Ask Charlie: Should I move in with a finance amateur?

This week my column will be in response to a situation in which a reader finds himself. He is 23, his girlfriend is 22 and they are going to be moving in together when she gets her new job, which will pay her 30 percent more than she makes now. His dilemma is that she has an auto loan at 22 percent, has no “rainy day fund” and in his opinion is not very good with money. He admits that he is only slightly better with his money because he has debt too, but his debt is at 6.8 percent. On the other side however, he is saving 25 percent of every paycheck towards his “rainy day fund.” The essence of the letter is the question, can these two people really live together without this reader being fearful of becoming his girlfriend’s reluctant sugar daddy?

DEAR READER: First of all thank you for asking. You are already on the right track as you recognize the limitations that each of you have in play. You mention that your girlfriend, all of 22, is not so good with money because she has an auto loan on a 2007 Camry Hybrid at a 22 percent interest rate. This does not make her bad with money; this just confirms she is an American. The borrowing of money to finance a depreciating asset is not just bad money management, it gets you into the American Consumer Hall of Fame. Get the sarcasm? She is not alone, the two of you another thing in common, Mr. Student and Car Loans.

My advice to both of you is that before you move in together you both need to agree on several fronts. It is OK not to be on the same page, but you need to want the same ending. If she wants to buy a house in the ‘burbs and you do not, that is a problem. If she wants four cats and you want a French bulldog that is a problem. If she wants to donate 10 percent to her church and not pay her part of the expenses that is a problem. Get the gist?

My mother and father were financial polar opposites. They were so opposite that they were the perfect match for each other. My father tells me he gave my mother his first check from the day they married and never ever endorsed another payroll check for over 50 years. My father was and remains “financially unencumbered and independent of any fiscal boundaries,” this means he does not know or care about his finances. Make no mistake, he is dependent on no one, he is financially independent by the sheer force of habit. My mother, rest in peace, was a “financial management powerhouse” not a penny was out of her control, hands or recollection. I remember her teaching me how to balance a checkbook, and her attention to detail was worthy of a curator of the most prized Smithsonian exhibit. My mother could have run the Congressional Budget Office with an abacus.

Here is my five step blueprint for financial bliss for all couples:

1. You must never ever discuss financial matters after the sun sets. The only exception is to inform each other that you just won the Illinois Lottery. You must remember money is not what people argue about most, it is what people use as an excuse to argue about. I believe people are usually angry and/or frustrated about sex (lack thereof), but use money as the excuse because that excuse they can share with friends and family.
2. You may not judge bad financial decisions that were made before you were in the picture.
3. You must, before you move in together, each have a minimum two months of rent saved up, including moving expenses and utility deposits. You both must agree on a written short-term (less than 1 year) and a long term (more than 2 years) financial plan and goals. This should cover all purchases over $500 except for gifts to each other.
4. You must have a Separation Plan in writing before you move in. This plan will be the working document if you break up outlining who gets what and who pays for what. If you have one, you probably will not break up. If you do not have one, you will definitely break up.
5. YOU MUST HAVE SEPARATE ACCOUNTS! Neither of you may have access to each other’s accounts. You may open a joint account and credit it monthly with the money to pay your joint expenses. You may quote me, “your money is your money, and her money is her money.”

Lastly, and I admit this is negotiable, no pets, no dogs, no cats, no snakes, etc. The only exception is a nice Beta fish that is purchased as an accessory. You wonder why I have this NO PET policy, I believe it hampers spontaneity and adds to the cost of a weekend away. Additionally, and more likely is the reality that pets get sick. Veterinarians are a lot like urologists who are very nice people but they are better to know socially than professionally. I hope this helped and I wish you great happiness and financial success.

The opinions and recommendations expressed herein are those of Mr. Garrido and do not necessarily reflect those of the firm and are subject to change without notice. This information is not to be construed as an offer to sell or the solicitation of an offer to buy any securities. The information contained herein has been derived from sources believed to be reliable but is not guaranteed as to accuracy and does not purport to be a complete analysis of the security, company or industry involved.