Thursday, August 25, 2016

One Year Purchase Review: August 2015


It's that time again: let's take a look at the things I bought 1 year ago to see whether they still look like good purchases after the initial glow has worn off.


No less than seven (7) T-shirts on sale from Gap, Uniqlo, and Pact - $80
Brightly colored V-neck T-shirts (long and short sleeve) were my staple workwear at work at the time, so I decided to stock up in some end-of-summer sales. A month after making these orders, though, I would quit for another job with a more formal dress code. I would then end up letting these T-shirts lapse into obscurity, and eventually donating them. So, no, not worth it.


Goodwill Stuff - $18
I didn't write down what I got but I usually don't regret these purchases.


Navy blue rayon dress - $40
This was the moment: the moment I found The Perfect Dress at Second Time Around, a vintage/used nice clothing shop. I now own two of these (identical) plus two very similar dresses and I wear them each once a week. It's my summer work uniform. A+++ would buy again.


Brooks Brothers skirt - $60
I can't believe I didn't get my navy pinstripe pencil skirt until August of last year; I remember wearing it a lot last summer, but I guess that was mostly within the one month! I still wear this a fair amount, and I like it a lot.


Brooks Brothers pants - $100
I wore these pants a ton before I shrank them in the wash a few months ago. I think the purchase was worth it, but I shouldn't have shrank them in the wash.  


Second Brooks Brothers skirt (eBay) - $30
Unable to leave well enough alone, I got another skirt on eBay since I liked the first one so much. But I didn't like the second one as much. The colors weren't what I expected. I wore it a few times before donating it. Not worth it.


Organic cotton sweatpants - $51
Given that sweatpants are easy to buy for, like, $12, I guess spending $51 is excessive. But these are some damn good sweatpants. Cozy French terry, big pockets, comfy and medium-stylish tapered jogger cut, great for lounging or working out - they're basically the Cadillac of sweatpants. They spark joy, what more do you want?


Backup Pumps - $35
After spending $100 on the perfect pair of pumps, I discovered in quick succession that (a) they were discontinued and (b) Amazon had one more in my size in stock for $35. Although I already owned them, I loved them, so I grabbed the $35 pair as a backup. I still have them and haven't needed them yet, but I still love the original pair and wear them almost daily at work, so… To be determined!


New Tevas - $44
This was a good price on a replacement for a pair of sandals I'd worn out after wearing them daily for 3 straight summers. I didn't really realize just how worn they'd gotten, though, until I got the new pair and compared the thickness and bounciness of the sole! I've now worn the replacement pair for just over 1 summer, and they are in great condition. Definitely worth it.


Casual Plaid Shirt - $30
I got so many compliments on this. It's one of my favorite casual summer shirts.


Totals

Total Spent: $488
Total Worth It & Still In Use: $243
Total Worth It But Since Destroyed: $100
Total Not Worth It: $110
Total Unknown: $35

Lessons


  • Avoid "stocking up" on several of the same type of item all at once. For one thing, your circumstances may change such that you don't need so many anymore! Buying things slowly is a form of "dollar cost averaging" in a way, since it allows you to confirm gradually over time that you still need the item. (Anyway, if you buy them all at once they'll wear out all at once.)
  • Just because you love something, doesn't mean you need another one.
  • Buying a replacement of something you really liked that legit wore out from overuse is usually a good idea.
  • When buying something inexpensive, bumping up from the cheap basic to the still-pretty-cheap "cadillac" version can be a joy-sparking good decision.
  • If you get a lot of compliments on something, it probably looks good on you.
  • Don't put wool in the dryer. DON'T PUT WOOL IN THE DRYER.

Tuesday, August 23, 2016

How To Join Finances



That place where there's only one set of footprints? That's that time you had mono and I paid the electricity bill for a month. 

So you've decided it's time for you and your partner to join your finances. There are several different methods available to you. I know couples who use each of these methods; it really comes down to your circumstances and preferences. I'll review the pros and cons of each.

