The following post comes from partner site LowCards.com
Valentine’s Day is just around the corner, and thousands of couples will get engaged on this romantic day. But life is not a bed of roses, and the sooner couples deal with the financial challenges, the better their marriage will be.
Financial problems are the leading cause of stress and tension in a marriage. Making financial decisions together can be extremely difficult since many couples can’t even agree on the temperature for the thermostat. However, couples who create a workable and efficient financial plan significantly lower their anxiety levels and have more time and money for romance.
A recent survey, conducted for CESI Debt Solutions, found that 80 percent of spouses spend money without their partner’s knowledge and 18 percent admit to having credit cards they keep secret from their spouse. More than 24 percent of respondents said they would never tell a spouse about their spending habits. Hidden debt and spending can be catastrophic in a marriage – 38 percent of married couples are worried that the truth about their spending would result in separation or divorce.
Financial planning shouldn’t begin when pressure from bills and credit card debt creates anxiety or starts to damage a marriage. Financial planning should be one of the first steps to take when merging your life together. Talking about money may be initially awkward, but don’t avoid it. Building a solid financial foundation is much easier than bitterly trying to re-build after a financial collapse.
Here are 10 tips to reduce financial stress:
1. Start with full disclosure of all debt and financial obligations
Make a list of all student loans, car loans, credit card debt, even loans to friends and parents. Get copies of credit reports to verify all open accounts. This can also provide clues to how your future partner handles money. One or both of you may enter the partnership with debt. If he or she ran up debt on their own and it’s not in your name, it will become your problem after you say “I do.” Debt payments drain away money you could be saving to help you reach financial goals. If either partner has problems with credit, your rental or mortgage application may be denied, or you may have to pay more money on loans with higher rates.
“Tell your partner about all of your debt,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “It is not fair to wait until the first round of bills comes in and then tell your new spouse about your debt and liabilities. Once you join together, your debt affects your spouse.”
2. Joint or individual bank accounts
Will you have one bank account for all income and expenses, or will you start with three accounts – yours, mine, and ours? Each arrangement has advantages and disadvantages. A joint account is easier to manage and will prevent some disagreements over dividing bills, but decisions need to be shared. Separate accounts that are planned and budgeted correctly can give each partner control over their own account. Separate accounts are easier to manage if both people earn and spend close to the same amount. Couples tend to gravitate toward joint accounts once they add children and major expenses. If you choose to have separate accounts, develop a plan outlining which account pays each bill before the first bills arrive.
3. Raise your credit score
Make it a goal for both partners to have a credit score over 720. This will this help you get the best terms and interest rates on loans and save many thousands of dollars over your lifetime. In addition, insurers, landlords, and employers use credit credit reports to make decisions about your applications.
Here are ways you can raise your credit score:
- Pay bills on time (35 percent of score).
- Pay down your debt (30 percent of score).
- Build a long credit history with one or two credit cards. Long credit records show you are a good credit risk (15 percent of score).
- Limit credit applications. Lenders see new credit as additional risk (10 percent of score).
- Have a variety of credit. Lenders like to see that you can handle different types of credit. A car loan and a credit card is better than two credit cards (10 percent of score).
4. Plan for spending
Both spouses will spend money on things they think are necessary, and often this is subjective. Conflict occurs when spending leads to judgment or anger from the other spouse. Together, work out a plan for daily spending and how to save for some of the bigger purchases – and even an occasional splurge. This can help remove the temptation to hide purchases and keep secrets from
your spouse about spending.
5. Keep a credit card in your own name.
Keeping a credit card in your name helps build up your individual credit history. If you are worried about your partner’s spending habits, don’t give them a credit card. Add them as an authorized user to your account and monitor the monthly statements for any unrecognizable charges.
6. Pay off debt
Decreasing debt reduces financial stress. The faster you pay off your balance, the sooner you can start saving and building a strong financial foundation. When you receive gift money, a bonus, a second job or a tax refund, use this to pay off debt. Making micro-payments can help pay down your debt faster. Eat a meal at home or use coupons, and immediately apply the money you saved to your credit card balance. If you have multiple credit cards with a balance, pay off the balance with the highest interest rate and then move to the next-highest rate.
7. Emergency fund
All couples should have an emergency fund of six to eight months’ worth of living expenses held in a safe place such as a money-market fund. Simply knowing it’s there can reduce stress, since you know you’re not walking a fine line between comfort and catastrophe. Make savings consistent and untouchable by setting up an automated deposit from your paycheck into your savings account.
8. Monitor your accounts
Even if you divide up bill paying and investing duties, both parties should be able to easily access accounts to know what is going on with your money. Websites like Mint.com can keep track of all accounts – investment, checking, college funds, and loans. It is easy to quickly log in to Mint and know exactly where your finances stand. This keeps information clear and in the open for both spouses.
9. Get help
If arguments prevent you from getting started or making a financial plan, it may be good to seek professional counseling from a financial counselor or credit counselor. If your debt is overwhelming and you need help creating a plan for payment, contact a credit counselor. The National Foundation for Credit Counseling can help you find a certified credit counselor in your area. They can help you create a debt management plan. The set up fee is typically $50 and the monthly fee is about $25.
10. Talk it out
Regularly make time to talk about your finances. It is important that both partners actively participate in these discussions. Keep it comfortable and conversational – do not make this a business meeting. It is not a time for blame and accusations. Let it be an open forum where either spouse can bring up problems and issues and even ask for suggestions and help. Let your actions show that you are in this together.