5 Tips for Consolidating Your Dollars and Debt Before You Get Married
So you’ve found the love of your life and decided to tie the knot. Congratulations! Married life is an exciting journey to embark upon, but like most journeys, it will be far smoother if properly planned out. And one thing that all couples can and should plan is their finances.
Whether it’s the result of student loans, credit card usage or something else entirely, it’s common for partners to approach marriage while in debt to some degree. As such, many couples are curious as to what this means for them. Whose responsibility is it to pay these debts off? Should they consolidate their debt? Having these important financial discussions before you get married can seem daunting, but clearing the air about debt is the key to starting a marriage out on the right foot.
Debt Consolidation for Couples: What You Need to Know
In general, debts that are incurred by the individual prior to marriage remain the sole responsibility of the individual. In common law states, such as Pennsylvania, debt remains the responsibility of the spouse who incurred it, unless the debt was taken out jointly by the couple or the debt benefited both of them. This also means that should a couple decide to consolidate their individual debt into a single loan, they would be jointly responsible for it.
Whether or not debt consolidation is a good idea is highly dependent on individual circumstances. One of our certified financial planners can help you with a free financial planning consultation should you like to know more.
What About Joint Bank Accounts?
Another issue that couples often wonder about is whether or not to open a joint bank account. These also have their associated pros and cons and whether or not a couple is better off with them would again be dependent on individual circumstances.
If you are considering opening a joint account with your spouse, there are a few things to consider first to help ensure a smooth handling of joint finances in your marriage.
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Have an Honest Discussion About Your Debts
Some people carry a degree of shame with them about their accumulated debts. But when you get married, it’s time to solve these problems as a team. If you have not been fully forthcoming about your level of debt with your partner, it is absolutely crucial that you do so now.
Carefully Evaluate Your Individual Spending Habits
Are you a saver or a spender? Different people have different views about the role of money in their lives. While you are probably already quite aware of your partner’s spending tendencies, it’s best that a more careful evaluation takes place before committing to a joint account.
Create a Budget and Stick to It
Creating a budget may be one of the most repeated pieces of financial advice out there. But there’s a reason for that: budgets work. You and your partner need to sit down and work out a financial plan for the use of the joint account. The plan should include payment priorities (debt servicing may be at the top of the list, for example) as well as allocation, which is often divided proportionally to income.
Schedule Regular Budget Update Meetings
As a marriage progresses, both goals and circumstances change. You and your partner should set aside a time each quarter to update the budget as necessary.
Keep Clear Lines of Communication
This may be the most important tip of all. As the saying goes, the key to a good marriage is good communication. The closer a couple’s finances are integrated, the more important that open and clear communication becomes to avoid letting finances drag down a marriage.
If you’re still unsure whether or not you’re ready to open a joint bank account, why not take our quiz? Once you’re ready to take the next step, the customer representatives at Citadel are more than happy to help you set up your finances for a happy marriage.