Semi-Joined: Three Account Method


In this method, each partner maintains their own bank account(s). Just like pre-relationship, all income is deposited to the earner's individual personal account. The partners also maintain a joint account which they use to pay shared expenses: rent, utilities, and so on. The partners agree on an amount that they each contribute to the joint account to cover these expenses. This might mean that each partner contributes an equal amount, or they may contribute uneven amounts to reflect different life circumstances (differing incomes, financial commitments, etc.) After contributing the agreed-upon amount to the joint account, each partner is free to spend the remainder in their personal account however they wish.

PROS
  • Scales up and down well; just contribute more or less of your money to the joint account, and define more or fewer expenses as shared responsibilities. This allows partners to ease into joined finances in a way that is still relatively easy to disassemble. For this reason, it's the setup I recommend to start with, even if you plan to eventually move onto fully joined finances. It may also work great as a permanent solution.
  • Creates clear lines of responsibility. Joint-account decisions are made by committee; all other financial tasks are performed individually.
  • Allows partners to shield each other from certain financial complications, such as  debt or other obligations from a prior life situation (alimony/child support, etc).  
  • Partners don't see each other's personal spending, so they can't judge. This also makes it possible to get surprise presents for each other!!!
  • Maintains a feeling of independence. Your money is still your money. You just choose to contribute some of it to shared expenses.

CONS
  • Gets weird with uneven incomes. This system doesn't work at all for families where one partner doesn't bring in any income (e.g. stay-at-home parents). I think it mainly works best if both partners are bringing in about equal amounts of money (or, at least, the lower earner is still earning plenty to live on.) It is possible to do this method with unequal incomes, but the reality is that the person who makes more will have more spending money. Some couples think this is fair, but it makes me feel a little weird.
  • Can cause problems in an emergency, for example if one partner is hospitalized, it may be difficult for the other to pay the bills without access to their accounts. (For that reason, I recommend that at least some portion of the family's emergency funds be placed in a joint account.)
  • Easier to commit "financial infidelity." With separate finances, you may be unaware of very relevant financial information that can affect both of you, especially if you marry or switch to fully joined finances. Could your partner be hiding a spending problem? Debts you know nothing about? BLACKMAIL???

POP QUIZ, HOTSHOT!

Suppose Alex makes $1,200 per month and Billie makes $2,400 per month. Their joint expenses amount to $2,000 per month. How would you choose to divide responsibility for those expenses?

  1. Each partner contributes the same dollar amount to the joint account. That means they're each contributing $1000; which is 83% of Alex's monthly income, but only 42% of Billie's. Alex has $200 per month left over after contributing the joint, while Billie has $1400.
  2. Each partner contributes to joint account proportional to their income. Since their income ratios are 1:2, Alex contributes ⅓ of the monthly expenses ($666.66) and Billie contributes ⅔ ($1333.34). That means they're now each contributing 56% of their income to the joint expenses, and they each have 44% left over after their contributions ($533.34 for Alex, $1066.66 for Billie).
  3. All moneys are contributed to the joint account, and the spoils are divided evenly. Alex and Billie make $3,600 per month together and only need $2000 for their bills -- that's pretty good, they're able to live on only 55% of their joint income. That leaves 44% ($1600) left over, which can be divided evenly between them, with each taking 22% ($800).
  4. All moneys are contributed to the joint account, and there are no spoils. The $1600 which is not needed for bills is invested in their shared future!

RESULTS:

If you said A, you are for scrupulous fairness and rewarding higher earners. Nothing wrong with that--but would your answer change if one of you took a financial hit for the family? What if one of your left work to care for a child? What if one of you got a dream job in a part of the country where the other couldn't find a job?

If you said B, you believe that a higher earner should shoulder more financial responsibility for the family--while also enjoying more of the spending money! Nothing wrong with that, but there is a pitfall to be aware of: with proportional contributions, it's easy to get into a situation where the lower earner ends up committing to a lifestyle she cannot afford. What if Alex and Billie's expenses were $3,000 instead of $2,000? Together, they can still afford it; with proportional contributions, Alex contributes $1,000 ($200 left over) and Billie contributes $2,000 ($400 left over). Suppose they break up and Alex is now in an apartment that costs $3,000 a month to run. Even with a roommate, that's not going to happen on a $1,200 per month income. Say what you like about scenario A, at least it forces the couple to keep their expenses low (to the level where the lower earner can at least afford half).

