Im hoping the community here can provide some guidance here. I have been dating my current girlfriend for nearly two years, and we have begun to discuss moving towards engagement, marriage, etc. We click on many many areas in life, however personal finances is the biggest stumbling block for me.
Jane (her name for purposes of this thread) has worked in a management position for a cable provider for the past six years, having climbed the ladder after college. Jane admittedly likes to shop, and can justify in her mind many of her purchases/lifestyle. She purchased a 2018 BMW 4 series coupe as a gift to herself for her 30th birthday. That you may think is fine, however she already has a 2016 Toyota Rav 4 she is still 20 months from paying off. Her debtload is the following:
Mortgage Payment w/ HOA ($1520) 27.5 years left
Car Payment 1 ($290) - 20 months left
Car Payment 2 ($575) 71 months left
Student Loan ($404) 38 months left
Credit Card 1 ($120) Balance between 4-5K
Credit Card 2 ($252) Balance 12K - used to replace floors in house in January
That is what reflects on her credit. I have only two debts with balances, as I rent at the moment, having sold my prior condo to help speed up
my debt payoff process.
Credit Card 1 ($90) Balance $4.7K
Student Loan ($55) Balance $3K
By the sound of your post, your girlfriend spends as much as she makes, which could cause trouble down the road. Kudos to your family for giving you advice, however it is up to you to decide what's most important.
A few follow up ?'s....
1. Why does she need two cars?
2. Have you two discussed money matters in depth?
3. Would you be comfortable taking on her debt if something were to happen to her income and she couldn't work?
Me and my wife keep our finances separate. Obviously, I'm not going to let her do something that will affect us both, but what she does, doesn't affect me 99% of the time. I've given her thousands to pay off her debt and she hasn't used it because she likes the high balance in her bank account. I told her I don't want to hear her complaining about her bills because of that, so she doesn't. I helped lay out a plan and provided her the means to free up $500 a month for paydown. She understands that's on her if it doesn't happen and luckily, we live in a state where she can file bankruptcy on her own. Its worked for us for the last 12 years.
There have been speedbumps, but they've been relatively minor. Her main issue is she takes care of everyone (family) before she takes care of herself. We had to lay down rules about it. For the most part, she sticks to them, but there are times where I have to give her money because she gave someone else money. I don't throw it in her face, but she knows I'm not going to bail her out every time because I'm a firm believer in you reap what you sow. She also knows that despite that, I'll give her whatever she needs if she asks, but thankfully, she doesn't take advantage of it.
I don't want to comment on whether you should remain in a relationship with her because the heart wants what the heart wants and I disagree with your family about the definition of marriage. But, if you look at what I'm guessing is her take home pay, it looks like she's pretty far under 40% DTI and that's against take home, not gross. That's fairly healthy. Also, you mentioned her savings, but does she possibly have a large 401K through her company or something? Or, is she newly arrived at this salary? I have to say, based on the data you've provided, I don't think she needs to change anything. She has experienced great career success and is still young. Presumably she will continue to experience even greater success. She makes plenty of money to service that debt.
The biggest question is how long she's been making her current pay. Cause that amount of money should be able to knock out her minor debt extremely rapidly.
The biggest worry is that if she has been making that amount of money for any amount of time then money is almost evaporating into thin air.
Treating yourself a little is fine. But, paying minimums on 4 digit or 5 digit credit card balances, especially if they're not 0% APR, when you're not struggling income-wise... that is not good.
Maybe a good approach would be to have a discussion framed around "what are our goals and how can we tackle them." Avoid shame or nitpicking. Instead, frame it as "this is small potatoes, we're doing well, let's just make sure our money is going to us and not wasted on interest."
Decide what 2 to 5 year goals are, set that amount outside of casual spend. Plan to have followup conversations every 6 months.
She technically doesn't "need" two cars. She simply wanted something she could drive that was fun, and the coupe purchase surfaced. Discussion around money/finances first arose about a month into dating. As we have grown closer, the topic has come up often more. I believe in combining finances at marriage, and she seems to go with the flow of whatever I believe. I do not feel comfortable doing so with the amount of debt she has, however.
She has been making over six figures for the past three years. Her debt and cost of living has increased with her raises.
I believe in combining finances at marriage, and she seems to go with the flow of whatever I believe. I do not feel comfortable doing so with the amount of debt she has, however.
The thing is, her debt load isn't crazy. It's unnecessary and maybe ill advised except for personal whim, but it's not outrageous.
The worry is that it appears to have a $3k to $5k per month hole in her budget.
The debts listed are $3161/mo. Then there's $175k/yr income. Assuming a high tax area, that's maybe $120k year take home income. Phrased slightly differently- $10k per month. So, there's almost $7k in "disposable" income even after all the debt. Even assuming living in the moment instead of frugally, that's still several thousand per month into a void.
The debt is important, but it's not the big problem. You and she have to find a way to wrap your heads around where the money is disappearing. Maybe it's sustainable and not a problem. But, if she has a sudden loss of income then her lifestyle is going to take her current debt and literally explode it. Her current debt is manageable, but it's important to sort out how to control lifestyle creep and plan for life events should that $10k/mo dry up.
Jane is obviously an intelligent and accomplished person. That does not always translate into money smarts. Is it possible that she is not completely aware of the cost of borrowing? That happens.
I am a saver. I married a spender. I could not possibly have found a better partner. I got the prize in the relationship. When we were buying a home I did not want endless debt. The loan officer was promoting the longest term mortgage. No way I would sign on to that. I said I'd do ten years. The loan officer had all kinds of reasons why the endless debt was better. Payments were higher with the shorter term and that was spun as a negative. We didn't make a decision at that meeting.
I got an amortazition schedule for both loans. When my intended saw the cost of the life of the loan we were on the same page for ten years and not another day.
She's smart and accomplished. Maybe she just does not realize the overall cost of the debt. As for buying a fun car just because you want it, I'm guilty so no comment there. Mine was a cash purchase but still frivilous as it's a seasonal vehicle and I can only drive one car at a time.
Buying fun items like a weekend car makes sense if you are doing so in cash and if you have little to no debt.
I may be in the minority here, but I see this relationship having issues unless they get to some common ground. I doubt "Jane" is on a forum on the internet asking about how to become a better saver lol. The real question is does she even think it (the finances) are a potential issue.