Marrying Debt
Posted by Gail | Filed under Credit Wise, Relationships
Most people get married without having done a forensic financial investigation into their partner’s life. Passion can be distracting. But having hooked up, with or without the paperwork, you’re eventually going to discover just how good or bad your buddy is with money.
I am often surprised at how willing some partners are to accept their meaningful-other’s shortfalls with statements like, “Oh, yes, (s)he has a ton of debt, but I’m willing to take that on.”
First, let’s clarify some information many people are confused about.
You don’t automatically assume your partner’s level of indebtedness simply because you choose to tie the knot. The only way to be on the hook for your partner’s debt is to actually sign up for it. If you don’t co-sign, co-borrow, or in some way put your John Hancock on the paperwork, nobody can collect the debt from you.
However, if you have joint assets, his or her share of the assets could be affected when the bill collectors want their money back. They can force the sale of joint assets to get their piece of the pie. So the trick would be to not own anything jointly.
And your pal’s crappy credit history could come into play when it comes time to start fulfilling some of your dreams. A lousy history with money may mean your partner becomes dependant on your credit history; you end up doing all the borrowing in your name so you don’t pay exorbitant rates. Now you’re on the hook.
Okay, so that takes care of the liability issues. On to the repayment issues.
Over and over I meet people who having blithely accepted their partner’s failings with money and jumped into the relationship, are filled with seething resentment at all the compromises they have to make because of the debt. There are the vacations that can’t be taken, the house that can’t be bought, the dinners out that they must forgo. It can be wearing after a while. And if the in-debt partner just so happens to earn less than the out-of-debt partner, watch out!
While you did choose each other for better or worse, that usually refers to your circumstances and not your personality make-up. And if you love your partner enough to marry him or her regardless of the debt, then shouldn’t your partner love you enough to want to do everything humanly possible to get rid of that debt?
Don’t whine about how hard it will be, how many extra hours you’ll have to work, how long it will take. Whining is a waste of time. Just make a plan and buckle down to the task at hand.
Sell one car to pay off some of the debt and use the other (if there is another) for everything else. Or trade down.
Rent instead of buying. Yes, I know the one about renting being a waste of money, or a mortgage payment being the same amount as rent, but it isn’t true. When you factor in the property taxes, increased utilities, maintenance, insurance, and all the stuff you house-proudies are going to spend on stuff, renting until the debt is gone makes sense. Besides, nobody said that if you have debt you can afford to rent an expensive place. Rent cheap.
Buy everything second hand until the debt is gone. Ewwwww! Okay, you can buy your undies new if they’re on sale. But that’s it.
The person with the debt must work over-time or part-time on the side to earn extra money to get that debt paid off as fast as possible. This shows the not-in-debt partner that their lover is committed to making things better. It’s like penance. If a partner isn’t willing to do this, they’re not a good partner to have.
Don’t buy anything you don’t NEED. No CDs, DVDs, clothes, electronic toys… nothing that you don’t absotively posolutely need to keep body and soul together.
If you get an income tax refund use it to pay the debt.
Don’t stop saving money. Just because you’re on a debt repayment binge doesn’t mean you don’t need to be stashing away your 10% for long-term savings and some money for your emergency fund.
Try living on one income and using the other for debt repayment. If you’re eventually planning to save for a home and/or have a family, this will be good practice for the future.
But Gail, that sounds like a crappy life. Yup, it can be, if you let it. But if your relationship isn’t strong enough to live through the debt repayment, then you shouldn’t be hooking up at all. This may be hard, but it won’t be the hardest thing you have to do as a couple. And you get to show each other just how committed you are to making a life together. No guts, no glory!
January 13, 2009 at 7:37 am
I could not agree more with this post.
Everyone should wo(man) up and take control of their own debt to get out of it on their own instead of relying on a Prince(ss) Charming on a white horse to do it for them.
How else are they going to learn financial independence and what it takes to earn $1, net? And it’s not fair that bringing debt into a relationship for YOUR education is the responsibility of your future spouse, because if you leave them, your brain goes with you.. but they paid for it.
Debt incurred separately should be paid separately, but having the moral support of the spouse is certainly crucial in those cases.
Fabulously Broke in the City
Just a girl trying to find a balance between being a Shopaholic and a Saver…
January 13, 2009 at 9:14 am
This is certainly an issue we’ve debated back and forth a lot recently.
