Tuesday, 17 January 2017

Relationships and Finance: How to Get 2017 Started Off Right

Many couples have a difficult time learning how to manage finances as a couple, especially if they spent the last several years budgeting only their own income. Even experienced couples can get off track in their management of money. With 2017 barely begun, this is a terrific time to sit down with your significant other and look over your financial situation, make money decisions, plan for financial freedom and long-term goals. Some of the topics that come up repeatedly in couples’ financial planning are student debt, credit card debt, and general budgeting. This post is going to dispense advice on all three topics to give you a starting place for the first financial conversation of the new year.

Student Loan Repayment:

If you borrowed for college and haven’t paid it all off yet, student loan payments are likely to be one of your three biggest monthly expenses – the other two being rent or a mortgage, and possibly a car payment. In other words, student loan debt is something that needs to be budgeted for by couples, whether one or both of them are borrowers. The first step is to formulate a strategy for paying it off, and this depends on a variety of factors such as available income, other debts, and other financial goals. Think about, and discuss, whether each individual’s income will be used to pay down their individual student loan debt or whether income is going to be pooled together and put toward payments. If one half of a couple earns significantly more than the other then this is an even more important conversation to have. You’ll want to make sure you are each on the same page in order to avoid hurt feelings or resentment later on.

These days, many federal borrowers are on income-contingent repayment plans. Your marital status and your tax filing status may affect how large your federal student loan payments will be, depending upon the type of plan you choose. So before having the discussion about student loan repayment as a couple, first find out from your servicers which plans you are on and what plans are available. Moreover, as a couple it is going to be easier to meet the qualifications needed to refinance student debt. By refinancing and consolidating through a private company, you can expand the number of repayment options available. Part of your financial planning may involve switching repayment plans for one or both of you.

Credit Card Debt:

Almost all couples have credit card debt. Debt that is acquired during their time as a couple, and which relates to expenses for household use, mutual vacations, overspending etc., is usually not too painful of a conversation to have. When the conversation gets trickier is when credit card debt acquired prior to the start of the relationship is discussed, or debt acquired during the relationship but for the benefit of only one individual. Whether married or not, any committed couples sharing finances should discuss who is responsible for paying off one-sided debt brought into the relationship. If the couple will pay it off with pooled income, then credit card payments should be incorporated into the mutual budget. If the person who acquired the credit card debt is going to pay it off themselves, then a discussion should be had concerning which part of their income goes toward that debt versus the portion that goes into the couples’ mutual, recurring expenses.

General Budgeting:

Your budgeting conversation is going to depend a great deal on how combined your finances are. Is each half of the couple maintaining almost complete financial independence? Or have finances, both income and debt, been completely merged? Or, as many couples are, do you fall somewhere in-between these two extremes? Assuming that your finances are completely or somewhat merged, you will need to discuss and plan a general budget for your lives and household. A budget allows couples to plan for their financial priorities, such as recurring monthly expenses like housing and groceries, short- and long-term goals such as vacations and retirement, and payment of debt such as the student loan and credit card payments we’ve already discussed. Moreover, budgeting as a couple allows both people to be transparent and honest in their priorities and more accountable to their goals as a couple.

Some couples take the plunge and completely merge their finances. If you take this route, you will only need one budget for all of your needs. However, some couples choose to only partially merge their money. For instance, if you and your significant other have very different spending and saving habits, or if one or both of you feel strongly about maintaining a degree of financial independence, you might choose to keep some portion of your income as “me money” to save or spend without needing to get anyone’s approval. Again, this will affect how you budget as a couple, since you’ll first need to split your income, and sometimes debts, between individual budgets and the couple budget you both share.

If you haven’t yet had these discussions, and have been winging it so far, the start of the year is the perfect time to take control of your finances. Your relationship will thank you!
Image Credit: Pixabay

18 comments:

Beauty Unearthly said...

Interesting post my dear, thank you for sharing :-)

HOOTIN ANNI said...

Now, this is quite a piece of education for all ages!!

Shilpa Chandrasekheran said...

Good to know !

Launna said...

I agree that being open about your finances is the only way to go in a relationship... otherwise issues can crop up...

JoJo said...

I had all my credit card debt finally paid off last spring and then we got blindsided by a major expense and I'm back to being almost 30k in debt again.

Debbie said...

great information for young couples. the hubs and i have done well - and were able to provide educations for both our children. they graduated from college with no student loans and were both very grateful!! we and the children are savers and good at sticking to a budget!!

no mortgage, no debt but we are in our late 50's!!!

Tom said...

My wife and I learned the value of $$$$$ when we were children, because there wasn't much around!

Out on the prairie said...

I have it pretty down pat with spending until the holidays come and then I spend all I can get. LOL

Romance Book Haven said...

Thanks for this informative post and great advice!

Red Rose Alley said...

Some great tips here. Thanks for sharing. I hope the new year is a bright one for you. :)

~Sheri

messymimi said...

The earlier this discussion starts, the better. Couples who get on the same page about money are more likely to stick together long term and see at least some of their dreams become realities.

peppylady (Dora) said...

On spending it seems like quite a few people does know the difference between a need and want.
Coffee is on

Victor S E Moubarak said...

Thank you.

God bless.

Christine said...

Great topic and necessary info

menopausal mama said...

All great ideas and necessary to keep the budget planning steady.

Leigh said...

Excellent tips as usual!

Stephanie Faris said...

Money can definitely be a huge stressor in a relationship, especially if two people have dramatically different views on how finances should be handled. I had no idea student loan repayments were now contingent on a person's income. That's actually a great idea!

Olga Hebert said...

I have been in a long term relationship where money was the major stressor and on in which hour handong of money was very compatible. These are excellent suggestions.

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