of the funds contributed to Social Security, the idea that doing so would bring better results remains untested.  Ironically, however, the current payroll tax holiday, offers a chance to do just such a test.  How would this work?

Well, you may have noticed that your take-home pay has been a little bigger lately.  This is because the payroll tax on the worker side has been decreased from 6.2% to 4.2%.  This means that if you make $50,000 per year, you’ll be taking home an extra $1,000 per year.  While this may be too little to result in any economic stimulus, as was envisioned, it is plenty to perform a little experiment.  Since this is “found money,” instead of just blowing it on something, why not pretend your takehome pay is the same and use the money that would have been going to Social Security to see what privatization would be like.  After all, if you lose it all you would be in the same position as if you had sent the whole amount into the government in Social Security taxes.  Here is the experiment:

Take the extra take-home pay and start saving it in a savings account or in a drawer in your home.  Once you have $1000 saved (which will take about a year if you have a gross income of $50,000), call Vanguard (who recently lowered their minimums to $1000) and put the money into one of their equity mutual funds.  Good choices would be the S&P 500 fund, the Mid Cap fund, or the Small Cap fund.  Then, as long as this payroll tax holiday lasts, keep putting the extra into the fund.  You can even set up automatic withdraw to Vanguard so you don’t forget.

Once this is done, continue the monthly investments or, if you are worried about the market, just stop the deposits but leave the initial investment.  Then, forget you have the account for 10 or 20 years.

If I’m right, when you check back in 10 years, you’ll probably have something like $2300 in the account if you just made the $1000 minimum and nothing else.  In 20 years, you’ll have about $8,000.  In 50 years, you’ll have about $128,000.  In 56 years, you’ll have about $256,000.  With that money, you could take a withdrawal of about $30,000 for the rest of your life if you lived until you were 90 years old before exhausting the money.

So, if I’m wrong, you’ll be out $1000.  If I’m right, you’ll have $256,000 in 56 years.  If I’m a little wrong, you’ll have $100,000 in 56 years.  Anyone willing to give it a try?

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Should You Stop Paying Your Mortgage?


I’ve  heard many who are saying that if you are underwater and your mortgage company doesn’t agree to modify your loan, you should stop paying.  After all, it isn’t fair that you need to pay $400,000 for a home that is only selling for $350,000, right?  That big, evil mortgage company is being greedy, so you shouldn’t need to pay them, right?

Let’s take this further.  If you walk into a store and you want a pair of jeans, but they now cost $40 and were on sale a few weeks ago for $30, you should just take them, right?  After all, are the jeans really worth $40?  If you put them at a yard sale, you’d be lucky to get $5 for them!  Why should you pay this big store $40 when they are only worth $5?

Hopefully, even if you agree that you should stop paying on the house, you are not agreeing with my second example, but what really is the difference?  In one case, you are stealing a pair of jeans selling for $40.  In the other case, you are refusing to pay the $400,000 you promised because the house is now worth only $350,000.  When you agreed to the loan, you were willing to pay $400,000.  You also got use of the house.  Would you have called the bank and told them to reset the loan up if the value had grown to $500,000 in a few years?  Would you walk into a bank and steal $50,000 from them over the counter?

I know there are special circumstances where people can’t pay.  Someone has a medical emergency or someone loses a job.  Maybe there is a divorce and your spouse who was the breadwinner just decides to leave you with the bills.  If you can pay and just chose not to, however, you are stealing.  No matter what the price of the house is currently, the bank gave you the full price of the house when you bought it and you agreed to pay them back.  You agreed to the interest rates, you agreed to the terms, and you agreed to the  payments.

One of the top traits that people who succeed and grow rich site is very strong ethics.  People who grow a successful business keep their word and do what they say they will.  People who lie and cheat sometimes get something for nothing, but in the end they tend to end up broke and penniless.  I don’t know if it is God, or karma, or just that those who tend to cheat get figured out and lose future business, but there is a definite correlation.

So if you are underwater in your mortgage and don’t like it, get mad and start working to pay the thing off as fast as you can.  Work extra, eat out less often, and cut some of the accessories from your life and put every penny towards the mortgage.  But don’t be a lying cheat and stop paying because you now think the terms are unfair.  You are hurting your neighbors and yourself by driving down home prices.  You will never win by cheating.  Also, you will never have the pride that comes living honestly.  While it is easy to equivocate and justify your actions, that voice deep down inside of you is telling you that you are wrong.  Listen to it instead of the moral equivalency around you.  You know what is right.

Your investing questions are wanted.  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.