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Pay Dirt is Slate’s money advice column. Have a question? Send it to Athena, Kristin, and Ilyce here. (It’s anonymous!)
Dear Pay Dirt,
I’m preparing to ask my husband for a divorce in the next few months, and I’m wondering if you can weigh in on what is a…fair division of our assets. Here’s the situation: We’ve been married for six years, and during that entire time we have owned a business in the seasonal travel industry together. The actual work happens from May to October, and we do divide the labor during the season 50/50, but he acts more like a contract laborer and I am the planner and client-facing person as well as laborer. It’s my year-round job to do admin, accounting, marketing, and customer service. In the “off-season,” he essentially does nothing. The occasional gig, but that money usually gets whisked away into his hobbies. For a long time, this was honestly fine. Our business was so successful, that as long as I put in 10-15 hours a week in the off-season, there was really no need for him to work. That has all changed in the last two years. The market has changed significantly and I have found myself working 50-60 hours a week every single week of the year, juggling running my business, doing the work of my business, and taking on gig work like childcare and substitute teaching to make ends meet. We’ve accrued some credit card and tax debt due to our severe drop in revenue.
He has not adjusted to this new reality. We have fought many, many times about the fact that we are barely scraping by and that times are just tough now. He hasn’t made an effort to find freelance work or side hustles. I asked him to take some marketing things off my plate, and asked that we start keeping time sheets—he regularly logs 15-20 hours of vague “website work” compared to my 50 hours of balancing a full-time job and two part-time jobs. He just got a gig that pays $400 and immediately spent $400 on his hobby. I’ve come to accept that there is nothing I can do to change this man. I want to ask him to move out and close the business. I’m sure that I can do just fine freelancing on my own if I get a roommate.
So as for our assets—after paying off debt, we will only have about $15,000 in our business checking, and no personal savings. We each own a vehicle, and have $150,000 in equity in our house (owing about $350,000). If we split our remaining cash and the cars, what do you think should happen to the house? I really want to stay here—I love the house and our community, our interest rate is 2.5 percent, the area is getting more and more desirable, and we have two pets that would not be suited to apartment life. If I asked him to move out and got a roommate to pay rent, what would I owe my soon-to-be ex? Nothing until we sell later on? Do we capture a snapshot of the equity at separation and then everything that grows belongs to me? Is there a way I need to be cashing him out at separation? My name is on the loan, but the house is marital property. If we take a divorce to court, so be it but I would love help with a starting point that acknowledges the fact that our financial partnership has been pretty lopsided for a long time.
—Feeling Stuck
Dear Feeling Stuck:
It sounds like you know what you want to do, but are stuck on how to tap your home equity to pay your husband his share. A growing number of Americans are caught in the same trap: They need cash for one reason or another (divorce, debt payoff, job loss, etc.) but don’t want to refinance out of their amazing sub-4 percent mortgage interest rate.
Lucky for you, there’s a new way/old way to tap into your home’s equity: home equity agreements. There are a handful of companies (Hometap and Unlock Technologies are two of the biggest) that will give you up to 20 percent of your home’s value in cash if you give them a percentage ownership of your home. You pay nothing against this arrangement until you sell the home, so there are no monthly payments. If you owe your husband half of the $150,000 in equity today, he’d get $75,000, which is a good deal for him since he’d get less if you had to sell and pay the costs associated with that transaction (broker’s commission, transfer taxes, and anything extra spent to fix up or market the property). But your equity in the home will continue to grow and you’ll keep your low interest rate. When you sell, you’ll share a percentage of the proceeds with the company. Or, you’ll have the option to pay off the amount if you refinance in the future.
The problem I see is that your husband has a great life and may not go quietly. To your telling, he does less than half the work and none of the worrying about your lifestyle. Now you’re asking him to put on his big boy pants, move out, and get to work. The conversation probably won’t go well.
So, accept that you’re probably not going to get compensated for your extra work, get your financial ducks in a row, and make him his best offer. If he says no, then get ready to give up your neighborhood, sell your home, and move on. Or, see him in court, which will quickly eat up a good portion of that equity.
