Welcome to Part 3 of the Q&A with Manisha Thakor, co-author with Sharon Kedar of the new book GET FINANCIALLY NAKED: how to talk money with your honey.

**Due to the length and detail of these answers, I’ll be breaking the Q&A into 5 parts, with 1 winner revealed at the end of each Q&A. Look for the subsequent parts to come in a few days. See here for Q&A Part 1 and Part 2.

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MommyMel – What is the best way to protect your finances before and after marriage if your significant other will bring debt or a bad credit history to the table?

Manisha – Before marriage – talk about it openly and honestly.  Share a list of what you each own, owe, and your credit scores. Talk about what behaviors led to the numbers being what they are and how you might want to change going forward. My personal advice – do not combine finances or loan each other money. Discuss when you get married whether who is responsible for paying down that debt.  There are no right or wrong answers.  Some couples will decide that once married all previous debt accrued is a joint problem and you’ll work on paying it off together.  Other couples (this would be my preference) would say what happened pre-marriage stays pre-marriage and each person takes responsibility for cleaning up their financial situation that occurred pre-marriage and everything post-marriage becomes a joint problems.

After marriage – If you’ve gotten financially naked before marriage, this part should be the easy bit.  You know what the problems are, you know who is responsible for what.  Now your goal is to make sure you both keep each other fully informed about the progress you are making on the game plan you’ve set.  Additionally, because life happens, if there are any slip up, that you both commit to telling each other asap.

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Psychsarah – How often do Manisha and Sharon suggest you re-jig things in your financial life with your partner? I find that we’ve had tons of conversations over the years, gotten things pretty much figured out, but then we fall back into habits and arguments every now and again. Is there a timeline for a financial relationship “re-assessment”?

Manisha – In GET FINANCIALLY NAKED, Sharon & I suggest you have a “re-evaluation” conversation once a year.  Personally, I recommend January as then you can do a full recap of the prior years income and spending along with a review of whether you met your savings goals and how your investments have done.  If you have a volatile or uncertain income stream (you work for yourself or on commission) I personally recommend doing this exercise twice a year, in January and June.

The similarities between getting financially fit and getting physically fit are striking – keeping it simple and actually doing it are the two turbo charging agreements.  So don’t beat yourself up for falling back in to old habits & arguments.  That’s just human nature.  The antidote is to set up a structure (family financial summits) once or twice a year to nudge you back on track.

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Paranoidasteroid – How can you create an environment where you can track your spending as a couple, but without making the other person feel like they have no privacy. This is especially important now that husband isn’t working. I don’t want to track everything he does, but I still want to track our money together.

Welcome to Part 2 of the Q&A with Manisha Thakor, co-author with Sharon Kedar of the new book GET FINANCIALLY NAKED: how to talk money with your honey.

**Due to the length and detail of these answers, I’ll be breaking the Q&A into 4 parts, with 1 winner revealed at the end of each Q&A. Look for the subsequent parts to come in a few days. See here for Q&A Part 1.

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Red – How do you approach having serious financial discussions with a partner who is more concerned about “the now” than the future? My live-in boyfriend D is loathe to have financial discussions with me, though I have said many times that we should have a serious discussion about money and our goals.

When we have spoken (briefly) about opening savings accounts or retirement accounts, he says that planning for the future like that could be a waste of time. “What if you save up $50,000 and you die at 30?” is his common response.

I know other couples where one person has the responsibility of doing the saving while the other pays more living expenses to even things out, but I’d much rather know that we were both saving for retirement and putting money away for emergencies. How can I convince D that saving now will pay off later?

Manisha – Ahhh, welcome to the wonderful world of opposites attracting.  The root problem here is that you have a “future” orientation (as do I!) while your BF has a “now” orientation.  I suggest going to www.GetFinanciallyNaked.com and downloading two free exercises: (1) Your Money History, and (2) A Financial Compatibility Quiz.

The first will help each of you understand what is is in your life to date that drives your future/now orientation.  Understanding what’s at the root of that is a key step in finding common ground.  The quiz will help you see how you two compare on three metrics around money: knowledge, interest, and behavior.

