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Starting a marriage on right foot

By the time Candace Kirby and Patrick Letts Jr. say "I do" this summer, they want to be on their way to a solid financial life together.

It's not that the Baltimore couple lacks romance: Kirby's parents are the hosts of a destination wedding at a Florida winery, and the couple will then sail off for a weeklong Caribbean cruise.

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But there's a practical side to Kirby, 25, and Letts, 24.

Both are living with their parents, which helped them to be able to prepay the honeymoon trip. Letts paid cash for the engagement ring, and both have been aggressively paying down auto loans and stashing away money for a down payment on a home. Their big entertainment splurge? Joining a couples' bowling team.

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Like a lot of young couples, they have dreams, including buying a house and saving for retirement. They also have challenges, such as paying off debt, boosting their savings while getting started in their careers and melding their finances.

"We are saving as much as we can, but it is frustrating because we feel we are not saving enough and will not be able to afford a house," Letts wrote in a letter requesting a Money Makeover.

This year, the couple expects to make a combined $70,000, an impressive figure for twentysomethings starting careers, said Elizabeth Potts Weinstein, a financial adviser and attorney in San Jose, Calif. But they don't yet have a firm handle on what their expenses will be once they move out of their parents' homes.

"Your net worth is $12,000, which is great considering your age," said Weinstein. "A lot of people in their 20s have negative net worth because of student loans."

They do have student loans totaling $19,000 and remaining car loans of $9,488, but the value of their cars and their accumulated savings bring their total assets to $41,233. That leaves a net worth of $12,745.

Another positive is their commitment to communicating about money even before the wedding. They met as teenagers working in a pretzel shop, and they've always been comfortable talking about the business side of life.

To help Letts and Kirby get off on the right foot, Olivia Mellan, a therapist who specializes in couples' money conflicts, talked with them about starting their financial life together.

Mellan gave a thumbs up to a plan to merge most of their finances but keep small amounts of spending money separate.

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Mellan told the couple about some listening skills and communication techniques to handle financial stress once they're married. One example: One partner lays out a subject he or she finds very stressful, while the other partner listens intently and repeats back exactly what the other person says, a technique called mirroring. It helps partners empathize with one another during stressful times, the therapist said.

Kirby and Letts have full-time jobs in the Baltimore area, where they plan to stay for the foreseeable future. Letts is a sales representative for the Major League Soccer team D.C. United; Kirby is a data analyst for a federal contractor.

While Kirby has had a couple of years of full-time work to begin building some savings, Letts started at D.C. United in April, after a stint waiting tables at night while working as an unpaid intern with the Baltimore Orioles.

Letts loves his job and hopes to stay in the world of sports, but the nature of his sales position means 40 percent of his income is in commissions, another challenge to setting a budget and beginning to save for retirement.

Combined, they've saved $7,680 in non-retirement accounts, but they'll need $10,000 just to make a 5 percent down payment on a starter home in their area, which they expect will cost about $200,000.

"Also, a lender is going to want to see two to three months of mortgage payments in the bank," Weinstein said.

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That means the couple needs to start an emergency fund in addition to their other savings, she said, and they should strive to have between $15,000 and $25,000 over the next few years.

And that's on top of Weinstein's recommendation for each of them to save 10 percent of their income for retirement each year.

Kirby is on track with that goal. She has $5,723 saved in a workplace 403(b) account from a previous job and in an individual retirement account.

Both Letts, who also has money in an IRA, and Kirby will be eligible to participate in their employers' workplace retirement plans within a few months.

If they both save 10 percent of their incomes going forward, and receive raises at least equal to inflation and earn investment returns of 6 percent above inflation, they will have accumulated $52,000 for retirement by the time they turn 30, Weinstein said.

"I always had in the back of my mind that I'd like to have $50,000 saved by 30," Letts said.

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What to do in the meantime?

Weinstein recommended they change their financial strategy to focus on building up their short- and long-term savings rather than putting such a heavy emphasis on paying off their $9,488 car debt.

One of their auto loans is at 2 percent, a rate low enough to justify putting more money into savings for the house, Weinstein said.

She recommended Kirby roll her 403(b) account from a previous job into her individual retirement account and consider converting it to a Roth IRA. She'll lose a tax deduction, but, considering her age and income bracket, having a Roth IRA at retirement that she'll be able to withdraw tax free is worth far more, Weinstein said.

As for the couple's participation in company savings plans, she suggested funneling 15 percent of contributions into a bond-fund selection, 45 percent into stocks of large-capitalization companies, 20 percent in small-cap stocks and 20 percent in international stocks.

For their IRAs, she recommended keeping things simple with target-date retirement funds from a low-cost fund supermarket, which will be rebalanced automatically and offer a broad array of asset classes.

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They also have been putting money into individual stocks. This isn't a bad strategy, Weinstein said, but she encouraged them to begin focusing most of their new money on broadly diversified, low-cost mutual funds.

Because of their coming wedding, Weinstein urged the couple to draft powers of attorney, wills and health care directives and make any needed changes to their beneficiary designations on their accounts.

She also recommended they rethink their cash-management plan. In addition to keeping some spending money separate for each spouse, the couple was weighing a strategy to open several different checking accounts to manage expenses.

Keeping some separate money is fine, Weinstein said, but she worries that so many accounts will generate high fees and, ultimately, will be more confusing to manage. Streamline joint spending into a single account, she said.

"You guys are already ahead of a lot of people" in terms of planning for a future money life, Weinstein said.

"Our goals and values are very similar, and we just mesh well," Kirby said. "He knows how to calm me down when I'm upset and vice versa. We're both each other's voice of reason."

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Janet Kidd Stewart writes for Tribune Media services.


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