Newly Married With Debt – What to Do

Debt is so common today, especially among young people. There are student loans, credit cards and car loans and everyone seems to have them. For that reason, it’s easy to underestimate the significance of debt when getting married. We tend to see debt as very personal, as if it’s our space. But once you get married that all changes.

Debt, as with all things financial, will have an impact on your spouse. It represents a claim on marital income and that has broad implications by itself.

If you’re a newlywed and you have substantial debt, what should you do?

Be honest with each other

This is the first, best step when either or both spouses have debt. It actually much better to have this “money talk” before you get married but it’s better late than never my friend. You’re bringing two separate and very distinct financial profiles into the marriage. That includes how you spend, how you save (or how you don’t), and even how you view money. Like every other component of your formerly separate lives, your financial profile and attitudes will also have to be “married”, at least gradually.

That will start with fully disclosing the amount of debt you both are bringing into the marriage. This is a necessary step in order to 1) begin dealing with debt, if in fact it’s a problem, and 2) to prevent going deeper into debt that marital financial secrecy might encourage. It’s much easier to come clean now than have to deal with misleading others about money later on.

This should be done in a non-judgmental way. Each of you were functioning as separate financial entities prior to being married and may have had very different attitudes about debt. It will take time before you come to a place where you have relative agreement on the issue.

Neal’s Notes:  If you want to be sure you are getting (and giving) your spouse the real picture, show each other your credit reports. This displays the good, the bad and the ugly and there is no hiding what’s really going on.  Trust…..but verify!

Make getting out of debt your first priority

One of the transitions that has to happen is that you both have to agree that debt is a bad thing that must be controlled and eventually eliminated. A lack of agreement on this front could set the stage for a married life of debt.

Where marriage is concerned, this is never harmless either. Financial stress is one of the biggest reasons for divorce, and debt is one of the biggest reasons for financial stress. Agreement on debt is not a true option – it is a requirement for a successful marriage.

Now that there are two of you, the only way you’ll be able to get out of debt is by being in agreement and working together. If one partner is committed to getting out of debt and the other isn’t, all of the first spouses efforts at debt freedom will be undone by the other.

Combine your finances—most of them at least

One of the best ways to deal with debt is by combining your finances, at least substantially if not completely. As discussed above, that includes fully disclosing the debts you do have. And depending on the levels of debt, it may also prove to be the best way to make the debt go away as well.

One of the financial advantages of marriage and the combining of your finances is the combining of expenses. It’s sometimes said that “two can live for the price of one”—meaning one house payment, one car, etc. It’s not a perfect analogy, expenses do drop but not as substantially as the saying implies. Still, marriage can free up a lot of income for constructive purposes.

If you both previously had separate house payments, rent or mortgage, the elimination of one should enable you to pay off your debt much more quickly. By combining your finances, you can work out a debt snowball—paying debts in order of size, smallest to largest—that will eventually pay off both spouses debt in a way neither could do alone.

Watch the major purchases

Since major purchases—houses, cars, recreation equipment, etc.—are typical causes of debt, you will need to be in agreement on this issue as well.

In order to eliminate any debt that was brought into the marriage, there may have to be agreement by both spouses that there will be no major purchases until pre-marital debts have first been paid. If that doesn’t happen, the couple may risk stacking debt on top of debt. That can easily become a lifetime pattern that will eventually cause serious marital problems later on.

Concentrate on saving money so that you won’t need to borrow

The ultimate financial goal for an individual or a couple is some level of financial independence—being able to do what it is you want to do in your life without going into debt in order to do it. Whether that’s for the purpose of having an emergency fund, saving for college for the couple’s children or for retirement, savings will be a requirement to make it happen. Savings will also eliminate the need to borrow money!

But once again, in order for that to happen, the couple must be in agreement that they need to save and that it needs to be a priority. Once again, if one spouse is saving money, and the other is spending it instead, all of the first spouses work will be undone.
Many elements of life must come together in a marriage, and one of them is finances. Debt is a major part of that since it’s also so common today. Once a couple is in agreement on debt, all other components of finance will likely follow.

Did you or your spouse have significant debt when you got married? How did you handle it?