No one talks about money on their wedding day, do they?
Maybe they should.
The two biggest questions I get from my newly married couples are “how do we pay all this debt off?” and “what do we do with all these accounts?”
Many people now merge their financial lives with tens of thousands of dollars in student loan debt, car loans, credit cards, mortgage(s); because of high student loan amounts, even some shockingly young people are facing piles of debt before they tie the knot. Additionally, people are generally marrying later, which means they already have established routines and stable financial relationships – and usually many different accounts. There are a few simple rules to consider when discussing (and planning for) debt and account management in a new marriage.
Rule #1 – You don’t automatically become responsible for your new spouse’s debt when you marry. If it’s in their name only, unless you’ve co-signed for it, it’s their responsibility. Many people think that once they’re married they become obligated to the new debt. Not true. So, the rule is this: Don’t assign yourself to your spouse’s debts once you’re married. There’s no reason to become a joint account holder on their mortgage or credit card account.
Rule #2 – In some states, you can be liable for debts your spouse accumulates after you’re married. That means you need to be open and honest at all times with money. No one likes a surprise credit report ding.
Rule #3 – New marriage equals new banking relationships and credit relationships. It’s the cleanest way to do things. People change banks now like they change shampoo, so this really shouldn’t be an issue – both of you can keep your own checking accounts, but create a joint one at a separate credit union or bank that you agree on and use that one for household expenses. Same goes for credit cards. Don’t become “joint owner” on your spouse’s credit cards unless it’s a $0 balance.
Rule #4 – One person should be named on all utility accounts. Everything shows up on your credit report now, including your utilities (I learned this the hard way). To keep order, one person should be named on all utility accounts, i.e., electricity, water, gas, cable, phone, etc. That way if one person has issues, it only takes one person’s credit score down and the other remains fairly clean in case you need credit in the future.
Money isn’t complicated. It requires very little thought and discussion, but it does require some. My overall advice is simple: be honest and up front with the debt you’re bringing to your relationship and develop a plan together to pay it off.
Photo courtesy of: photographerglen