Women, Money and Marriage: What You Need to Know

In today’s world, “Leave It to Beaver” stereotypes for men and women in partnerships should only exist in Nick at Nite reruns. Yet many women still don’t understand their household’s finances and aren’t actively involved in managing money matters.

To achieve true equality in a partnership, both individuals must have knowledge of and involvement in their partnership’s assets and debts. If you’re one of those women who isn’t participating in the financial side of your marriage, here are some tips to get you on the right track:

Talk Money

If your partner has always handled most financial matters, it may seem difficult to bring up that you want to be more involved. The first step is to initiate a conversation with your spouse about your desire to learn more about your household’s assets and debts and to be more actively involved in making decisions.

Choose a time and place without high levels of stress or too many distractions to have this discussion. Bring it up in a positive way, rather than in a tone that might sound complaining or accusing.

Keep Current

It’s never fun to think about something bad happening to the people you love. Yet you must be responsible and realize that if your partner should no longer be able to carry out the role of primary financial decision-maker, the tasks would fall to you.

Make sure you’re familiar with and have access to all financial records and documentation. Know how to quickly access everything from account numbers to mortgage documents to investment information.

Get Involved

Look for ways to become more integrated in your marriage’s finances. Whether it be creating and maintaining the filing system for your financial paperwork or paying the bills, sharing responsibility can be rewarding and make your partnership more balanced and fulfilling.

Stay Independent

There can’t be a strong “we” without a strong “me.” While marriage is a partnership, you should still maintain your own financial standing. We recommend that each partner have a checking account and credit cards in his or her own name so that both can build good credit.

Get Help

There are many programs available today that are focused on helping women handle financial matters. Many companies today provide financial services to help women achieve financial empowerment, security and independence.

Equality in marriage exists on many different levels and requires working together as a team – a team where both members are informed and involved.

Credit Score Factors – The essentials

Do you know your credit score but are wondering what it means? We’re here to help you understand it. The data pulled from all of your financial histories is placed into five primary categories that make up your FICO score. These five factors are as follows: payment history, amounts owed, length of credit history, new credit, and types of credit used. Represented by the pie chart below, each factor is weighed differently – some are weighed more and some are weighed less. To find out which areas of your personal finances should be given more attention, review the easy-to-use chart below, and then read out tips for raising your score through these five factors.What affects your credit score

What Makes Up a Credit Score?

Payment History

As the most weighed factor of your credit score, your payment history is a very important factor in determining your chances of qualifying for loans and mortgages. We all know that there is no way of going back and changing your past, but there are indeed ways of erasing your past mistakes. With 35% of your credit score is calculated from your payment history, it is important to make sure that you avoid missed payments and late payments. Contact our credit team to find out how you can get your bad items removed from your payment history.

Amount Owed

The next largest factor that determines your credit score is the amount that you owe to your creditors. This is calculated by the amount that you owe on all of your accounts, and how much credit is available to you on your revolving accounts. To easily determine where you stand in regard to the amount owed, you can calculate your credit-to-debt ratio. In this, you simply must divide the amount of debt on your credit card by the limit amount on your card, and then multiply by 100. For example, if you have $2,000 in debt on the card and the limit is $10,000, then your credit-to-debt ratio is 20%. Anything below 50% is an acceptable ratio.

Length of Credit History

The third factor of your credit score is particularly pertinent to young people. This number is calculated by how long your cards have been open. Basically, the longer your accounts are open, the better. In calculating your length of credit history, FICO takes the following factors into account: how long your collective credit accounts have been established, how long each credit account has been established, and how long it has been since you used each card. The best advice regarding your length of credit history is to keep all of your cards open for as long as possible.

New Credit

Making up 10% of the weight of your credit score, having new credit is an easy way to boost your score. If you have a steady source of income, then consider opening one or two new cards for charging small items. The credit reporting agencies will, however, penalize you for overdoing it and opening too many cards in a short period of time. In order to effectively build your credit by opening new credit cards, it is important to do so in moderation.

Types of Credit Used

Finally, the last factor of your credit score is the types of credit that you use. The types of credit considered in your FICO score are as follows: credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. It is important to have a good mix of all of these different types of credit in order to boost your credit score. Diversity in your credit cards and accounts is essential to building a good credit score.

The Differences in Debt

Debt is one financial matter that fills me with dread. The prospect of owing someone else money is like a crushing weight on my soul. But that being said, debt can, at times, be a good thing.

I classify debt into three categories:

  1. Debt that does not add value.
  2. Debt that adds value.
  3. Debt that does not add directly add value, but is necessary, or has the potential to add value.

First, let me clarify that by “value,” I mean some intrinsic financial worth. Not the kind of value that you get when seeing the joy in your kids’ eyes while opening Christmas gifts.

Debt that does not add value is destructive. That new car is not increasing in value; it is depreciating. I know what you’re thinking, “Dude, I love my car, and I need it to drive to work, so it does have value!” Consider my ₹8,00,000 car loan that I took out last year. I’ve diligently been making payments every month, so my liability has decreased. Unfortunately, cars don’t last very long, and the resale value is decreasing even faster than I’m paying it off! This means that even if I were to sell it today, the best I could hope for is to make enough to pay off my loan.

Debt that does add value can actually be a good thing. Most people who open a business do so with the help of a loan. Ideally, the business will begin to make money, and the business will be worth more than the value of the loan. There are many examples of this constructive type of debt. But the idea is that you get a loan for the purposes of making money. This is leverage and thus needs to be used with care. However, if you know that you can borrow money at 6% and you know that you’ll make 8% off of the investment, then you’ve just earned 2% on money that didn’t belong to you. Even better is that (at least in India), you can deduct the interest from investment loans!

The third type of debt lies somewhere between the previous two. For example, taking out an education loan does not immediately provide you with a return. For the four years (or two, or ten, …) that you are in school the loan money does not provide you with a fiscal return on your investment. But in the end, when you get your high-paying job, it does reveal its benefit.

I will also place in this category the most common debt, your mortgage. Many people claim their home is an investment, and therefore it is constructive. I disagree;

  1. You make mortgage payments out of your own pocket rather than having the investment pay for it;
  2. You would not likely sell your ‘investment’ because where would you live;
  3. In India and the USA, these payments can be used against taxes. However, this is not the case in many other countries, such as Canada.

Don’t get me wrong; homeownership and mortgages can be a good thing. I simply argue against it being a constructive debt.

So my goals in order of importance to me are to:

  1. Eliminate all destructive debt.
  2. Reduce necessary or non-value adding debt.
  3. Make use of constructive debt where prudent.

I’m sure most people would agree on the first item.  However, it is the last two points that will draw a lot of contention.

In the past few years, people have been loading up the mortgage debt to the point where they can afford little else – all in the name of home-ownership.  25-year mortgages have now become almost commonplace so that you can retire in debt.

With the low cost of borrowing, even so-called constructive debt is running rampant (leveraged buyouts, etc., and included in this).  Corporations buying another or an individual buying any arbitrary stock with debt simply because it’s cheap will certainly be sorry once rates rise and/or the company’s finances crumble.  That is why I say use leverage when prudent