If you said C, you have basically invented joint finances. Nothing wrong with that--as long as you never, never break up. See the next section!

if you said D, you are a firm believer in joint finances and nobody having any fun. I kind of feel like there's a little wrong with that. Saving is great, but it's important to make sure that everyone feels free to play around with at least a little money, no questions asked, whether that's in a joint account or elsewhere. See the next section!

Fully Joined: One (Main) Account Method


All income is pooled in the joint account, from which all expenses are paid. This includes joint bills and personal expenses for each member of the family.

This method may still involve additional accounts (e.g. each partner may still maintain a separate account which is funded by an "allowance" out of the main account), but the joint account is the primary income and expense account for both partners.

This requires a mindset shift: instead of "your money" and "my money," all money is by default "our money."

PROS
  • Works beautifully with uneven incomes. All money is pooled before it's redistributed, so it's irrelvant if you each make $50,000, or if one of you makes $100,000 and the other isn't working; the result is the same. That can make this a more reasonable and livable lifetime money management method for many families. Throughout their long lives together, most couples go through various periods where one or another is unemployed or underemployed, whether that's due to raising children, job loss, illness, moving for the other person's career, etc. This method takes these see-sawing fortunes in stride, whereas income-curbing life events can throw a monkey wrench in separate finances.
  • Easier to save for joint goals. Family saving, like family spending, happens in the joint account. It's easier in this scenario to have an "everything left over goes to savings goals" mindset, instead of an "everything left over goes to candy and gum" mindset.

CONS
  • Can't unring that bell. Fully joining your finances is a huge plunge, and it's very difficult to undo. Warning, handle with care, surface hot, only do this if you and your partner are absolutely Together Forever.
  • Easier for one person to become financial captain. Very often, when finances are this intertwined, one person slips into the role of "finance person" and keeps the books. This isn't necessarily a problem if the finance person enjoys the chore and the other partner dislikes it. However, it can become all too easy for the finance person to make decisions without getting their partner's input, or for the non-finance person to be totally effed if the finance person becomes ill, dies, or leaves. Even if one person is the clear financial captain, it's in everyone's best interest for the non-finance person to keep an oar in.
  • Can feel paternalistic, especially if you're not the financial captain. It can feel like you're being given an "allowance" and having all your spending watched. This can make independent people chafe.
  • The consequences of "financial infidelity" (or outright theft) are swift and unforgiving. Nobody wants to believe they'd ever get involved with a swindler, but the truth is that living your life out of an account that another person has access to opens you up to the possibility of being royally screwed over.
  • Hard to surprise each other. My wife and I use the same checking account and charge card, so we really can't buy each other surprises. Each Christmas I know where she got my present and how much she spent. This is a minor bummer. Maintaining individual accounts for your "free spend" money could resolve this, but in our case consider it too much trouble.

If you are on the fence about joining finances, I suggest you take some time to think about it. Don't leap into it! If you have any hesitation, there's no shame in waiting a bit to see how things go. The worst case scenario is that you deal with inefficiencies and slightly mundane tasks (paying each other back for things) for a bit longer.

If you decide to go for it, I'd recommend starting with semi-joined method; it will give you a chance to see how you both handle the joint account while still maintaining your individual accounts to fall back on. If you like it, stick with it! The three-account method is an absolutely workable long-term solution for many couples.

If, however, you are getting tired of the hassle of dealing with multiple accounts when you already think of all your money as "ours," if you've gotten to the point where you're paying practically everything out of the joint, and especially if you're facing a life situation where one partner will be sacrificing income for the good of the family unit, making the plunge to fully joined finances can be a huge simplifier.

Thursday, August 18, 2016

Can't we just agree that certain things should be left for the next tenant?

Can we just agree that certain things should be left for the next tenant?


