In this article, we will provide answers to the most common financial questions of 2022.
How to divide expenses when your partner earns more?
It’s easy to talk about money with your romantic partner, but there are certain situations that require more sensitivity and consideration. Perhaps you’ve decided to move in together or get married, but what happens when one person earns significantly more than the other? How can you fairly divide household expenses like rent between both of you?
Kristin recommends that if one person earns significantly more than the other, they should pay a relatively larger amount when it comes to rent and other shared expenses. The recommended amount to pay monthly for rent is 30% of your income, and this would be different if one person earns a much higher income – splitting rent 50/50 may seem equal but that doesn’t mean it’s fair. However, if you feel financially comfortable contributing half and prefer that instead, you can do so as well. The key here is to understand your financial limits.
Note: If you are considering merging bank accounts and credit cards, our best advice is to wait until you are married. This is because you won’t have any legal protection if your partner decides to close the joint bank account without informing you.
If you see yourself living with someone for a long time, you will want your relationship to be as financially stable as possible, meaning neither of you should stretch your budget beyond your ability to cover shared expenses if you decide to live together. Have an open and honest conversation with your partner where you can set your goals, concerns, and expectations regarding money. This way, you can create a household budget that divides expenses fairly and supports your long-term financial goals.
I want to start investing but I’m afraid of losing money – what should I do?
With market fluctuations throughout this year, this is another common question we’ve received: How can I start investing when I’m afraid of losing money?
While it may seem daunting, investing is a great way to build wealth. Although the S&P 500 index has dropped this year, the stock market has historically provided an average annual return of 10% (or 7% when considering inflation). The returns over a three to five-year period on the S&P 500 are about 8%.
Now that you know it’s possible to make money in the market, the next step is to overcome your fear. Take a look at your budget and find the amount you feel comfortable putting into an investment account – do not invest money you need for living expenses such as rent, credit cards, or loans. It’s perfectly acceptable to start small and commit to investing some money each month, whether that’s $50 or $500. Kristin advises thinking of investing as a long-term endeavor, not as a way to make money quickly.
Note: You can open a brokerage account or sign up for an investment app to start investing for the future.
For new investors, Kristin recommends passive investing in index funds like those tracking the S&P 500 or ETFs (exchange-traded funds), which are baskets of stocks or bonds. These are considered lower risk and can be a good starting point for new investors. With diversified large-cap ETFs, you are investing in many high-quality companies across various industries, so it’s less likely that you will lose a lot of money if you’re afraid of that. ETFs and index funds can also be beneficial for those who are already investing in the market and want to mitigate some risks in their portfolios.
Questions
Another Finance: Combating Inflation, Spending Money, and Paying Off Debt
Inflation has certainly been on the minds of many this year, as soaring prices have forced us to pay more for everything from fuel to groceries to rent in 2022. According to Christine, making changes to your budget, cutting back on spending, and rebalancing your investment portfolio are some of the best ways to combat inflation.
While keeping spending in check is important, enjoying the money you earn is just as crucial. The good news is that you can definitely carve out space in your budget for fun – whatever that looks like for you, whether it’s shopping, trying new restaurants, or traveling. One of the easiest ways to do this is by following the 50/30/20 budgeting formula, where you allocate 50% of your monthly income to your needs, 30% to your wants (such as going out with friends), and 20% to your future, whether that’s for buying a home or retirement. After all, you’ll find it hard to stick to a very strict budget. When you have a budget and know your financial priorities, you can save for the future while still enjoying the present.
Paying off debt is also something many strive for – and with interest rates rising this year as the Federal Reserve attempts to cool inflation, carrying debt has become more costly in 2022. If you have multiple loans, it can be challenging to know which loan to pay off first. While there’s no way to avoid interest on loan repayments, Christine’s advice is to tackle any debt with the highest interest rate, which can help you save hundreds of dollars in interest over the long term.
Whatever your financial inquiries are in 2023, be sure to keep sending your financial questions to Christine, so she can help alleviate your concerns and grow your wealth in the new year.
Thank you for your feedback!
Sources:
– HUD. “Determining Housing Affordability”.
– Consumer Financial Protection Bureau. “I have a joint checking account. Can the other person close the account without telling me?”.
– S&P. “S&P 500 Index”.
– Securities and Exchange Commission. “Saving and Investing”.
– Elizabeth Warren and Amelia Warren Tyagi. “All Your Worth: The Ultimate Lifetime Money Plan”.
Source: https://www.thebalancemoney.com/making-cents-of-2022-splitting-expenses-and-investing-6890849
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