Love and Marriage (Combining assets & debt after marriage)
Q: My fiancé and I are trying to figure out how we’ll combine our finances when we get married. We both have student loans and debt coming into the marriage, and I’m wondering if we should consolidate our debt or keep it separate?
A: Well, first of all, everyone brings some baggage into a marriage. J-Lo and Larry King bring numerous other marriages; Britney brought annulment papers to hers in Vegas; Heck, even Mike & Carol Brady brought 3 kids each with them. So, your respective loans and debt are certainly manageable.
Seriously though, combining your finances is one of the biggest adjustments in married life and usually an issue that is poorly addressed until after the fact.
As a basic rule of thumb, it usually always makes sense to consolidate debt. Besides ease of management, the bottom line with all debt is that you should always seek out the lowest rate. The less you are paying a debtor in interest, the better. So, if you can combine your individual debts (credit cards, loans, etc.) toward the single lowest rate available, you will have done your new marriage some immediate financial good. Keep in mind that you cannot actually combine this debt until you are married for tax reasons. Consider the debt consolidation your first in a series of consolidations, compromises, and accommodations. Amazingly, you’ll both find it infinitely easier than sharing that bedroom closet or master bath.
My wife and I have married friends who literally maintain separate finances – owing each other money, deciding who should pay for dinner, and separating the bills. I personally have never understood separate checking accounts for married people. Unless you are constantly planning for divorce, what is the point of keeping these dollars which are for a mutual home (and life) separate? To me, it just seems silly to keep the finances in “roommate mode” – separate but equal – when presumably neither of you plans on ever having to leave with your half. I suppose the one exception would be a small individual account for purposes of gifts. After all, getting a gift from your spouse has a whole different feel if you get the bill for it a month later.
Another issue to consider as you prepare for the tangible aspect of the whole “for better or worse” concept, is to make sure that there is accountability for finances in your new marriage. By this I mean that it is critically important to keep written track of money (balancing checkbooks, keeping records of bills, etc.) because, for the first time, there is someone else who actually cares what’s going with these dollars. You know that brilliant little system you’ve always had for keeping track of your money – that old notepad in your car, or the famous “I keep track of it in my head”? Well, that probably isn’t going to be very easy for your new spouse to understand. Once you’re married, it’s time to write those things down. Otherwise, mistakes can and will happen as one spouse spends money that they think you both have.
Lastly, I would highly recommend marrying rich if at all possible. It solves everything above except the bathroom issue…
3 Responses to “Love and Marriage (Combining assets & debt after marriage)”
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August 24th, 2005 at 12:45 pm
My wife and I read a book my parents recommended called “Smart Couples Finish Rich”. I highly recommend it!
It helps give you communication tools to discuss finances- which can be really hard on a new marriage.
I promise I’m not getting kick-backs from the publishing company to push this- but here is the link in case you’re interested: http://www.finishrich.com/books/couples_brandhome.php
August 24th, 2005 at 1:28 pm
I actually am not planning on getting married for a while, but would like consolidate my own debt. I have a bunch of credit cards and college loans and it’s hard to keep track of everything.
How hard is it to consolidate debt as an individual? Do I have to have a house?
August 24th, 2005 at 9:49 pm
Erin: It’s not hard at all to consolidate debt - in fact sometimes it’s as easy as calling a couple 800 numbers or shifting through your junk mail for the best credit card offer on balance transfers. You certainly do not need to own a house to do so. Actually, you most likely will not own a house UNTIL you do so!