Can't we just agree, as a species, to leave a few things in our apartments and houses when we move, for the convenience of the next tenant? Everyone needs these things, and nobody really cares about them*, so let's just save ourselves the trouble of moving them from place to place and declare them officially Part of the Apartment.**

  • Clothes hangers
  • Curtains / curtain rods
  • Wastebasket / recycle bin
  • Hooks (over-door hooks, command hooks, picture hooks, etc. - just leave them up, the next people will have things to hang)
  • Plunger
  • Toilet brush
  • Shower curtain / shower curtain rings
  • Bath mat
  • Welcome mat
  • Organizers that work really well in built-in cabinets and drawers
  • Any storage furniture (e.g. shelving unit) that fits into the space in just such a DARLING and PERFECT way that it would be a shame to move it
  • Ditto rugs
  • Window thermometer
  • Garden hose
  • Take-out menus but ONLY for the best places
  • 1 roll of toilet paper

* Okay, some of the people care about some of these things… and I'm one of them. I always upgrade light bulbs to LEDs and discard wire hangers for wooden. But I have no problem with being the "Johnny Appleseed" of LED bulbs and hangers, going from apartment to apartment leaving behind a little upgrade. Spread the love.

** I realize that advising you to leave things in your apartment when you move away might or might not be "a bad idea" and "a violation of your lease agreement" and "technically against the law." Most landlords won't care about this stuff, but some really will deduct from your security deposit for insufficient removal of personal property. So don't go acting on this unless you're pretty sure your landlord is cool.

If you are a landlord: I beg of you, be cool.

Tuesday, August 16, 2016

Should you get married for the tax benefit?


Marrying in the Cayman Islands - 

that has to help, right? 

I think I can unequivocally say you should not get married just for the tax benefit. The "marriage bonus" applies only in certain situations, and even when you get it, it's pretty minimal. More importantly, marriage is a pretty big deal, and has ramifications that are way more consequential than paying a little more or less in taxes.


Reaaallyy?


(Note: The details I discuss below apply to U.S. tax and marriage law, but the overall thesis is, I think, sound.)

For my partner and I, marriage was never a given. We're both skeptical about the institution because of its origins in the historical view of women as property and with an obsession with the legitimacy of offspring for the purposes of property inheritance. Modern-day marriage is often connected with monogamy, heterosexuality, kids, and ticking off boxes on the default path to adulthood--more things that don't really appeal to us. When it came down to brass tacks, then, we took a very pragmatic view of marriage. What does it really mean, why would we do it, and why would we not do it?

Why Get Married? - The Short List

  • Worst case scenarios: Marriage provides a whole bundle of legal benefits that kick in at the worst moments of your lives. A married spouse can make decisions for a partner who is incapacitated in the hospital; they can visit a partner in the hospital (a legally unrelated individual can be barred from visitation, especially if the legal family is unsupportive); they can inherit their partner's property. These are chiefly the rights that LGBT marriage equality movement has been interested in fighting for. Generally these rights can be granted outside of marriage with various other legal instruments (healthcare proxy/living will, will, making them the beneficiary on various accounts, etc.) But it's extra money and effort to reproduce the rights of marriage individually through various other legal instruments. Marrying provides all these rights at once with one cheap, simple document you can get at city hall. Our marriage license cost us $55, no lawyers needed.
  • Health insurance/employer benefits: If one partner doesn't have health insurance through an employer, marriage can enable the other partner to cover them through their own workplace plan. (Details of workplace plans vary. Some workplaces allow coverage of domestic partners, which may or may not be more expensive than coverage of spouses. Even after marriage, it's usually cheaper for each spouse to cover themselves individually, if possible.)
  • Feelings: Some people have a strong emotional connection to the idea of marriage. They may wish to be joined in a public declaration of love and permanence as symbolized by the unbroken golden ring, witnessed and supported by the greater community, or whatever. 