Taken together (as we describe in our book, GET FINANCIALLY NAKED:  how to talk money with your honey) these two exercises can go a long way towards getting you both on the same page.

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SS4BC – How do you decide as a couple what an appropriate emergency fund is and who should contribute what % if the incomes aren’t equal?

Manisha – As a rough rule of thumb, 3 months is the minimum you’d want to aim for if both of you are working in steady, stable jobs.  If either of you is in an industry rife with downsizing, you want to increase that to 6 months.

As for how to contribute, I’d argue that you should do so proportionally to your income. So if your combined household income is $100,000 – and one makes $60,000 and the other makes $40,000, the person making $60,000 should contribute 60% of your monthly savings target and the other person would contribute 40%.

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SavingDiva - When do you think is the proper time to start a financial conversation with your significant other?

Manisha – My coauthor & I like to say… if you are willing to take your close off with each other one way, you should be willing to take your clothes off financially as well.  This doesn’t mean on the 3rd date but it does mean that when you think this person is someone you could see yourself in a long-term committed relationship with, it’s time to start the dialogue.

At a minimum, before you move in together or get married its a must to have this dialogue if you really want to invest in your long-term future together.

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MissAlphaWrites – How do you bring up bad credit history to a long-term boyfriend without scaring him off?

Manisha – Straight up.  Think about how David Letterman handled his “transgressions.”  That’s the role model I’d use.  State it honestly, head-on, and emphasize that the reason you are doing this is precisely because you want to have an open honest relationship.  Also discuss what you are doing to clean up your bad credit history so he can see that you are now on top of the issue.  One of the many great things about America… we love turnarounds

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InvestingNewbie - Is it appropriate to advise a significant other on their financial goals? If so, how can you do that without coming off as patronizing or not supportive?

Manisha - A good relationship is all about understanding what makes each other tick and learning to compromise so that each person can be as happy as possible.  As such, I’d say nope – not a great move to “advise” a significant other on their goals.

However, it is a GREAT idea to sit down once or twice a year and discuss together each of your personal goals and your goals for you two as a couple.  In the course of this mutual conversation it’s a great idea to ask for suggestions on how to improve your goals and to offer thoughts on how to help your significant other achieve theirs.

You may be thinking, “Manisha – that sounds like double speak!”  But the key is that by structuring the conversation as a routine mutual review you set the stage for a much more constructive dialogue that if out of the the blue you say (I’d I’ve had this urge…), “Hey, honey, have you maxed out your IRA for this year???”  The former helps bring you both closer… the latter feels attacking.

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The 2nd Winner of the Giveaway is SS4BC! Congratulations. Please email me your name and mailing address to receive your prize.

Thank you to everyone who contributed questions to the Get Financially Naked and/or entered the giveaway, and a BIG thank you to Manisha for taking the time out of her busy schedule to give such detailed answers!

**Due to the length and detail of these answers, I’ll be breaking the Q&A into 5 parts, with 1 winner revealed at the end of each Q&A. Look for the subsequent parts to come in a few days.

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Bonnie: My BF is older than I am and has virtually no retirement savings right now. He did start a 401K last year, and he’s going to open up a Roth IRA soon. How much should he be contributing to ‘catch up’ to those of us who started in our 20s and early 30s?

Manisha: The short, tough love answer is… he should be socking away at least 15% for his retirement between this 401k and Roth IRA if he’s in his 40s. If he’s in his 50s, he’ll need to up that to 20%.  The rough rule of thumb is that in order to maintain your standard of living in retirement, you’ll need a nest egg that is between 20x – 25x the income you require to comfortably live on.

For each decade you delay past your early 30s, you’ll need to tack on an additional 5% to the oft quoted rule of thumb to “save 10% for your retirement annually” if you want to make up for lost time.

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Cate: When one partner is handling the majority of the finances, what is the best way to keep the other person up to speed on what’s going on with the money?

Manisha: In today’s CrazyBusy24/7 world… this scenario is increasingly the norm, not for gender reasons but for sheer lack of hours in the day.