I come into our relationship with 16k of student debt, and I am absolutely committed to having it paid off before we tie the knot in January 2010- even if that means, as it has, working extra hours to bring in some extra cash, pouring ‘found’ money into OSAP, and trimming my own ‘frills’ down as much as possible so as much money as possible can be poured onto that debt. I don’t want to bring that albatross into our marriage!
He seems to be less convinced. He figures we’ve got time to pay it down (I had already upped my payment to shorten the time to pay off from 10 years to 5, and now I’m trying to shorten it to 14 months) and we have room to live a little less tightly. I figure that if we can learn to live off 1000/m less now, that means we have that much of an extra cushion to use towards RRSPs, RESPs, and emergency saving once the debt is paid off.
January 13, 2009 at 10:08 am
This is a great post — and an emotional one for many. Thank you for clarifying the status of assets/debts once married!
January 13, 2009 at 10:17 am
I was joking with my husband last night that I should get another $20K in tuition allowance for life since his student loan was that much more than mine, and we’ve been paying ours off together. A joke, with some truth, but the serious part is that we BOTH committed to doing what it takes, together, to get ourselves to where we want to be. It is a lot easier now, since the difference in our take home pay is inching closer, than it was when he brought in double what I made. For us, it is working out appropriately for our circumstances.
Great post, Gail. As always!
January 13, 2009 at 10:23 am
Another excellent post with the straight goods. Kate, good for you. I’m so proud of you. If you’re like me, you’ll start thinking about all the opportunities that lie ahead of you. After all, if you learn to live this frugally in order to pay off your debt, what else could you afford in the future if you keep putting money away? If you kept saving this aggressively, I bet you could afford a lot of things you never thought possible – not only a great retirement cushion but perhaps unleash a hidden dream…
January 13, 2009 at 10:26 am
PS Gail thanks for bringing up the rent vs own issue. While I look forward to finally settling down and buying a home, I am convinced I’ve made the right decision by renting all my life, despite the fact that it clashes with the thought amongst my peer group that it’s money down the toilet. Without expenses like utilities, taxes, maintenance, insurance, interest and furniture (i have lived in very small apartments requiring us to buy very little) we not only managed to pay off all debts but SAVE money for a down-payment, hoping to decrease future interest costs on the mortgage when we do buy.
January 13, 2009 at 10:50 am
While this may be true for consumer debt (it is yours and you need a plan to pay it off as soon as possible). I believe that student loan debt (within reason) is “good debt”. I came into our marriage with $24,000 in student loan debt that I have worked diligently to pay off. My husband did not attend school after High school and therefore did not have student debt. Because of my student loan I have an excellent job, very good pay, with an above average pension and room to “move up”. My husband has a job he “tolerates” and that does not pay near as well.
So, in the long run, I believe that this debt has been a “good debt” and has improved our families lives.
January 13, 2009 at 12:01 pm
Saver Queen- you have no idea how right you are!
SO’s albatross coming into this marriage is a very pricey house. While we love it, we figured out that with the mortgage, the property tax (we pay as many people pay in rent!), the maintenance, and the insurance, we paying nearly 2700/month in housing! That’s insane! That was with a substantial downpayment too!
Here’s to hoping we can sell the place for a decent amount and go back to renting…
January 13, 2009 at 12:07 pm
Pat:
I agree. If you got student debt for a better paycheck and career, that is good student debt and everybody benefits.
I do fell it is different if your debt is for an investment (instead of regular partying or pure consumerism).
January 13, 2009 at 1:30 pm
OUCH!
I agree with everything you said — in principle — but what if the person has HID his MONSTEROUS debt until after vows were exchanged? What if he has convinced her to consolidate HIS premarriage debt onto what used to be HER premarriage house (to make payments manageable). What if he continues keeping secrets and take large chunks out of the RRSP to gamble on the stock market? What if his commitment to his family is stronger than his commitment to YOU (buy mom a car, put nephew through college, etc, all on credit)?! What if he promised you a stable life and delivered lies, stress and a big charming smile?
This family I am talking about has kids together, and the dad is a very loving dad, but otherwise has turned a financially stable young woman into a complete basket case while he just keeps promising to “trust her” and quit NAGGING… blah, blah, bah….
Heartwrenching, and completely true.
I have heard you say that you can’t have an intervention for someone that doesn’t think anything is wrong… what if only one of them knows it’s terribly wrong and the other is in a fantasy world?
January 13, 2009 at 1:56 pm
My education debt had always been mine to pay for, even when I went back to school after we were married for 5 years. In June that $44,600 debt will be completely paid for.