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Dear Pay Dirt:
I (F 27) recently bought an old, fixer-upper with my partner (M27) about a little over a year ago. It’s been a huge learning curve with renovations—at first, we thought we’d be able to DIY a lot of the changes: new tiling, floors, yard work, etc. but we’ve ended up having to hire a lot more help than we planned for throughout the process. We’ve made many mistakes (wrong tiles for the bathroom floors forcing us to buy whole new ones, a fence mix-up, a plumbing issue) and are in a slightly better place now. But it feels like every time we just begin to catch our breath, some new major charge comes up leaving us with little money leftover and some of the more fun house projects (decorating) even further on the back burner because we can’t afford the furniture or things we want. This house feels like an endless money pit—we haven’t gone on any kind of vacation since we bought it and we don’t plan on one soon. We were so excited about this! But we can’t seem to get out of non-stop house stress and big charges mode. How do we get out of this cycle/does it get better?
—House Torture
Dear House Torture:
Wouldn’t it be great if you could renovate a home in 30 or 60 minutes just like every show on HGTV? I especially love the ones where two people build a whole new 3,000-square-foot house in 100 days—and they only miss the deadline if there’s been a hurricane!
Having pitched a fair number of reality television shows in an earlier part of my career, I feel qualified to say that unfortunately, life isn’t at all like reality television. Too many of us make mistakes and poor (and financially painful) decisions when we’re renovating or redecorating. When my husband, Sam, and I were renovating our current house, we made more than our fair share of mistakes, too, including hiring a contractor who went belly up in the middle of our renovation. One day, that contractor announced he had spent all of our money, leaving us to scramble to find more than $50,000 to get the job done.
Such great memories—not! What I can tell you, is it does get better. Eventually, you’ll finish up all of these little projects and save up to buy the couch of your dreams. What you’ll realize in the meantime is that all houses have problems and old houses sometimes have bigger problems. So, start planning for those eventual surprises.
On the plus side, you’re homeowners! And, with every payment you’re building equity and creating future financial stability. So, stick with it. I promise that it will get easier and you’ll have plenty of time in your lives to take great vacations again.
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Dear Pay Dirt:
We’re in mid-life, what society would consider highly successful (happily married for a few decades, valuable house, great quality of life, one going to college and the other in high school, cars, pets, trips, 750+ credit scores, etc.). We have greater than $1.1 million (50s F, primary earner) and greater than $775,000 (~55-year-old M) in retirement in a 401(k)/IRA. Per Zillow, we have greater than $1 million in equity in the house (greater than 60%), with a less than 2.5% mortgage.
We don’t use cash much if at all, so we can track all our spending, We store every last transaction in Quicken (and have for years), but that makes the amount of information overwhelming—over 400 transactions per month typically! As we look at potentially declining earnings and (of course) increasing costs and, of course, college tuition (and no need-based aid), we realize we never learned thing one about budgeting. Worse, we’re two supposedly educated (MBAs!) but are embarrassed to be “starting from scratch” in budgeting.
We’re trying to start budgeting not just because it’s the “right thing” or to teach our children, but because we’re often a single-earner household (my career is unreliable), again we have one child in college and another soon enough, sandwich generation (caring for an elderly parent on each side), and so on. Moving is not an option now. We can’t go down to one car. We do want to control our expenses, but we believe we need to put together some sort of budget (or some metrics!) first. Thoughts on where to start learning how to budget given our complexities?
—Lost in Later Life
Dear Lost in Later Life,
Why are you beating yourselves up? You’ve got nearly $2 million in your retirement accounts, and have managed to save despite one person’s variable income. This tells me that your inner budgeter is doing just fine. But let’s break it down so that your conscience knows what your subconscious mind is already doing.