Why Not Get Married? - The Short List



  • Divorce is expensive: Any financial benefit you may have accrued in marriage is generally wiped out by divorce - not just because you may lose assets to the other partner, but also due to unavoidable legal fees. Even partners who split amicably can have trouble keeping divorce costs low.
  • Feelings: Some people are strongly opposed to the idea of marriage. They may see it as inherently sexist, monogamist, heteronormative, and anachronistic institution that has outlived its time. They may object to the idea that something as fleeting, fragile, and ineffably beautiful as a human relationship should be pinned down in this clinical, legalistic fashion, and believe that instead we should each be free to soar to whatever ocean calls us, or whatever.

So that's it! Those are, I feel, the chief considerations when deciding whether to marry. 

Note that I have not included considerations related to moving in together or to throwing a wedding, since you can cohabit without marrying and marry without wedding-ing. Heck, you can have a wedding without getting married if you really want to. Just call it a "commitment ceremony" or a "Celtic handfasting" or a "party."

Handy Wedding Tip!
If you have a nonbinding handfasting and all your family and friends come and give you presents, but later you decide to get legally married after all, don't then have a wedding. People will revolt.

(For what it's worth, my partner and I decided to go ahead and do it, mainly because of the health insurance thing--I was unemployed--and because we were getting to a point in our relationship when we wanted all those worst-case scenario structures in place, but we are fundamentally lazy, so I figured we wouldn't get around to DIY-ing it. DIY-ing a wedding was easier and more fun.)

But let's say you've taken all that into account and you are still on the fence. You have met the love of your life and you will never, ever break up, so you're emotionally ready for the commitment that marriage entails, but you are neutral about the institution itself, and you're open to doing non-marriage documentation as needed for any legal rights you may wish to grant each other a la carte. So it really comes down to the tax issue.


When is there a tax benefit to marriage?



There is only a tax benefit to marriage under certain conditions. In other conditions, there is actually a marriage penalty. This chart sums it up. In short:


  • Unequal incomes are good: The most benefit goes to couples where only one partner earns income. The least benefit goes to partners who earn equal incomes.
  • Midrange incomes are good: Couples whose combined income is very high or low (roughly, those who make under $30,000 or over $300,000 a year) are least likely to enjoy a "marriage bonus" more likely to be hit with a "marriage penalty."
  • File jointly: The "marriage bonus," in cases where you are entitled to one, can be maximized with a filing status of Married Filing Jointly. At the same time, you can't escape a penalty by filing separately. Married Filing Separately is usually the worst of both worlds (although there are corner-case reasons to do it - like if you have high medical expenses, which you can only write off if they exceed 10% of your income. It's easier to get over that threshold with just your income, not your combined income.)


Handy Tax Tip!
You file as married (jointly or separately), not single, in the calendar year in which you marry, no matter when in the year you married. So if you are expecting a marriage bonus and planning a January wedding, you might want to scooch it to December to spread the wealth to an extra tax year! You're welcome.


If you're hoping to marry for the tax benefit, therefore, you should be planning on the likelihood  that you and your spouse will have very different incomes for most of your earning years. So you're likely to win in the tax game you're planning to pull a Don and Betty Draper (sole breadwinner + stay at home parent), or a Marshall Eriksen and Lily Aldrin (two incomes in very differently compensated industries), or a Don and Megan Draper (primary breadwinner + hopeful but largely unemployed artist).


It doesn't make as much sense to marry for the tax benefit if the income inequality is clearly temporary, like if you'd normally make about the same but your spouse was out of work this year. One the situation changes, you still have to keep on being married. You can't "unmarry" because your earning situation has changed and you suddenly are losing money in this deal - except by divorce, which would result in a much bigger loss than any marriage penalty.


Handy Relationship Tip!
Don't press your partner to evaluate the likelihood of their FINALLY WINNING THAT STARRING ROLE in order to evaluate if their income will rise and if, by extension, you should marry or not. It's not worth it.

With all that said, the tax benefit is so slim that it's not really worth even investing this much thought in. I mean, I think my partner and I saved about $90 this year. Pretty much any of the reasons for marrying or not marrying above should definitely trump this. I would think of any tax benefit as a cute little bonus to whatever situation you are already in. It is definitely not a reason to marry someone you are not so sure about, or if you are not so sure about marriage itself.