Q and A: Get Healthy About Money
How to end bottom-line battles, build up college savings, and morefrom
finance coach Lynnette Khalfani-Cox.
Q: My husband and I constantly fight about money, especially when things are tight. How can we get on the same page?
A: Money battles are a frequent source of frustration for couples. The biggest culprit generally isnt how much is in your bank account, but your clashing money styles (youre a spender, hes a saver, and so on). Another huge problem is lack of communication. Lets face it: Most of us arent comfortable talking about moneyeven with our spouse.
But it doesnt have to be that way. Have a nonconfrontational “monthly money date” with your husband. Adopt this mantra: disclose, discuss, and decide. Start by disclosing the debts, assets, income, savings, pension benefits, and loans you each have. Then get at what drives your arguments by each completing this sentence: “What stresses me out (or scares me) most about our financial situation is …” Is it really about a lack of money, or is it something else? For instance, perhaps youre handling all the financial affairs, and its totally stressing you out. Once your fears are out in the open, you can discuss your financial priorities. (I suggest setting them in this order: paying off debt, building savings, and setting aside funds for specific goals.) Then youll be able to decide together where to save and where you can splurge.
Q: Im stressed about not having money for my kids college education. Whats the best plan?
A: There are lots of options, but the best one, hands down, is the 529 Plan. These are state-sponsored college-savings accounts that let you sock away as much as $250,000 for tuition, fees, books, supplies, equipment, and room and board by investing in mutual funds. Earnings are tax-free, and your children can attend virtually any school in the country. You can sign up for any states plan, but check out your own first, because many states offer juicy tax breaks for residentsConnecticut, for example, allows 529 tax deductions for up to $5,000 a year for individual filers and $10,000 for joint filers.
You can make saving easy by setting up monthly automatic deductions from your bank account into a 529. Grandparents and other relatives can contribute, too (some states even offer them tax breaks for it). To learn more about 529 plans, go to www.savingforcollege.com.
Q: I make more money than my friend, and she often cant afford to go to the places I choose. How can we have fun without the money thing hanging over our heads?
A: One solution is to scale back on the fine dining and expensive outings with this friend. (Whats motivating you to choose places she cant afford, anyway?) Save the pricey plans for nights out with a friend who has more disposable income. But you can also get creative. Suggest lunch instead of dinner at that hot new bistro. Tell your friend “lets grab some appetizers”and mean it. Seek out complimentary or inexpensive wine and food tastings (try www.localwineevents.com), or snag a pair of discounted theater tickets at www.theatermania.com.
And try letting her take the reins with plans sometimes. Yes, she may pick restaurants or activities that wouldnt top your list. But if you keep an open mind, you may be pleasantly surprised by a new cuisine you never thought to try, neighborhoods you hadnt discovered, or fun places that are also easy on the wallet.
Lynnette Khalfani-Cox, is the author of Your First Home: The Smart Way To Get It and Keep It. Find out more about Lynnette online at www.themoneycoach.net.