Odd couple: When financial opposites attract

Before tying the knot, they must reconcile their different money managing styles.

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By Yuval Rosenberg, Money Magazine contributing writer

odd_couple.03.jpg
Rory Durkin and Michele Roth aim to find a financial common ground before tying the knot in August.
Rory Durkin and Michele Roth
Minneapolis - Rory, 43; Michele, 32
Goals: Blend financial views, pay down Rory's debt, budget for a bigger home.
Assets
$195,000 in retirement plans
$66,000 in savings
$55,000 in taxable investments
$55,000 in home equity
pie_chart.gif

(Money Magazine) -- Opposites attract, and Michele Roth and Rory Durkin prove the point - at least when it comes to their finances.

She works for a financial services firm and is a self-described hoarder. He's a lawyer and an impulsive and generous spender.

She despises debt. He sleeps comfortably with $25,000 in credit-card balances.

"We're night and day," says Rory. Knowing full well that financial issues are a prime reason that marriages fail, Michele, 32, and Rory, 43 - who met in their condo building and got engaged in July - want to bridge their differing views on money and figure out a way to marry their finances before walking down the aisle next August.

Where they are now

The Minneapolis couple will be starting their married life on solid enough footing. As a criminal defense attorney, Rory earned $209,000 last year while Michele, who works in human resources, pulled in $80,000 plus a bonus.

Although Michele is younger, she's off to a better start as a saver. She has already amassed $190,000 in investments and retirement savings. Plus, she has $50,000 stashed in money-market funds for emergencies.

Rory, on the other hand, has $62,000 in his SEP-IRA. And his rainy-day fund consists of $10,000 in cash and silver and gold coins.

What they should do

Get on the same page: Rory concedes that he'll need to make some changes.

"I'm just going to acquiesce," he says. But Ruth Hayden, a St. Paul financial educator who counsels couples, warns that this approach won't work in the long term because no one can alter his financial personality that easily.

Instead, Rory and Michele need to find a middle ground. For instance, Hayden says Michele might enjoy life more if she were a bit less cautious about money. And Michele admits that she admires Rory's generosity, such as his willingness to pay for nights out with friends who earn less than he does.

One solution: The pair should keep individual and household accounts. Rory can deposit several thousand dollars each month into a checking account earmarked for joint expenses. With what's left he can pay down his debt and spend as he desires.

As for their investments, Ross Levin, a financial planner in Edina, Minn., says newlyweds shouldn't rush to combine their portfolios. But Levin suggests a few changes.

Between them, Rory and Michele invest in 16 different funds managed by American Funds. Where there's clear overlap - for instance, both own balanced funds run by the firm - they might want to pare that down.

Meanwhile, they should consider adding blue-chip funds run by other firms, such as Vanguard Dividend Growth (ticker symbol: VDIGX).

Another issue: Once the couple marry, they will have near-term goals to consider, including buying a bigger home. And that means they'll need some safe fixed-income investments to protect their down payment.

Levin says the couple need to boost their bond allocation to about a quarter of their portfolio. He recommends adding a well-diversified, low-cost fund like Loomis Sayles Bond (LSBRX).

Deal with the debt: Rory, who worked his way through college and law school, feels strongly that Michele should not use her savings to wipe out his debts. Levin agrees. He says Rory's income is more than adequate to attack his hefty credit-card balances, $30,000 in car and motorcycle loans and $76,000 law school debt.

Levin suggests paying off the smallest balances first. This should give Rory confidence that he's making headway, while also freeing up future cash flow to pay down his credit-card debt.

Budget for a new home: The couple's two condos are on the market (Rory's one-bedroom is listed for $214,900; Michele's two-bedroom is going for $279,900).

Once the condos are sold, they hope to find a larger house nearby. Michele is comfortable spending between $400,000 and $500,000, but Rory thinks they can go as high as $600,000.

Hayden says that the couple are putting the cart before the horse. Before wasting energy fighting over price tags, Rory and Michele need to hammer out a household budget to see what they can actually afford.

"I think that makes a lot of sense," says Michele. And ever the long-term planner, she adds, "I'm excited to start talking about those things."

Want a money makeover? E-mail us at makeover@moneymail.com. To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.