Podcast Summary: "Combining Finances With My Partner"

Podcast Information

• Title: Jill on Money with Jill Schlesinger
• Host/Author: Audacy
• Episode: Combining Finances With My Partner
• Release Date: December 24, 2024

Introduction

In the December 24, 2024 episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger delves into the intricacies of merging finances with a partner. This episode features a listener, Jeff from Florida, who seeks guidance on balancing significant financial decisions as he and his partner consider entering the real estate market. Jill offers practical advice to navigate their financial landscape, emphasizing the importance of strategic planning and debt management.

Caller Background

Jeff's Profile:

• Age: 42
• Partner's Age: 37
• Marital Status: Not married, identifying as DINKs (Double Income, No Kids)
• Income: Approximately $250,000 annually
• Residence: Recently moved to Florida, currently renting to assess the market

Financial Overview:

• Retirement Savings:
  • Jeff: $275,000 (including $70,000 in traditional accounts and $200,000 in Roth accounts)
  • Partner: $15,000 in an IRA
• Other Assets:
  • Taxable Brokerage Account: $300,000 (Jeff's)
  • Cash Reserves: $40,000

Liabilities:

• Student Loan Debt: $88,000 at 6.5% interest
• Pension: Approximately $55,000 annually in today’s dollars
• Housing Expenses: Current rent costs total around $125,000 annually

Financial Challenges and Considerations

Jeff and his partner are contemplating re-entering the real estate market after a hiatus since 2020. They are exploring the option of utilizing a VA loan, which allows for minimal down payments—potentially as low as 3%. However, several factors raise concerns:

1. Debt Management: The significant student loan debt at a substantial interest rate poses a challenge.
2. Emergency Fund: Currently, they have $40,000 in cash, which may not suffice for an emergency reserve covering 6 to 12 months of living expenses.
3. Retirement Contributions: While Jeff is actively contributing to his retirement accounts and using strategies like the backdoor Roth, his partner is just beginning her retirement savings journey.
4. Potential Job Instability: Jeff anticipates a possible career transition around age 50, which could impact their financial stability.
5. Prudent Spending: Their annual expenses, including rent, consume half of their combined income, highlighting the need for meticulous budgeting.

Jill’s Expert Advice

1. Tracking and Budgeting ([10:07] - [11:06]): Jill emphasizes the importance of meticulously tracking their spending for 90 days to gain clarity on where their $125,000 annual expenses are allocated. This foundational step is crucial for identifying areas where they can optimize their budget.

2. Building an Emergency Reserve ([12:12] - [12:29]): She advises establishing an emergency fund that covers six to twelve months of living expenses. This safety net will provide financial stability in unforeseen circumstances and reduce the reliance on their brokerage account during transitions.

3. Aggressive Debt Repayment ([15:30] - [19:11]): Given the high-interest student loan debt, Jill recommends prioritizing its repayment. She suggests allocating extra funds from their taxable brokerage account towards paying down these loans to alleviate financial strain and reduce interest burdens.

4. Retirement Contributions ([14:00] - [15:30]): Jill encourages maintaining robust contributions to retirement accounts. For Jeff’s partner, she advises starting with an 8-10% contribution to her 401(k) once eligible, ensuring their retirement savings continue to grow without being compromised by debt.

5. Delaying Home Purchase ([10:21] - [18:49]): Considering their current financial commitments and potential job instability, Jill recommends postponing the decision to purchase a home for another three years. This period will allow them to strengthen their financial foundation, reduce debt, and reassess their long-term stability in Florida.

Notable Quotes:

• Jill Schlesinger: “We need you guys to track your spending for 90 days... Where is this money going? I want to know how this 125,000, because that's a... it's not a huge amount of money, but... we need to track that.” ([10:21])
• Jill Schlesinger: “You have an emergency reserve, debt pay down, retirement, and supplemental retirement for you. And then I table the conversation about a house unless something falls in your lap and it's such a great deal.” ([17:37])

Discussion and Further Insights

Jeff acknowledges the practicality of Jill's advice but expresses concerns about balancing aggressive debt repayment with maintaining growth in their brokerage account. Jill reassures him by outlining a balanced approach:

• Emergency Fund: Prioritize building this reserve before tackling additional investments.
• Debt Reduction: Apply extra funds towards student loans without derailing retirement contributions.
• Retirement Savings: Continue maximizing retirement accounts to ensure long-term financial security.
• Brokerage Account Management: Use this as a supplemental bridge for future uncertainties, especially considering Jeff’s anticipated pension and Social Security benefits.

Jill also touches on the importance of estate planning, encouraging Jeff and his partner to finalize their will and designate beneficiaries to protect their financial interests.

Conclusion

In this episode, Jill Schlesinger provides Jeff with a comprehensive financial roadmap tailored to his unique situation. By prioritizing debt repayment, building an emergency fund, and maintaining retirement contributions, Jeff and his partner are well-positioned to achieve financial stability. Delaying the home purchase allows them to solidify their financial base, ensuring that when they do enter the real estate market, they do so from a place of strength.

Final Takeaways:

• Strategic Planning: Essential for couples combining finances, especially when handling significant debts and planning for future investments.
• Debt Management: High-interest debts should be addressed promptly to prevent long-term financial strain.
• Emergency Fund: A critical component of financial security, providing a buffer against unexpected expenses.
• Retirement Savings: Continuous contributions are vital for long-term financial health, even amidst other financial obligations.
• Delayed Gratification: Postponing major financial commitments can lead to better stability and opportunities in the future.

For more financial insights and personalized advice, visit JillOnMoney.com and subscribe to the Jill on Money podcast on your preferred platform.