Newlyweds and debt can be a bad combination. So too, many folks say, is money and marriage. Is a debt-free lifestyle possible for couples? To be sure, it is when they understand the essence of managing God's money and marriage is lifestyle management.
For more than 25 years, Michel has been giving so-called financial counselling to many engaged couples. "So-called" because it's never finances but the couples' attitude to money that's crucial —lifestyle choices that lead to money challenges. Sometimes, one of the couple has over $40,000 student loans and credit card debt combined. Typical for 50% of these couples, one has no debt. And almost 100% of them have not discussed their attitudes and approaches to handling money with the other. Often, they ask me three questions:
- Should we wait until one pays off his or her debt before getting married?
- How should we manage our money after marriage?
- How do we build our credit scores to enable us to buy a house?
Couples' Attitude to Money Will Decide A Debt free Lifestyle
I have not heard a logical or reasonable answer for waiting to repay debt before marriage. One person, Jack, said he felt better if he entered marriage debt free because his fiancée, Patience, had no debt so he thought this was only fair. The issue of couples and money depends on each individual's attitude to money. It's what you believe that will decide how you spend. In turn, this will decide whether you live a debt free lifestyle.
"How long will you wait?" I asked.
"As long as it takes." Jack replied.
"Have you done a debt repayment schedule, Jack?"
"No."
After doing a debt repayment schedule, Jack realized it would take seven years at current rates to repay his debt. "Hmm, I didn't realize this." He said.
My counsel was, and is, simple. Ensure you are getting married for the right reasons. When those reasons exist, go for it; don't link extraneous events and other people's pressure with your decision and timing.
Three Newlyweds Case Studies About Money and Marriage
Tony and Patsy married when Tony was in his final year of college. Tony had a small loan from his parents and Patsy was debt free. They committed to each other for life and decided they would marry. Meanwhile, Tony would attend college full time and Patsy would be the sole income earner until Tony finished college. Their decision reflected the fact that after marriage they would be one and would handle money as one pool. They agreed an approach to spending, budgeting, and decision making and have followed that since. Money matters have never caused an issue in their marriage.
Joshua and Rebecca married with no debt. They did not discuss budgeting, spending, or decision making, but assumed all would be well because they started debt free. They agreed Joshua would "control" the family finances, Rebecca did not want to become involved and review finances together. Joshua made bad choices and the couple ended up over $75,000 in debt including credit card debt. They are still dealing with this debt, and often fight about money, though the issue isn't money.
Simon and Yvette entered their marriage with $40,000 of Simon's student loans. They agreed an approach to handle the family finances by budgeting, a pre-spending review process, and regular Family Council meetings. They believe they must save before buying, pay credit card balances fully each month, and avoid consumer debt. In 18 months they were debt free and saving to buy a home. Money has never been an issue in their marriage, though they have had to delay getting items most couples their age have.
Be Transparent
Newlyweds, it's not your financial condition at the start of marriage that will decide your financial future, it's your ABCs (attitude, behavior, and choices) during marriage that will be paramount. These three cases and several others I have dealt with confirm this fact. It's important newlyweds recall that consequences result from attitude and behaviour, and can last a long time. Meanwhile, engaged couples, try to understand the following issues before you marry:
- Before marriage, agree an approach to handle finances during marriage. Don't meet each other halfway, that's sub-optimal and will cause resentment later. There is a way that will keep you debt free, choose that path. Work with a budget; have regular reviews about where you are and changes needed, if any; agree a process to decide spending; set up a Capital Fund, and most of all, decide a process to settle disputes. This last point is critical.
- Consider pooling funds in the marriage, not his or hers, but ours.
- Be transparent about finances before marriage; put everything on the table. Say how you got into debt and what you are doing about it. The goal is to understand each person's attitude to money: views about credit cards, savings, home ownership, renting, further study, student loans. It's important to be on the same page.
Start Your Debt free Lifestyle Today
The challenge future couples have is to understand they can start a debt free lifestyle now. Decide today to live within your means and not add debt. Use the Affordability Index before spending. Often, when one party decides to wait to repay debt before getting married, something else is driving that decision. My experience is once the couple discusses their debt alone or with a counsellor's help, issues become clearer and they fix their marriage time excluding this issue.
If you are in the waiting zone to become newlyweds, reflect on the real reason for the delay.
Managing Money After Marriage
Two keys to managing money after marriage is to agree a dispute resolution process and start a Family Council, a safe meeting place for the family to talk and listen to one another. These are indispensable for transparency and getting stress reduction.
The Family Council will require each of you to invest time learning and growing together to sort out a process to make effective lifestyle choices. Today, everyone is busy; hurry-sickness leads to shortcuts to doing everything. Merchants oblige us with enticing products and unless we remain intentional about not no taking on debt, we will spend what we don't have. Pause, listen to each other, practice the ABCs, and use your decison process, affordability index, and follow your gut. Besides personal study, the Family Council is the forum to learn, model and teach each other good practices.
Marriage is a partnership. Successful partnerships need the parties’ agreement on at least three fundamentals: goals, values, and a dispute resolution procedure. Develop these in the Family Council.
Building Your Credit Score Versus A Debt free Lifestyle
We can view personal finance in two ways. The usual approach teaches how to use credit cards, and how to maintain a good credit score. Or, the method I apply: Encourage people to strive to live debt free lifestyles.
In the first method, you can get a great credit score, and maintain it always. But, what does that mean? It means you have been in debt, you have stayed in debt, and you repaid your debts as required. You didn’t add much debt, and you are not paying off too much debt. Do you get it? You became a slave to debt! That’s what the world tells you, and most folks tell their children. Isn’t this absurd?
I practice and teach folks to avoid debt. I suggest we save, and then buy. If we must use a credit card, pay the full balance each month; ideally, use a debit card. To buy a house, save a down-payment that fits in the household budget, then buy when you can afford to buy. Most significant, rent when you can’t afford to buy. But, please understand, trying to live without credit can frustrate you. The system will require you to jump through many hoops to prove credit worthiness. To be sure, you will need to show consistent payment of rent, utilities, and other regular payments. Click here to read about living and not watching your credit score.