Joint funds to pay down my student loan? Or invest?

[frugalNYC]

Okay. So I have a student loan balance of about $65,000 with interest at an average of 7.5%. I know. oof.

My amazing spouse and I are newlyweds with mostly separate finances. We each contribute half of our income to a joint account that we use to pay for shared things like rent and groceries and internet. It's more than enough to cover our expenses. The other half of our incomes is discretionary. I use my money for paying off my loans (and the occasional brunch with friends). Contributing $2k/month, I can knock them out in about 3 years.

Spouse makes much more money than I do and gets a five figure end-of-year bonus, half of which is going into the joint account. We both agree that having more than $10k in that account is counterproductive and we've been talking about investing it. Spouse has some healthy personal investments. I'm just trying to claw my way out of student debt.

I broached the idea of using our extra couple cash to pay down my loan instead of investing but Spouse considers this unfair. Financially, we are three separate entities: me, him, couple. Spouse sees using the couple funds to pay my student loan as penalizing that entity for what was my personal decision/expense.

But I'm bugged by the idea of using our couple money to invest when I have such a huge pit of flaming debt. Am I just being totally selfish? I don't have anything saved for retirement-- and since I know that I can pay this off in 3 years at my job anyway, maybe it's a good idea for us to invest the couple cash?

[LWYRUP]

My personal view is that finances should no longer be seperate once you are married.  You both stood up in front of all your family, friends and god and said that you would be together forever, for richer or poorer, in sickness and in health.  There is no longer really my money and my spouse's money.  Just our money. 

That being said, not everyone feels this way and a lot of people who do not still have wonderful lifelong marriages.  Finances is one of the trickiest part of a relationship, and there is unfortunately no single right answer here.  I think you and your spouse need to have a global discussion about money generally and craft a specific plan based on that. 

[Bruised_Pepper]

I wouldn't want to foot the bill for someone else's student loans.  But then again, I'm a selfish bastard who probably isn't going to ever get married--for this and many other selfish bastard reasons.

[Mickijune]

I feel you, but I have $80k, half at 6.5% and half at 8.25%!! We never thought twice about combining expenses/incomes.

I also agree with blinx. If it's extra money, I think it should be used for the good of both of you. You got married to spend your life together. I would do everything in my power to help my spouse out and that includes contributing financially to get him to a more secure place so we can be secure and move forward together.

If it's couples cash and it should be used for joint expenses, why not skip a month of contributing to the couples cash fund (or however long you can push out the fund with half the bonus)? Then you can use all your income for one or two or three months to pay off your student loans, he can do whatever with his and the joint expenses are still paid. Return back to normal when necessary.

[frugalNYC]

Finances is one of the trickiest part of a relationship, and there is unfortunately no single right answer here.  I think you and your spouse need to have a global discussion about money generally and craft a specific plan based on that. 

I hear ya, blinx7. For the most part, Spouse and I are both really digging our financial arrangement. But now that I think about it, our financial goals are still very separate as well. I'd probably be more interested in investing joint funds if it was in the pursuit of a particular goal.

I wouldn't want to foot the bill for someone else's student loans.  But then again, I'm a selfish bastard who probably isn't going to ever get married--for this and many other selfish bastard reasons.

I think it's totally fair for someone to not pay off their partner's loans, especially when that person has worked so hard to stay out of debt themselves.

If it's couples cash and it should be used for joint expenses, why not skip a month of contributing to the couples cash fund (or however long you can push out the fund with half the bonus)? Then you can use all your income for one or two or three months to pay off your student loans, he can do whatever with his and the joint expenses are still paid. Return back to normal when necessary.

This just might be the answer. I'll talk it over more with the Spouse. Thanks, Mickijune!

[the fixer]

Having your spouse "refinance" some of your loan at a lower interest rate may be a compromise worth considering. You could pay spouse back by contributing more each month to the joint account.

[lifejoy]

This is interesting to me, because I have offered to help my SO pay down his debt, and he is weird about it and pretty much says no. I think he wants the satisfaction of paying it off himself, and to know that he hasn't caused me any financial burden. That being said - our finances are seperate right now.

Gail Vaz Oxlade says that if your buddy accumulates a debt, it is their debt to pay off. But she has been divorced 2.5 times...

[Frankies Girl]

Something about that rubs me the wrong way. Did you both discuss your feelings and positions on: kids, religion, family relations, holidays (where you spend them) and money/debts - those are the ones you want to hash out before you get hitched. If you didn't, might be time to sit down and go over stuff like that, but let's hope that you both basically agree on those things...

Now that you're married, I'd also bring up the fact that the interest rate you're paying on the loans is going to cost the both of you more money the longer it takes to pay that off... so he's kind of shooting himself in the foot by not helping to kill that debt.

ETA: I do hope that the investments he's making are jointly held.

[CanuckExpat]

It sounds like you have to decide how and if you are going to merge your finances, and from there decide on what to do with the student loan. There are a few popular models apparently ranging from completely combined to completely separate:
http://www.mint.com/blog/planning/should-you-merge-your-finances-after-marriage-0413/?doing_wp_cron=1385597590.1005580425262451171875
http://www.forbes.com/sites/learnvest/2012/09/10/how-to-combine-finances-with-your-partner/

One model isn't more correct than another, it depends on what works for you two and what you are comfortable with. If you go for the completely merged model, it makes sense that you would use the extra money to pay off the high interest loans. If you go for the completely separate, then you may decide that debts incurred before the marriage are not to be paid with "joint" funds. For a model in between, you will have to figure out how that works.

So it sounds like you will have to have a conversation about how you want to handle your finances going forward :)

edited with correct link

[frugalNYC]

Thanks everybody! This has really helped me to think through the situation a bit more.

I don't want to give the impression that my spouse and I didn't talk about our finances before we got hitched-- it's just that until two months ago we were both anticipating very meager incomes as we both transitioned to freelance consulting jobs. We talked a lot about what that would mean. Then a few opportunities came our way and we ended up in full time gigs with steady incomes and for the first time I feel that I can put my student loans front and center -- I'm just impatient with the results.

Spouse has worked very hard over the years and is probably nearly at FIRE if he wanted it. He just doesn't feel the same urgency about my debt as I do. But maybe that's ok. We both like having separate finances, at least for now. And I'm still making progress paying the loan myself.

I'm going to suggest that we not put more cash in the joint account for a few months. That way I can make additional loan contributions and we still use couple money for couple things. I'll see how far that gets me and reevaluate as we go along.

[frugalNYC]

Hey, just wanted to give y'all an update on this. After reading through your advice, I had more discussions with the spouse about student loans and joint money and we agreed on a new arrangement. Amazingly, the money currently in the joint account is enough to cover a year of our expenses so we won't be putting any more into it and I can use my entire paycheck to pay down my student loans each month.

Spouse  "refinanced" my loans into a personal loan to him at 4.5% with the stipulation that interest will go up in two years to mimic whatever happens with federal interest rates.

However, I'm going to pay it all off before then ;)

[Thegoblinchief]

That sounds great. Just saw this thread with your update. Personally, marriage without joint finances is an alien concept, but statistically I know that money is a huge sticking point.

Hope things continue to work out :)

[Grateful Stache]

I broached the idea of using our extra couple cash to pay down my loan instead of investing but Spouse considers this unfair. Spouse sees using the couple funds to pay my student loan as penalizing that entity for what was my personal decision/expense.

To me, the very definition of a 'couple' is a pair who work together towards the same goals.

I consider our household student loan debt as one in the same. We both need to work towards paying it off before moving on to other goals. Whether it's my loan or hers, it's the same goal.

[thelamb]

I recently pondered this question myself and came to the conclusion that the three account model, like you have, is the way to go. 

Being married means you share expenses, goals, etc, especially for the kids, the home, travel, food... 

However, in this day and age, married couples don't always, or usually don't, share careers.  And I think it could be argued that personal finances are part of personal careers.  One person's student debt was that person's investment made in order to get the job they want, while another person's savings and investments might be a bridge to the new business or whatever that they want. 

This is a selfish thought, but throwing all in would seem to stifle and disincentivize those forms of personal development and career goals.  So I like the three account model and it sounds like you guys came up with a great solution that maintains that while also allowing your SO to help out. 

[Fletch]

The other option is to contribute to the joint fund proportional to income.

I.e. if you make $40k, they make $60k, and joint expenses are $20k you would contribute $8k and they would contribute $12k. It's a slightly different hierarchy of couple funds before individual funds, while still maintaining separation.

[frugalNYC]

The other option is to contribute to the joint fund proportional to income.

I.e. if you make $40k, they make $60k, and joint expenses are $20k you would contribute $8k and they would contribute $12k. It's a slightly different hierarchy of couple funds before individual funds, while still maintaining separation.

This is basically what we do. We each contribute an equal percentage of our incomes. It works out great and is an effective budgeting tool because we're individually paying for nonessentials like take-out coffee, clothes, or books. Makes you think about it just a little more.