It’s worth the mental exercise to try my Go-to-Zero plan. Write down everything you spend on notecards, including regular daily, monthly, and annual expenses. Then, write down some things you pay for once in a while. Make sure you include savings outside of your 401(k) and a 529 contribution for your child. Prioritize those expenses in order of importance and stack those on a table. Then, on a separate sheet of paper, write down how much you and your husband earn right now.
Take the highest priority payment (likely rent or mortgage, 401(k) health insurance, or perhaps childcare expenses) and put it on the table. Subtract the amount from your take-home pay. Keep going until you’re either out of expenses or your take-home pay is gone. If you’re budgeting well, then all of your expenses will be taken care of and you’ll have money left over for savings. If you’re not, then start removing the last expenses first—presumably, these are the lowest priority.
This is an easy way to visualize your expenses differently than pulling a profit and loss statement from Quicken and it may help you figure out where you’re leaking money, if indeed you are.
Dear Pay Dirt,
My partner (we are not married and don’t intend to be, however, we are in a long-term, committed relationship. We are happily child free.) and I have combined our finances in a slightly unusual way, and I want to make sure there isn’t a downside we are missing. I make a decent salary, but my partner makes about three times what I make, and likes the finer things in life. We used to have discussions about what was a fair way to split costs and I was stressed about affording the things they wanted to do. So a few months ago we started a new system. When I get my paycheck, a decent amount goes into my 401(k) and HSA. Then I put some into my personal savings. The rest I transfer to my partner. They pay all of our bills, including our joint credit card. This has been a good solution for us. We never have to discuss who pays what or how much, and I, selfishly, never have to worry about paying bills. I have my own accounts—including my own credit card—in the event that we split. We hope to buy our first home in the next year, and both have excellent credit. Can you think of any potential issues with this arrangement that we have overlooked? Or is this the true solution?
—Blissfully Budgetless
Dear Blissfully Budgetless:
I get why you like this lifestyle choice. It’s low(er) cost for you and a lot less work than actually managing your money. While I like that you’re putting what you consider to be a decent amount into your 401(k) and HSA accounts, and some into personal savings, I don’t like that you’re handing over the rest of your money to your partner who outearns you three to one.
What happens when you buy your house? Do you buy as equal partners? As joint tenants with rights of survivorship? Or, do you get 25 percent and they get 75 percent and you buy as tenants in common? In that case, what happens if they get hit by the proverbial bus and suddenly a bunch of other heirs show up? Do you sign papers allowing you access to some or all of the furnishings? Will you both sign wills and powers of attorney for healthcare and financial matters? Will you have to hire an attorney to negotiate with other heirs if you never get married? What if they run up $50,000 on your joint credit card account and then skip town? What if they don’t pay their share of the mortgage or homeowners insurance policy? Will you have online access to these accounts? I worry about these and so many other unanswered questions about this arrangement.
At the end of the day, if you like not knowing where your money is going, or how it’s invested, and you’re OK with simply turning over your cash so you don’t have to make any decisions, then it’s one possible solution that works. But it’s only going to work until the inevitable curve ball comes your way, at which point in time, it may be too late to course correct.
—Ilyce
Classic Prudie
I’m married with four little kids. I work, my wife stays home. She has struggled with anxiety and depression, for which she is on medication. We are pretty easygoing, except for one big rift in our marriage: credit cards. I am against them and don’t have one. My wife has always been financially smart and has often taken care of the bills in our home. We agreed that she would use her credit card smartly and pay it off every month. She did not like me seeing her card statements (part of her anxiety is feeling judgment where there is none). I agreed and it was never a problem. However, in the last three months, she has spent our entire life savings in online purchases.
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The Link Lonk
July 16, 2024 at 05:00PM
https://news.google.com/rss/articles/CBMiWmh0dHBzOi8vc2xhdGUuY29tL2FkdmljZS8yMDI0LzA3L2h1c2JhbmQtc21hbGwtYnVzaW5lc3MtbW9vY2gtcGVyc29uYWwtZmluYW5jZS1hZHZpY2UuaHRtbNIBAA?oc=5
My Husband Has Mooched Off My Hard Work for Years. I’ve Had Enough. - Slate
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