I was just discussing with my wife how these days we have planning resources for just about everything in life. We have health plans, retirement plans, wedding planners, and estate planning. You can plan a vacation with experts and plan where to go to college with sage advice when you need it. But despite the fact that we have marriage counseling and credit counseling available, they always come after the problems arise. And for unmarried couples, well, it may not even exist. “Couple planning” is left to the couples themselves and it can be a huge task to get it right. If there’s relationship debt, it gets even more complicated.
Debt can quickly and easily become a source of contention between a couple. That’s why it’s important to deal with relationship debt proactively, before it becomes a destructive force.
Debt and Relationships
We seem to always talk about debt in terms of “me” and not so much in the “we” sense. That may be true if you are a single person and you have started out in life with college debt, heavy use of credit cards, and basically being young and foolish enough to rack up some scary debt all by yourself!
But truthfully, being a couple and debt go hand in hand. That can start because many couples enter into a relationship with an already existing personal debt, while others often face debt problems in the midst of a relationship.
Being a Couple or Being Married?
In so many ways, being a couple today and/or being married are very different than they were 100 years ago. In the 21st century, couples are not hanging out, then simply saying goodnight and going their separate ways at the end of the day as most would have been doing in 1921. The big deal of pooling their financial details and living arrangement without the benefit of matrimony was pretty uncommon back then.
The big deal of “living together” was really born in the 20th century. It has become so acceptable that it’s barely anything to talk about. It is expected as part of the steps in building relationships more often than not these days. That building process includes your finances.
One hundred years ago, you could have a steady committed relationship without sharing a place to live or any information about your expenses and debts. Traditionally, one person (usually the male in a heterosexual relationship, as that was the only publicly accepted option back then) paid for almost everything in the relationship with a traditional partner, the female. Like I said, things have really changed.
Debts Before You Were a Couple
Usually a debt you incur before becoming part of a couple is simply your legal debt. You did it, so you pay it back. That seems to be fair and responsible, right? Things like student loans do not automatically become relationship debt for a couple, but some debts can be seen as very different after a couple moves forward and decides to get married.
The good news is that you aren’t responsible automatically for your partner’s pre-marriage debts. If you have a pre-marriage debt in just your name, they aren’t responsible for what you owe (and vice versa). Getting married doesn’t magically mean you are on the hook for repaying their obligation. The only way that can happen is if the debt is transferred into both names, such as through a refinance of a mortgage or adding a spouse on as a joint credit card account holder, but it just doesn’t happen by itself. After marriage, if a couple signs on a new joint account together, then both of them will become liable holders of that new debt.
So while that covers which debts legally remain your debts, the truth is that if you are combining finances as a couple, both your individual debts will become part of your joint finances. Being a couple is a team sport, so what helps one of you, helps you both.
When you get married, the debt equation changes in some ways, but not in others. Here are some other important things you need to know about debt and marriage.
Bringing Debt into a Marriage Isn’t Uncommon
American adults almost always bring debt with them into a marriage. Usually it is credit card or student loan debt, however it could also include auto loans, mortgages, or any other obligations one has accumulated in life.
But make a note of this: If you cosigned on any debt before your marriage, then you are also responsible for that debt. Cosigners have the same repayment obligations whether or not they are married to or even related to the original debtor.
Debt in a Divorce
Many times, in cases of divorce, one person is stuck paying more debt than the other person. The splitting of the entire amount of debt is according to the division of the assets after the finalization of the divorce. The person with more property ends up getting a larger part of debt than the other gets. Some can avoid this situation as many states enforce the equal payment of debts. However, usually the person who is benefitting the most from a divorce gets the largest part of the debt.
Debt Acquired as a Couple
Another matter faced by many couples (whether married or not) is the debt they acquire together. This happens when a couple opens a joint account, which then leads to the debt problems, by either one or both of them. If you have co-signed a car with your debt partner, you are responsible for its monthly down payments and if you or your spouse fails to do so, you accrue the debt equally.
Similarly, in the case of a credit card with both names on it, both are liable for any spending and debt done with the card even if just one party uses it.
Things Couples Can Do to Avoid Debt
In a study of over 4,500 couples, arguing about money early in the relationship was the number one predictor of divorce. Since debt is a major cause for the failure of marriages in the United States, you need a defense plan against it. If you believe that debt might become a hurdle for you and your spouse, here are some tips which can help you to avoid the harms of a debt crisis:
1. Discuss your spending before you get married
To keep each other out of debt, couples should spend a significant amount of time discussing their spending habits and making a budget to avoid shopping and debt disaster! It’s a good practice to discuss major purchases together before buying them. Is that something I really need to tell you?
2. Look at and discuss your credit history
Look at your partner’s credit score/report to know if they are behind in their payments. Anything that may affect the credit rankings of one can have effects on the other when they apply for something such as a loan together.
3. Talk about any of your unpaid loan payments
If you are a new couple, put all the debt-related issues on the table as soon as possible to avoid any future overspending. Talk about ways of solving your debt-related issues with your partner.
4. Make your financial goals together
Make saving and spending goals that work for both of you. It is necessary to discuss the future goals ahead of time to avoid breaking the bank. Be sure to make well thought-out purchasing plans with your partner for the future to avoid debt situations.
5. Look at your financial future
Make some decisions about your future including insurance and retirement planning. No matter what age you are, if you are in a serious long-term relationship, you need to prepare for what life will be like when you are older, even for retirement and death. Reality is that there’s a good chance that one of the two of you will be alone at some point in the future and that requires some kind of plan to deal with that possibility. If that wasn’t the case, would you hear so much about it and know those who have gone through it with and without a good plan?
Unfortunately, couple life planning and the financial aspects and triggers it entails are all left to the couples themselves and it can be difficult to get it right. We spend more time planning our vacations together than our future money challenges ahead of us. That can’t be a good recipe for success. So if you want to achieve success, you need to do something about your relationship debt!
Are you part of a couple? Are you planning marriage or planning to live together? Do you have your finances in order or are you facing big debt and have you discussed that with your partner? Will you discuss it and do you have concerns about talking to them?