Unfortunately we continued to rack up debt separately, but that’s changing slowly and we’re both paying off our own debts from our individual pockets. Yeah, I may have bought something for the house, but it wasn’t agreed upon so I should have to pay for it in my eyes. We’ve always kept things separate, and will likely continue to do it this way as it works for us. He covers the mortgage and taxes, I take care of everything else. Once our salaries are the same (mine will be dropping soon), then we’ll revisit the budget and make it more 50-50.
January 13, 2009 at 2:02 pm
I guess I am dumb then. When we got together she had about $25K in student debt. I just paid it off rather than make her work til it was gone. We’re debt free and I just pay cash for whatever she wants.
January 13, 2009 at 3:09 pm
Pol, that’s very sad and I have to say that if I were in that situation myself, I would make the very tough decision to give my partner an ultimatum – work together by sticking to a mutual debt-repayment plan and budget or get a divorce.
January 13, 2009 at 5:56 pm
I’m constantly fascinated by how many people do not talk about money at all, whether before or after getting married. I knew my partner’s financial blemishes, and he knew that while I wasn’t going to be able to contribute financially for years (while working towards my professional degree) he was willing to support me through that process, as it would be mutually beneficial to us in the long run. Hence, we avoided a lot of student debt. I say we, because the way we see it, we are a team, and our money is just that, ours, in good times and bad.
I think money and how you talk about it (or don’t) and how you decide to deal with it (or don’t) is representative of the relationship-if you’re mature, honest, and working on things together in a way that is acceptable to both parties, your relationship has a good chance of making it. If you hide things, lie to each other, and resent each other for financial decisions made singlehandedly, watch out-you’re relationship is in trouble!
January 14, 2009 at 8:34 am
Gail, if you don’t mind, I’d like to share 2 links that could help a lot of people:
http://www.attorneygeneral.jus.gov.on.ca/english/family/famlawbro.asp – This is from the Ministry of attorney in Ontario. There, you can find a booklet that everybody should read before getting married or live together. Tons of good information. Just keep in mind that it depends the province you’re living in Canada.
http://www.freecycle.org – If you can’t afford to buy, why don’t get it for free? That’s how Freecycle is helping people around the world. If I, you or someone else have something that is not being used, we can just post on the list. That’s how I’ve got a printer, a dryer and an exercise bike.
Good luck everyone and thanks Gail for your hard work!
January 16, 2009 at 7:35 pm
Sadly, at 29 yrs old, I am new to understanding Debt and the weight of it. Seeing as i was in an accident about 16 months ago, my ability to work has dwindled drastically.
So, living only on the gov. child benefits and child support (divorced and NOT on welfare) with two young boys has been challenging. However, after spending a very lonely christmas I had to chin up and accept what the heck was going on.
I was stealing from Peter to pay Paul, but Peter hadn’t cashed the cheque yet. I didn’t even know that the Credit Card Companies tack on an additional $20 if your interest goes over your balance.
So, in short, I recently got another credit card that was a max of $500 which was great as it helped pay for desperately needed glasses. However, my most recent bill shows that they have increased my balance to $6000. Now, the first thing I did was put it in a zip lock bag, into a container and into the freezer.
There it sat for a whole week before I realized I would need it to pay for a bill. No big deal. $30. After trying to forcast what the next week would look like for me, I realized that I was going to sadly need the cash advance until I got a few cheques.
So, after making the call to get the PIN to use the card, they told me that seeing as I was late paying, I wouldn’t be able to use the card until I’d paid the minimum. No biggie. But there went my plans to filling the house with groceries to pay off later.
HOWEVER, in this entire time, My main focus has been can we live off of $100 a week for groceries? Well, I finally got to find out. I recieved two cheques for $200. Knowing (all that planning Gail talks about.. ) that I could very well really need that $100 for next week I opted to use only $100.
It didn’t make it very far at all. WEll, I still got groceries, but any hopes I had of having a drink tonight to relax went out the window. yes, I still have that extra $100.00 in my account, but I have learned some real lessons in the last few weeks.
Moral of the story? Be careful what you wish for.. You just may get it! I wanted so badly to get a full understanding of my money and how I am using it.
It was so bad that I finally had to admit to myself that I am over spending by $339 a month. It’s disgusting. I follow Gail’s show and it has awakened me greatly.
thank you (and every creditor who has called thanks you too! They were surprised that I asked them a million questions about how interest is charged, and how happy I was to explain my situation. No they couldn’t remove some of the interst, but it’s nice to have them be nice to you too in a hard time.)