Local financial adviser talks the importance of communication about money during marriage

Christine and Cory Iseminger owe money for car, school and family loans, but they’re on their way to dumping that debt and achieving financial freedom.

They know where they want to go financially and — perhaps more importantly — how they’re going to get there.

For this young Grand Forks couple, sound money management wasn’t always a priority.

“We definitely make decisions differently now than when we were first married,” Christine said.

Four years ago, as newlyweds “we didn’t pay too much attention to finances,” she said. “If we had enough money we’d go buy something. We went out to eat a lot. We never exceeded our income, but we never had clear financial goals.”

After buying an older home, they borrowed money to finish a kitchen remodeling project before their son was born. As homeowners and parents of 7-month-old Caleb, she said, “Now, we’re ready to move into a more mature place financially.”

They have no credit card debt and both are employed.

Cash budgeting

They manage their money according to a cash budgeting system they learned through “Financial Peace University,” an online course developed by personal finance expert and author Dave Ramsey (www.daveramsey.com). “It’s a really great program,” Christine said. “It helps you take ‘baby steps’ to get finances in order. It kick-started how we handle our finances.”

The system calls for creating a budget and putting a set amount of cash in envelopes labeled by category, such as groceries, eating out and clothing. “Every two weeks, we go get cash for the different categories,” she said. “When it runs out, that’s it.

“It’s helped us cut down on what we spend. We have to stick to our budget.

“Any extra money left over at the end of the month goes toward paying off debt, rather than something new,” she said, “so we’re paying more than the minimum.”

Debt snowball

Some people choose to nibble away at debt across the board or start by reducing the specific debt with highest rate of interest.

Following Ramsey’s advice, the Isemingers are using an approach called “debt snowball,” working on retiring the smallest debt — their car loan — first. When that’s paid off, they’ll start paying down the next-smallest debt.

Paying off debts from small to large reaps benefits — not the least, psychological.

“You can see that you’re making progress more quickly — it keeps that momentum going,” she said. “It keeps you motivated, keeps you excited.”

She looks forward to the day she and Cory are debt-free.

“That freedom from making loan payments would be a wonderful thing,” she said. “Then, we can save aggressively for retirement, a fund for our son’s college education and fixing up the house.”

They maintain three accounts: checking, savings and a high interest-earning “emergency fund that we don’t touch,” she said. They set aside separate “personal fun money” to spend as each pleases. “If I want to buy a purse that costs $300, as long as I’ve saved that up, I can,” she said. If the funds are not there, “you have to wait ‘til you’ve saved enough.”

Using this approach, “we don’t have to worry about the other person getting mad.”

‘Financial personalities’

“Being in debt “puts a lot more stress on me than my husband just by virtue of our personalities,” she said.

She and her husband “have very similar goals and understanding of money,” she said. But their approach to money management differs somewhat.

“Of the two of us, I’m more into details and crunching the numbers. He’s not the kind of person who wants to do the nitpicky things. He’s happy to review the budget and make changes.”

When financial questions come up, they have a strategy. “If money is running low we make adjustments and compromise from there,” she said.

Communication is key to money management, said Marybeth Vigeland, supervisor of financial counseling for The Village Financial Resource Center in Grand Forks. The Center is part of, and meets the standards of, the National Foundation for Credit Counseling. Financial counseling is provided online, by phone or in person.

Vigeland works with couples who are coping with a build-up of debt that causes stress.

“They have a feeling of being out-of-control and not having a good handle on how to manage money or how to track it,” she said. “It’s not just numbers, it’s all the emotions that go into it.”

She sees couples who have distinct “financial personalities.”

“One is trying to handle it all, trying to stretch money farther than it can stretch. The other will say, ‘hey, I make all this money, just pay the bills.’ That person doesn’t want to know specifics — like there’s not enough money for groceries — because it might mean making some adjustments.”

Vigeland tries to get a clear picture of the couple’s financial situation, she said. “There’s often a disconnect between what they really have and their cash flow. Spending is out of synch with what their income will allow.

“The credit card becomes a source of income, and they don’t have a way of paying it down fast.”

Create realistic plan

She recommends creating a spending plan that includes predictable, fixed expenses.

“It must be realistic and something you can stick to,” she said. “If you have something on paper, it’s got to work. You still need more income than expenses.”

Some couples underestimate the cost of living — “things like groceries and kids’ clothes that you don’t really realize what they’ll come to,” she said.

Also incidentals — quick trips for bread and milk or vending machine purchases — should be taken into account.

“It’s important to track what you spend. Write it down,” she said, at least for a few months.

A common error is not planning for “periodic” expenses — clothes, car repair, insurance vision, pet care and gifts, Vigeland said. “If you plan for these, there’s less of a chance of being thrown off.”

A separate account for household expenses may be useful, she said. “It’s difficult, though, if two people are using a debit card — it can get out of control. Then, they need to have two accounts.”

Unforeseeable events, such as loss of a job or medical expenses, can cause major financial difficulties.

“Medical is a big one,” she said. “It can mean loss of income and extra travel expense. Even with insurance, some things are not covered. You may have high deductibles or co-payments.”

Building up a reserve to cover expenses for three to six months, even a year, is smart, she said. “Pay yourself first. Get that savings built up, so you can weather a medical crisis or layoff. With that cushion, you’ll be able to stay on your feet.”

Early money lessons

Entering into marriage, each person brings attitudes and approaches about money they learned growing up, Vigeland said. They may have picked up different “money messages” that influence how they think about and handle money as adults, she said.

“How was money approached? Was it a tense thing? Did parents discuss it openly — or just say, ‘don’t worry about it?’”

Since disagreement over money is one of the top three reasons for marital discord, Vigeland recommends that engaged couples share their full credit reports — “so there are no surprises” — and discuss financial goals.

“Talk about what you want,” she said. “If you want kids some day, how are you going to adjust?”

She counseled a woman who found out, after she married and was house-shopping, that her husband’s credit was so bad, buying a house was impossible.

“She said she was not sure — had she known about his credit rating — that she would have married him,” Vigeland said. “There was a major delusion there.”

When they married, Cory and Christine decided they would combine their finances, she said. They discussed money, big purchases and how they would allocate income.

Comparing how each of their families approached finances, there was not a big difference between us,” Christine said.

“Money was talked about in my home. My father sat down every week to pay bills. He talked to me about credit cards and house payments.”

Societal problem

Incompetency in financial management permeates American culture, Christine said.

“I think our society as a whole has a problem with finances. We have a very ‘instant-gratification’ society.

“People think, ‘If I want something, even if I have to go into debt, I’ll get it,’” she said. “I don’t think that’s a very sound (approach).

“My husband and I are going to work really hard to manage our finances the best we can. You never know when the rug is going to be pulled out from under you.”

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