Welcome to Ask the Bills, where every two weeks Helaine Olen answers readers’ questions about their most nagging personal finance and financial etiquette dilemmas. Seeking advice on a money issue? Email email@example.com.
My partner and I have a great relationship but very different philosophies about money. I’m in my early 30s and have a decent paying job, a fully funded emergency savings fund and I started contributing the maximum to my retirement account last year. I also put away a couple of hundred dollars a month for vacations and other luxuries. I’m repaying my student loans on an income-based repayment plan. My partner is in his mid-40s and has about $25,000 in medical debt he was in default on but is now working on repaying. He’s part owner of two successful local businesses and earns a decent salary and annual distributions from them. But he has no savings account or retirement account. To me, it’s like investing all your money in the stock of one company. That’s a bad strategy, right? He also likes to indulge in things I consider luxuries: fancy meals, Ubers, the newest gadgets, massages. Other than his medical debt, he has no debt. In other words, he can afford the luxuries but at the expense of saving money for the future. For now, we agree to disagree: If he wants to go to a fancy dinner, for example, I either don’t go with him or I let him pay because it’s not part of my budget. When I try to bring it up, the conversations never really go anywhere. As risk-averse as I am, he’s eternally optimistic. He doesn’t see a problem with not saving, and he really enjoys the stuff he spends money on, and it’s not like we can’t pay rent or bills. Still, I’m afraid I’m putting my head in the sand about our financial incapability? Things are fine for now, but if something went wrong, like an illness or a business closing, I’m not sure they would be. I can imagine going through a tough time and becoming resentful thinking about all the money he could have saved throughout his life but chose not to. Is our relationship doomed?
Let’s discuss how “opposites attract.” In many ways, the cliché is not true. Studies show we actually seek people who are similar to us. If we went to college, chances are we want a partner who did, too. Introverts prefer introverts, and extroverts like extroverts. The fancy term for this is assortative mating.
But then there’s money. According to a paper in the Journal of Marketing Research titled “Fatal (Fiscal) Attraction: Spendthrifts and Tightwads in Marriage,” thrifty folk tend to marry people with looser grips on their wallets. And what happens next? Couples who disagree about their approaches to money argue more. They are also—surprise!—significantly more likely to accrue debt than a cheapskate-cheapskate pair. Spenders will spend.
So should you follow the Gershwins’ advice—potato, potahto, etc.—and call the whole thing off? Of course not! That’s not what happens in the song, after all—one singer agrees to eat lobster with the other, even though she prefers scallops. There’s a happy medium here. Chances are you and your partner are doing the financial equivalent of self-medicating. You need someone who can help you loosen up the purse a bit while he needs someone who can impose financial discipline. So you found each other. And in some ways it’s working. He is, after all, getting a grip on his medical debt. You, on the other hand, appear to be enjoying more gourmet meals than you otherwise would.
But what about going forward? You’re right, after all. Chances are the two of you will, at some point in the future, hit a financial pothole. He might not believe it. Entrepreneurs are notoriously optimistic, forever underestimating the chances for failure and setbacks. And, yes, if you need to bail out your partner, you’ll almost certainly get resentful. He took Ubers while you took public transit (I’m guessing) and all you get for your savings is the chance to rescue his finances? That won’t go down well. My advice? Offer to help him out—not with actual money, but the direction of it. It should be easy enough. Your partner isn’t a credit card addict, nor is he draining his businesses to continue spending. He’s simply spending up to the limit of his easily available finances. So he needs to lower the amount coming into his checking account by redirecting some of the inflow to a retirement account and an emergency savings account via automatic deductions from his paycheck. He’ll build up savings and investments while still enjoying at least some of the finer things. And you’ll hopefully avoid a few future arguments. But not all of them. No couple I am aware of has managed that.
