Couples who wish to spend the rest of their lives together often think they've got marriage all figured out -- that is, until it hits them that it means taking in both the good and the bad -- debts and loans included.
We sought the opinion of financial experts Sharon Que, Clarissa de la Paz, and Ofelia Tordesillas, M.D. on these common sticky situations involving a married couple's finances:
Q: “My husband incurred a lot of credit card debt. He wants to dip into our savings. Is this advisable?”
Ask your husband to cut the credit card, call the bank, and either ask the bank for an amnesty -- most banks will give a huge discount if the card holder will pay in full -- or, if it’s still too big an amount, tell the bank that he wants to pay the whole amount and negotiate for a one- or two-year term with a very reasonable interest rate (not 3.5%). Most banks will accommodate such a request. That way, the amount will be manageable, and he won’t need to touch your savings. - Sharon Que and Clarissa de la Paz
Sharon and Clarissa are co-authors of the bestselling book I Wish They Taught Money in High School. Que put up her first business when she was 10 years old, while de la Paz is both an employee and an entrepreneur.
Q: "My husband and I have three kids who are all in school, and we can barely make ends meet every month. Is it time for me to get a personal loan?"
First, look very closely into your spending habits. There are usually clearly identifiable unnecessary expenses that bore holes in your financial bucket. From there, you can start to determine how to better manage your resources and expenses.
If your income truly doesn't match your basic expenses, augmenting your income is the only solution. Is there any way you or your husband can reinvent yourselves by getting an additional stream of income that will work around your core gifts and passion? There are so many income opportunities around you, you just need to think hard enough. If you wish to push through with your loan, availing one should be done with utmost caution. If done for the purpose of starting a business, which you deem profitable after careful evaluation, then it can surely help. But if it's solely for the purpose of bridging your finances and you end up with loan sharks, then it will only turn your financial house upside down. - Ofelia Tordesillas M.D.
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Ofelia is a financial planner who promotes financial wellness by structuring portfolios to help clients become permanently wealthy. She is a pediatrician by profession.
Q: "How much should my emergency fund be, and where should I keep it?"
The general rule of thumb is for emergency funds to be at least the equivalent of your living expenses for three to six months. This is to adequately prepare you for unexpected events like unemployment, illness, or injury that takes away your ability to work, or any other unplanned expenses. People with a substantial income or a profit margin can aim for two to three months of their living expenses so there's time to move money around before the entire emergency fund is consumed.
Because of the very reason for which they have been created, emergency funds should be accessible and easy to withdraw. They should not be placed in volatile investments, as a market downturn can negatively impact the availability of funds.
You may opt to place the first two months of emergency funds in a savings account, time deposit, or money market. Then place the remaining four months of emergency funds in preferred shares or government bonds, or fixed income funds, which come with better yields and minimal risk, and at the same time are also very liquid. - Ofelia Tordesillas, M.D.
The above are excerpted from Good Housekeeping magazine's June, December, and November 2015 issues.