By: Bill Hardekopf
People are waiting longer to get married. According to the Census Bureau, the median age of a first marriage in 2010 was 28 for men and 26 for women. This means people also have time to accumulate more debt by the time they tie the knot
It is likely that at least one partner will enter the marriage with significant debt. The average credit card debt per borrower is $4,679 (TransUnion). The average debt of student loans and financial aid for graduating seniors ranges from $20,000 to $25,000. These debts can cause significant stress on a couple before they even get to the rehearsal dinner.
The best way to avoid financial stress is to reveal these debts early in the marriage planning. It’s not romantic and may be difficult, but it’s not fair for your spouse to learn about these when the bills come in.
Getting married does not automatically make you responsible for debts incurred by your spouse before the marriage. Your partner’s debt will not show up on your credit history as long as you aren’t added to the accounts. However, the debt will still affect you when it comes to income and there is a lot less money to pay for other bills, to save, or to spend in ways that are much more enjoyable than debt payments.
Here are some financial tips for newlyweds:
- Before you get married, know how your future spouse will treat money. Don’t assume your spouse shares your beliefs about money. Their spending and saving habits may surprise you. A free spender before marriage will probably be a free spender after marriage. Ask about their regular indulgences.
- Before the wedding, reveal everything in your financial closet. Be honest about your income, debts, and money problems. Bring out your bank statements from the past twelve months to show what you did with your money. Explain your strengths and weaknesses with money. Admit if you are a spender or a saver.
- Each of you should get a copy of your credit reports from the three credit bureaus. This will give you a clear picture of credit accounts, debts, and how creditors will judge you. Aim to get your scores over 750 to receive the lowest interest rates for your first mortgage and other loans.
- If your partner has been married before, find out about their financial obligations to the ex-spouse and children.
- Have a wedding and honeymoon that you can afford. Do not start a life together charging thousands of dollars in wedding and honeymoon expenses to your credit card if you can’t pay it off within a year.
- Avoid credit card debt. The best rule of thumb is simply “If you can’t pay for something with cash, you can’t afford it.”
- If you have a credit card balance, pay as much as you can above the minimum each month. If you receive gift money, a bonus, a second job, or a tax refund, you should use this money to pay off your debt. You can even make micropayments multiple times during the month to pay off your balance faster. Eat a meal at home and immediately apply the money you saved to your credit card balance.
- Before the first bills come in, decide who will pay the bills and when this will take place. If you have separate accounts, know which account pays each bill. Also notify creditors of your name change and new address.
- Reduce your debt-to-credit limit ratio. This will help improve your credit score. Your monthly debt, including your mortgage, should not exceed 35% of your gross income.
- Each spouse should have a credit card in his or her own name to build an individual credit score. Keep that card for a long time. Use the card for several purchases each month and pay the bill in full immediately. Building a long-term payment history with one or two credit cards is an important factor in your credit score.
What are some of the best financial lessons you learned as a newlywed?
Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.