My mother-in-law has been married to her current husband for about 15 years. According to the entire family, he began showing signs of struggling with addictions and mental issues a couple of years into the marriage. His behavior toward her was bizarre, possessive, and verbally abusive, and he attempted to isolate her from the entire family. They separated. But about a year ago, he re-entered her life. Recently my mother-in-law became chronically ill and she can no longer keep her low-paying job. She’s always been in a financially precarious situation and planned to work as long as possible. Her husband, while helping with her care, seems to be back to his old tricks, isolating her from the family and acting strangely. She owns the apartment she lives in and has about five years remaining on the mortgage, owing about $30,000. He is retired—he never had a high-paying job, often worked off the books, so I imagine he receives a minimal Social Security check. We have no hope she will divorce him, and we are struggling to help her while keeping relations friendly. My husband and I don’t have much extra, but we have been saving up for house renovations and could afford to finish off her mortgage for her and take the $500 monthly payment off her hands. We would like to do this with the understanding that we’ll get this money back if the apartment is ever sold, probably after her death. My worry is that once she dies—probably before her husband—the apartment will become his to do with as he wishes. What are our options?
I am so sorry. It’s bad enough when a friend marries someone the rest of the gang doesn’t much like and the friendship fades as a result. It’s much worse when the person making the unacceptable marriage choice chooses someone potentially abusive and you can’t do much to stop it. And it’s a possible disaster if this is your mother-in-law and she is ill and this person is likely to become both her primary caretaker and the conduit to her relationships.
Here’s one thing you should not do: Pay off the mortgage on her home. According to Carolyn McClanahan, a doctor and certified financial planner who specializes in aging issues with Life Planning Partners in Jacksonville, Florida, it’s likely the despised husband will end up with possession of your mother-in-law’s condo—paid for in part with your money—in the event of her death. Even if she signs legal papers saying the money is collectible when she dies, you’d likely need to evict her husband to actually get a hold of it. That’s time-consuming, difficult, and expensive.
Moreover, you might need to offer your mother-in-law help with a more pressing financial need in the future. Once money is put in a piece of property, there’s no guarantee anyone can access it short of selling it. And there are reasons your mother-in-law may not want to do that. Owning the condo ensures she has a place to live. Should she need long-term care and not have much in the way of assets, it’s likely the family will need to turn to Medicaid, the government health care program for low-income people. If she does that, the vast majority of whatever income and assets she has will likely go to the government in return, leaving her very little for whatever day-to-day expenses she still has at that point. But she wouldn’t need to sell the home—it’s not counted as a financial asset when determining Medicaid eligibility as long as the applicant or his or her spouse is living in it. (Yes, this is all very complicated. If you want to know more, let me suggest Planning for Long-Term Care for Dummies by Carol Levine and Get What’s Yours for Medicare by Philip Moeller.) In lieu of paying off the mortgage, McClanahan says you should consider giving your mother-in-law monthly support and consider it a gift—provided, that is, you aren’t endangering your own financial future by doing it. Any individual can gift any other person up to $14,000 annually without either incurring a tax bill from the IRS.
There’s another reason to use the gifting strategy, too, one I really hate to mention. Your mother-in-law chose this man. Twice. I don’t know why and neither do you. Maybe she sees something in him the rest of the family does not. Or maybe, knowing she is sick, she turned to him once again so that she wouldn’t need to face illness alone. Perhaps it’s both—life isn’t exactly either/or, and she never did file for divorce from him. The best you can do to protect your mother-in-law is to continue to have a good relationship with her and her husband, so you can see her frequently and without difficulty. I know that’s going to be hard. The husband sounds strange and difficult. He might, in fact, be abusive. But it seems that simply telling your mother-in-law he’s no good isn’t getting anyone anywhere. I’m guessing, as awful as this sounds, that offering even occasional financial assistance will make it much less likely that the creepy husband will be able to successfully isolate your mother-in-law. I wouldn’t recommend mailing her a check and hoping she uses it in a way that’s best for her. You need to keep an eye on things. Elder abuse happens in all too many families. It’s possible you’ll want to intervene at some point and call the authorities. And the only way you will know to do that is if you and your husband remain in close contact with her.