Back to FPA Money Makeover>

Lisa Brown and Beth Marks — whose names have been changed to protect their identity — would like to marry some day. Lisa is in her mid-forties and Beth is nine years younger. They live together and are in the process of merging their finances. They are looking for a financial roadmap to help them transition into one household.

“While our financial challenges may seem steep, we think many of them are common place,” said Lisa. “We think our case could be instructive to others.”

Indeed, Lisa and Beth are committed to each other and want to spend the rest of their lives together. Their situation is complicated by the fact that they are a same-sex couple and Lisa is in the process of finalizing a divorce that has dragged on for three years. Lisa has two teenage children from her first marriage. Lisa and Beth live in a community property state where same-sex marriage is not currently legal.

Lisa and Beth have a slew of financial goals ranging from family trips to international travel to paying off credit cards. Their challenge is that together they have excessive consumer debt in relation to their assets and combined income. Another challenge is that Lisa looks financially vulnerable given that her debt is significantly higher than Beth’s and multiples of her annual income. Given that Beth earns approximately twice what Lisa does, their combined finances appear healthier. Even so, their challenge is to come up with a strategy to pay down their debt in an expedited fashion so that they can move beyond a “paycheck to paycheck” lifestyle and realize some of their more uplifting financial goals.

Summary of Goals

• Lisa and Beth would like to marry within the next year or two. They cannot plan exactly when this wedding would be as their state law would have to change to permit same-sex marriage. They are looking at an overall cost not to exceed $10,000 including wedding rings.
• They are planning a family trip to Hawaii for an estimated cost of $6,000.
• Lisa and Beth would like to buy a home within two years. They would like to budget a down payment of $30,000 or approximately 20 percent of the anticipated value of their new home.
• Lisa and Beth would like to be able to travel regularly, with trips ranging from family obligations in Hawaii and the East Coast to vacations in Europe. Ultimately, they would want to budget about $5,000 to $8,000 per year for vacations.  
• Lisa and Beth would like to pay off all credit cards and car/motorcycle loans. Together, this debt sums up to $140,000, almost equal to their combined annual income.
• Lisa and Beth acknowledge that they will have to update their estate planning documents. They recognize that planning can be more onerous for same-sex couples. 
• Lisa and Beth would like to begin thinking about planning for retirement. They both have an adventurous streak and would like to retire when their finances permit. Beth works for the State and has a generous pension scheme which could allow her to retire before the age of 50. Lisa also is entitled to a pension which is significantly less robust. Both have 401(k) plans and they want to know how much they should be contributing to these plans given their prospective pensions and high debt levels that compete for same dollars. 
• Lisa and Beth both want to know if they should pay into a Roth Individual Retirement Account (Roth IRA).

What's a young couple to do? We asked FPA member, Elizabeth Cox, CFP®, a principal with Cox Financial Services, LLC., to analyze their finances and create a plan.

Read The Solution>