3 Easy Ways To Manage Spousal Debt – This is a guest post from Andy Masaki at the Penny Less Dad. Andy is a financial advisor from Oakland, California that blogs about recuperating from bankruptcy and living a debt free life with his family. You can also find his writing here.
Getting tangled in spousal debt is the last thing you want, once you are happily married!
But finance has its own thorny traps that pulls you in like a magnet.
You need to be careful, intelligent, and play safe at the same time, when it comes to finding ways to manage spousal debt!
But, let’s consider the worst case scenario! What if your spouse’s debts become your responsibility after marriage?
What to do then? It’s confusing right?
3 EASY WAYS TO MANAGE SPOUSAL DEBT
1. Merging your finances together
This is the best thing you can do. You and your spouse should infuse both the incomes, and plan on paying off debts unifiedly!
It’s all about budgeting, and managing finances together. Assuming that both you and your spouse are breadwinners, you have two stream of incomes coming in. One income can be easily channeled toward paying off debts, while the other can be used for savings, and day to day expenses.
You will have to figure out what debt obligations you have and how much payment is needed. Your target should be to count in all the debt payments under any one income, so that the other paycheck amount does not have to carry the debt burden!
You can easily opt for reverse budgeting, where debt payments are met first! Once debt payments are done with, you turn your attention toward savings. You should aim to save at least 20% of both the incomes combined.
Then, you progress to chalk out the most probable monthly expenses your family has to go through. These include grocery bills, utility bills and so on.
Practically, there are many ways to save money, even when you have many debts to pay off! The whole thing depends on you and your better half, as to how you want to manipulate the two incomes!
2. Dividing the liabilities if possible:
Just because you live in a community property state, or it is mutual understanding you came into with your spouse to pay off debts, it doesn’t mean you can’t put down the debt burden off your shoulders!
If you live in a community property state, where properties and debts incurred during marriage, become a responsibility of both the partners, then have a talk with a lawyer, and divide the debt liabilities whenever possible.
Some community property states have the option of nuptial agreements, where you can divide properties and debts as applicable.
But for such a step you need help of proper advocates. Also make sure, that dividing debts should not hamper your personal relationship. Have a thorough talk and discussion with your spouse, before signing nuptial agreements!
3. Taking help of a financial therapist:
Ultimately, if things start to fall apart when relationship health and debt liabilities start to clash, then you should not hesitate to take help of a financial therapist.
These unique therapists don’t only evaluate monetary issues, but also other different aspects that include psychological factors!
They will help you with a budget, that details out the best ways to pay off debts so that you can save more money on the debt payments.
If you google a little about available financial therapists in your area, then it won’t be very hard to get hold of the right one.
However, all the above points are discussed from the perspective of how to manage spousal debt, post marriage.
3 WAYS TO AVOID SPOUSAL DEBT IN THE FIRST PLACE
1. Understanding what happens when you move from “common law” state to a community property state or vice versa:
As you very well know our nation is divided into two types of states. One that follows a community property structure, where all properties and debts are jointly owned by a husband and a wife during their course of marriage.
Second are the states that follow “common-law” where marriage has nothing to do, with property or debt, until and unless both the husband and the wife agree to take up a property jointly.
So, if you are about to move interstate, where common law and community property law comes into the picture, then you better talk it through with an attorney.
Else not only debts, but also your properties will be treated jointly, with you having absolutely no idea of it, unless, one day, god forbid, you plan to deviate from the relationship, and want your share of properties back!
2. Understanding ‘co-signing’ and ‘co-borrowing’.
Always remember that cosigning, or coborrowing, any type of loan or credit account with your spouse, makes you liable for debt payments, if your spouse is unable to repay the debt!
The responsibilities of a co-borrower is always more than a co-signer! But both are dangerous, and make you technically responsible for the debt!
Always have a detailed talk with your spouse before agreeing to cosign or coborrow any property, loan and credit!
3. Always discuss about any ongoing debt problem both at your end and your spouse’s, before getting married:
It’s always better to be transparent before entering the wedlock! Both of you should have a clear financial picture of the other.
Finding solutions before getting married is way better and safer, than facing unexpected problems after marriage!
So, as discussed earlier in this post, be open to your spouse about any money matter or debt issue.
We hope, that this post definitely came of some help to you, and you can master your debts seamlessly, and live a happy married life!
And, later when you plan for the third member in your family, don’t forget to check out the post, that lays out some budget tips on how to plan for a baby, without going broke or landing into debts!