Marriage and debt are two areas that can cause a lot of stress and anxiety on their own. Combining them can set you up for even larger problems. But this doesn’t have to be your reality.
Couples frequently struggle with financial issues, and one of the most challenging is debt. A 2019 LendingTree Survey found that 45% of couples took on debt to pay for their wedding.
But wedding debt is hardly the only type of debt that couples have. Money owed prior to the relationship, such as car loans, credit card debt, and student loans, could be in the mix as well. Debts such as mortgages, medical expenses, installment loans, or back taxes may have even been accrued together.
If you want to take more than baby steps at eliminating any debt you have, you need to work alongside your partner instead of working separately. When your goals and strategies are in sync, you can go further and faster.
Here are 8 steps to get you moving together towards paying off debt:
1. Add up all of your debts and create a list of all you owe (together!)
Be open and honest about your debts, as this will aid you in resolving your financial issues together. Now is not the time to be hiding anything you might owe. By doing so, you’re basically working against each other. No one wants to be cheated financially, so open up. Be real. And be honest with your spouse.
When creating your list, make sure you are looking not only at the total amounts owed, but also at minimum monthly payments, interest rate charged, and whether any of the debts are delinquent.
2. Define your financial goals as a couple
The next stage is to come up with a shared strategy for reducing/eliminating your debt once you’ve determined how much you owe.
Make a list of the financial goals you and your partner want to achieve. Goals could include when you want to be debt-free, how much you want to pay off and save each month, and how you want to set up other accounts like an emergency fund and retirement plan, for example.
Consider your financial goals together, including what each of you can contribute to achieve mutual benefit. If you have children, your shared financial goals should also include plans for expenses such as: child care, educational savings and other related expenses.
(Need a little more guidance on creating your goals together? Let us show you how, Quickly and Easily)
3. As a family, commit to those financial goals, including sharing the rewards.
Seventy, thirty, or even twenty years ago, society has taught us that discussions about money should only happen between the parents, and children should not be privy to any aspect of those conversations.
However, that’s a really antiquated mindset about money that should be changed. It’s more vital than ever to explain some financial issues with your children. That’s because your spending and saving habits will impact their future financial success (or lack thereof).
Explain why financial goals are important, how to set them, and what your family’s financial objectives are. This will serve as a foundation for why kids can or cannot have certain things when they request them later.
Even very young children can understand money concepts, so don’t be afraid to share your financial goals with them just because your child isn’t yet in high school.
You can always go back to the necessity to save money, pay off debt, and make plans for the future as a reason to not make a purchase. Children imitate their parents’ good (and bad) financial practices, so be mindful of what messages you are sending their way
4. Set a deadline and prioritize which debt(s) to tackle first.
Examine your debts and create a timetable and priority list for paying them off, as well as deciding which debt repayment methods are best for you.
The debt snowball method tackles debts by paying them off in order of smallest amount to largest. This method works well if you need a little boost of motivation to keep going. A second method to consider is the avalanche method which tackles debt with the highest interest rates first. Depending on your level of debt, the second method might save you from paying additional interest. Check out this calculator to determine the difference for your situation.
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5. Create a family financial plan and debt repayment plan.
Knowing what you owe and how much money you make will help you create a monthly plan. (This doesn’t need to be a budget — and there are a number of reasons why we recommend AGAINST using a budget!) Every item, including monthly expenses like housing, auto payments, insurance, utilities, taxes, and food, should be listed in your plan.
You should also include expenses that aren’t regular monthly expenses, as some of these can be significant drains on your money and can impact how much you are able to dedicate to debt reduction and savings. Irregular expenses might include: vacations, annual subscriptions, medical expenses, Christmas, and tuition.
When you look at how much is being spent each month, and how much you would like to contribute to your debt reduction/savings plan, you might need to find ways to trim your expenses. This doesn’t mean that you need to eat rice and beans every night — in fact, we heartily oppose going to such extremes. Looking to find some “extra” cash that you aren’t likely to even notice? Grab our free ebook, Own Your Financial Future; 7 Strategies to Get You Started Today
6. Evaluate payoff choices and make a decision as a couple
Consider both individual and team plans when looking for solutions to pay off debt quickly.
For example, getting a shared personal loan to combine many of your high-interest bills into one streamlined payment is one strategy to tackle any high-interest debt you or your spouse may have. This can help you see a significant impact in your debt repayment efforts by reducing the amount of interest owed right off the bat.
If you also have student loans to deal with, you may need to devise a different plan, such as negotiating a lower interest rate or payback conditions. Determine what gets paid first and whether you should pursue more drastic options such as debt negotiation, credit counseling, or bankruptcy.
7. Rather than pointing the finger of blame…
Approach each financial discussion from an open and understanding point of view
When you get furious and blame your partner for the debt, nothing positive will result. Instead, focus on resolving the issue rather than assigning blame.
Mutual success, a fulfilling relationship, and a happy family are achieved through supporting each other’s efforts and working together to create positive money habits. Marriage and debt need not create an environment of stress and anxiety. In fact, learning how to discuss financial matters and managing debt together can help you create an even stronger bond with each other.
8. Be open and honest about money, and assess your progress on a regular basis
Celebrate your achievements and work together to find solutions if there are any setbacks. You can do this best by sitting down regularly, and looking at your progress. Seeing the progress that you have made together — and celebrating it!! — is a great way to keep the spark alive and motivate you to keep going.
Maintaining open channels of communication regarding money in a relationship helps to establish trust and commitment. You may both relax since you know you’ll be more effective as a team when it comes to dealing with debt or any other issue that arises.