Key Steps to Merging Your Finances After Marriage
My grandmother told me a story about her wedding day. When she entered the room, everything seemed perfect. The tulips she had ordered were strategically placed around the room. Her guests were smiling as she made her way down the aisle towards her husband to be, who looked rather dashing in his suit. As they both repeated their vows, the officiant got to the part that says, “For richer or poorer.” She responded that she was marrying for richer because she could be poor all by herself. If you knew my grandmother, you would know that she was serious. Many couples begin their marriage journey saddled with debts, such as student loans, wedding debt, credit cards, and car loans. It is no wonder that disputes about money is one of the top causes of issues in marriages that may lead to divorce. It is funny how we happily recite our vows, “In good times and in bad. In sickness and in health. For richer or poorer.” On our wedding day, there is no real thought about the possibility of any of these things happening in our marriage. We naively believe we could conquer anything, as long as we’re together. Sadly, the largest amount of debt married couples face outside of their mortgage can be attributed to student loan debt, credit card debt, and surprisingly (or not), debt used to fund their wedding. Many college students are graduating with an exorbitant amount of student loan debt. The Federal Student Aid reported a total of $1.56 trillion in student loan debt amongst American college graduates, with the average student owing approximately $32,731 and average payments close to $400 per month. The New York Federal Reserve reported a total of $3.93 trillion in credit cards were issued to Americans (that is, available credit), with a total of $893 billion in actual credit card spending. This breaks down to an average of about $12,000 per couple. As an immigrant to America, I was shocked to learn of the amount of money couples spend on extravagant weddings - from the cost of the rings and wedding dresses to the cost of the venue, decorations, and food. According to Business Insider, in the US, 28% of couples reported going into debt when paying for their wedding. The Knot, a popular wedding website, conducted its 2019 Real Weddings Survey, garnering feedback from over 25,000 couples who were married in 2019. This study showed that the average wedding in America costs around $33,900, which includes the cost of the engagement ring. In an article called, Wedding Debt is Up and Traditions Are Out, the author reported that one-third of 1,000 couples surveyed confirmed that they used debt, borrowing an average of $11,737 to pay for their wedding. With these staggering numbers, it is no wonder many couples find it difficult to maintain financial stability, especially when two individuals agree to marry their finances in some way but their money management ideals are significantly different. In my household, I am usually the person who scrutinizes how we are spending our money. On the other hand, my husband usually swipes with little thought of how a purchase will affect our bank account, which honestly causes some tension. Together, we had to find ways to help us change this narrative in our marriage. Some of our strategies were initiated before we got married and we worked on the others within the last five years to reduce the number of “money fights” we were having. I believe some of these may help you as well. Talk about your debt and financial goals My husband and I discussed our credit while we were dating. We both ordered our credit reports and I listed each debt in a spreadsheet, including the balance and the minimum payment. Together we talked about how we could begin paying off the debt with the lower balances. If that ship has already sailed and you are now married and in debt, it is not too late. The process is still the same. You can start today by requesting a free credit report via www.annualcreditreport.com from the three major credit bureaus and taking a hard look at your financial obligations. Once that is done, you can begin to devise a plan of action. Create a budget Schedule a budget and financial planning meeting with your spouse. You will need bank statements for all accounts, credit card statements, a pen, and paper. My husband and I currently use Google Sheets, which allows us both to make and view changes in real-time. Start your budget worksheet by listing your total take-home income by pay period. Leave spaces in between. Next, group and list your expense categories – for example household expenses (mortgage or rent, utilities, phone, and food), auto expenses (car loan, gas, and maintenance), debt payments, and so on. I strongly suggest including a category for a reasonable monthly “no questions asked” allowance. You will also need a category designated for emergencies. Save for emergencies For many Americans, an emergency may cause a financial burden if there is not a plan in place. We often pull out our trusted credit card and swipe with little regard for how it will be paid later. What happens if there is a major emergency, such as your spouse losing his job or your wife getting ill? Can your marriage survive without emergency savings? Pay off debt If the lack of cash flow is causing havoc in your marriage, you need a strategy to pay off your debt. When my husband and I started our debt freedom journey, we were both excited about the prospect of being debt-free. We had over $50,000 in consumer debt plus our mortgage. We followed what is known as the Debt Snowball Method. We arranged our debt by the total balance and began paying off the debt with the smallest balance first. We will call this Credit Card #1. We paid the minimum on each debt, except Credit Card #1. Any extra money in our budget was used to pay off Credit Card #1. As we depleted the balance on Credit Card #1, we moved to Credit Card #2. We continued this method until all of our consumer debt was paid. I can honestly say that the journey to financial freedom is not always easy, especially when there are two individuals with different mindsets about money. However, if you persevere through the challenges, the outcome will be worth the effort. I am sure we can both agree that you prefer not to be left wondering, will debt do us part? About Margo Margo Thomas is an author, speaker, and coach. She coaches high school students to make wise financial decisions about going to college, to avoid massive student loan debt after graduating from college. She developed two books to help prepare students and their parents for the transition to college, as well as a financial and budgeting workbook to help college graduates on their journey to financial freedom. Visit Margo at www.your-budget-coach.com.