You’d like to think that love conquers all, and sometimes it does. However, the sad fact is that money problems are often the undoing of many relationships. Even if the couple has sufficient money, differences in how each person feels about saving and spending can put a strain on a marriage. It is extremely important that some basic financial issues are discussed before the wedding. If they aren’t dealt with ahead of time, they will only become bigger issues as the years pass. Here are some suggestions for couples to discuss before tying the knot.
- Do either of you have debt? How much? Are you paying it off regularly?
- Do each of you know the income of the other?
- Are you going to pool your money? If not, who will be responsible for what?
- Is either of you looking for a change of jobs which might involve relocation?
- Will one of you be returning to school?
- Do either of you have a poor credit score?
- Who will be responsible for paying the bills and balancing the checkbook each month?
- Who will be be in charge of savings and investing?
- Do you have differences in spending habits? If one is a saver and the other a spender, you may have to learn to compromise.
One way to keep a handle on your financial situation is to make an annual balance sheet. It may sound complicated, but it is really just a list of all your financial assets and debts. If you make one every year and track your progress (or lack of progress) over the years, then you will be in a better position to understand your finances. You may be surprised by the results, and knowledge is power. After it is all done, be sure to share it with your partner so your situation is in the open.
Your assets (the things you own) should include all bank accounts, stocks, IRA’s, 401k’s, etc. Anything that has actual cash value. Do include your home equity – the value of your home minus the amount you owe on it. Don’t include physical property such as cars, clothes, collections, etc.
Liabilities are your debts. Do include credit card and consumer loans.
The only hard part is collecting all the information, and that gets easier the more you do it. The actual balance sheet can be just a list of assets with their value, a list of liabilities with their value, and your net worth (assets minus liabilities). Or you can follow the sample that I have provided here.
The numbers in parentheses are negative. This is bad. The key to having a positive net worth is getting rid of the debts. Then gradually add to the savings, and you will be on the way to wealth.
The best way to reduce your credit card debt is to control your money. First stop using your card except for emergencies (real emergencies such as a tow truck in the middle of the night.) If you don’t use your card, you will not be adding to the problem. You won’t be digging yourself in deeper. This is the first and most important step to get out and stay out of credit card debt.
After you have stopped using the card, you must begin paying your debt. You knew this day would come, and now it is time to bite the bullet and pay up. Every month make the minimum payment and some extra. The more you pay, the sooner you get out of debt and the less interest you will be paying. The less debt you have, the less interest you have to pay, and the easier it is to get to the $0 balance. It is a wonderful process if you can start and keep to it. When your debt starts getting lower, don’t get over-confident and start charging things again.
If you don’t have enough current income to make the minimum payments plus some extra, then you may have to reduce your lifestyle or take a second job. Still not enough? Take a little bit out of your savings account each month, borrow from your family, get a home equity loan or sell some of your belongings.
OK, all that assumes you have an income and the self-discipline to make your payments. What if you have no income or your total credit card payments are impossible. Try getting a credit counselor or try entering a debt management plan. Look here for how to get these: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm
Also, the Federal Trade Commission has a lot of good information on getting out of debt here: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm