Whether you are thinking of getting married, you are a newly wed, or you are a seasoned couple of marital bliss, you must have a joint talk about debt and credit. Debt communication is simply not an option. This debt and money talk article can open doors of communication and enhance the success of your marriage. In the case of premarital situations, it may allow you to realize "problems" before they even start.
In David Olson's 2003 National Survey of Marital Strengths we learn that the average adult spends 80% of waking hours earning, spending, or thinking about money. In a study of 21,501 couples Olson found that 66% indicated indebtedness was one of the top 5 major stumbling blocks to their marriage.
Conversely, he discovered "one of the unique strengths of the majority of happy couples was that they did not have major debt problems." Similarly the Administration office of the US Courts tell us there were 1,661,996 bankruptcies filed in Fiscal Year 2003 (up 7.4 percent from the 1,547,669 filings in Fiscal Year 2002). Bankruptcies have exceeded 1 million filings annually since the early 90's and show no signs of letting up.
All of the above strongly indicates one thing. Far more financial communication must occur in the relationship.
To overcome some of these staggering statistics, I firmly believe each couple has a superior chance of surviving separation and/or divorce because of financial stress, by simply opening the doors of financial communication. I strongly suggest 4 areas of communication for any couple regardless of how long they have been together. But the sooner in a couple's existence that communication occurs, the greater the opportunity of success for that couple and the less the stress level within their lives.
Here then are 4 suggested areas of financial communication:
1. Hidden Debt and Personalities - openly and without prejudice or pre-judgment
a. Share each other's credit report and ask questions about past performances. For example: Why are there late pays? Why is there no credit history? Explain the bankruptcy. What is this judgment about?
b. Determine and discuss each person's ability to be a spender or a saver. Do you have a tendency to live paycheck to paycheck or do you have a consuming desire to put at least something away for a rainy day? Do you track every dime or is anything under $10 unimportant to track?
c. Discuss any debts not listed in the credit report.
d. Determine who has what credit lines and what is each person's feelings on separate credit lines, joint lines, becoming an authorized user and/or co-signing any loans. Similarly discuss checking and savings accounts.
e. Discuss who has what assets and should they be kept separated or joined. (Should there be a pre-nuptial agreement?)
2. Goal Setting - where are you going and how will you know when you get there?
a. Set specific goals together for the next year, 5 years, and 20 years.
b. Read and discuss 5 Proven Steps To Budget Motivation (as well as other Budget Management articles under Article Index above.)
c. Commit a plan of action to paper stating how you will be accomplishing your goals.
d. List contingency plans when the inevitable "never expected emergency" pops up.
3. Budgeting and CEO - Who will carry the ball?
a. Who will have responsibility for paying the bills and balancing the checkbook?
b. How will you deal with existing bills? Especially for newlyweds? Will each continue to pay individually or will you join incomes to meet expenses?
c. Together plan out your budget
d. Frankly discuss "what if's".
1. No one plans on bankruptcy but what if the bottom falls out? Will you both declare so the one spouse does not have to absorb the other's debt?
2. What if divorce does happen?
3. What if one spouse dies or becomes disabled?
4. "What if..." and fill in the rest.
e. Will one person be assigned to listen to the partner but ultimately make the final financial decision or will both have an equal voice?
4. Estate Planning
a. Discuss the existing life, health, and disability needs of each partner. Does it meet current and future needs?
b. Talk to a reputable health and disability representative and determine your needs.
c. Based upon your future goals, what investment strategies do you intend on initiating and when?
d. Who will do your taxes and do you need tax strategies to offset tax payment?
e. How will you develop an emergency savings and how much will it be?
f. Are there education needs expected?
Now for the ultimate marriage counseling tip. Reschedule this exact same discussion for next year and the year after and the year after that. Just call it your "Annual State of the Union Discussion".