The key in this situation is to sit down together at least once a year (and ideally twice) to discuss the following items:  (1) Your current net worth, i.e. what you own minus what you owe, (2) How much income your household has had year to date and how much you’ve spent, (3) How the difference in #2 has been handled – if it’s a positive number how was that money invested.  If you spent more than you earned, what was the source of debt and how can you bring it down asap.

I also advise couple to set a dollar amount above which they both agree to consult each other before spending / investing to make sure that during interim periods no one person can wander off the financial ranch.

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Kari: My bf and I have been living together for 3+ years. He is planning on going to law school part-time next year which will last for four years. I have been saving up to buy an apartment and plan to do so before he graduates.

He would live with me and pay a portion of the rent but cannot be on the mortgage or deed as assets will count against him for student loans. What’s the safest way to do this to ensure we’re both protected even if we broke up

Manisha: Good for you for having been a diligent saver.  Before I say anything else, I’m sending you a mental high five for that.  As for your question, to be honest, I personally feel that you should not buy property together if you are not married.  The sheer number of horror stories I’ve heard from couples who have would make your eyelashes self-curl.

My feeling is that if you have saved up money for the house and it’s your name alone on the mortgage and deed – then it’s your house.  That means that your BF is essentially paying rent.  The downside to him in this arrangement is that he is not building equity in your home. However, you are the one taking the risk by buying the home in the first place.  You could consult a real estate and/or family law professional to draft up a formal declaration between you two on how you want to divide things should you break up.

My advice, however, would be to keep it simple.  If you buy the house, you are the landlord and your BF for now is merely a tenant. There’s no shame in him renting! I’d also suggest thinking long and hard about buying a home – until you are sure you can put 20% down, will live there for at least 5 years, and that the sum total of your mortgage payments, property tax, insurance, and upkeep will not be more than 1/3rd of your gross income (and I say your income because you want to make sure you can still afford that home on your own if you and your BF split up).

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Mrs. Smith: I got married in August and have a question about melding finances. My husband has a pretty low credit score (based on some bad habits with credit cards in college) and mine is pretty high but has slumped a bit recently due to 5 months of unemployment and unusual credit card usage.

Is it better to work on improving one credit score before the other? For example, besides making minimum payments on all credit cards and student loans, should we pay down my debt first to get my score back up, or focus on his to bring him up while I continue to carry a credit card balance?

Also, would it help him (or hurt me) to add his name to my credit cards since traditionally (before the last few months) I had better terms on my cards, a better history and little to no balance? Thanks for your help!

Manisha: First, congratulations on both your marriage and your desire to get on top of your finances.  The desire to improve is 9/10th of the battle.

The best way for you both to improve your credit scores is for you to do these three things:  (1) Make all minimum monthly payments on time, every single month.  That’s drives 35% of your credit score.  (2) Each of you tackle your credit card debt simultaneously and try to pay 2x the minimum monthly payment each month on each card.  This will improve your “debt utilization ratio”which is 30% of your score, (3) Both of you should keep your oldest credit card open and in good standing as this shows length of credit history, which is 15% of your score.  Those three steps drive 80% of your credit score, and if practiced consistently for a 6-12 month period should improve both your scores.

Yes, you could try to get super tactical about whose debt to work on first – but credit scoring is not a precise science.  We don’t know with 100% certainty how every single action will affect your credit score, so therefore I suggest focusing on getting the big things right.

As for adding each other to your cards as authorized users for the sole purpose of trying to improve each other’s credit scores, personally I wouldn’t advise doing that.  If you want to have each other on the cards because you are both using them for mutually agreed upon joint expenses that you will responsibly make together… fine.

But the credit scoring system is very opaque.  While it appears that FICO is again considering behavior by authorized users in their calculations of credit scores, individual financial institutions that you may be going to for a loan are free to use their own methodology – which may or may not include authorized user data.

This is my long winded way of saying, rather than trying to game the system your time will be much better spent practicing the best possible personal finance habits from this point forward as that is what will improve the scores for both of you.

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The 1st Winner of the Giveaway is Bonnie! Congratulations. Please email me your name and mailing address to receive your prize.