Financial Tips for Newlyweds
It is wedding season. You are about to join your lives together, but this person also becomes your business partner. One of the best ways to build a successful marriage is to get a financial plan together and know how to handle a budget and debt before the monthly payments start.
Couples considering marriage must have an honest talk about finances before they join their lives. It may be difficult, but it won’t be easier after you get married. Finances are one of biggest problems in marriage. To help you through this, you must have a clear understanding of the financial philosophy of your partner, the debt they have, and develop a budget before your wedding day.
Here are a few money management tips for newlyweds:
1. Before you ever say “I do,” be honest with each other about the debt you are bringing into the marriage. At least one of you will probably have credit card loans or a student loan. One of your first priorities as a couple should be to pay down your debt. Your debt should be less than 35% of your income.
Write down all of your loans, the date due, interest rates, and minimum payments. This should include credit card debt, auto loans, student debt, wedding/honeymoon debt, mortgage, family loans, etc. Then create a plan to pay off each bill. Start by paying off the loan with the highest interest rate. Pay that, and then move on to the loan with the next highest rate.
2. Before your union begins, make the commitment to avoid credit card debt. If you can’t pay for the item with cash, you can’t afford to pay for it with a credit card either. Do not use a credit card to finance your honeymoon, furniture, home remodeling, trips, or your entertainment. A mortgage or auto loan is the only new debt you should consider.
3. Talk about finances. You will be financially tied together and you can build a nest egg together, but you must share financial goals. If one of you is a saver or a spender, admit that and create a budget that allows for spending and saving.
4. Get a copy of your credit reports and credit score. This will show all accounts that are open, where you stand in the opinion of creditors and what you can expect from loan offers. Aim for a FICO score of over 760 to get the lowest interest rates.
5. It is important to build a good credit history for both partners. Put major purchases, loans and savings accounts in both your names.
6. If you can’t afford to pay with cash, avoid the urge to make major purchases immediately after your marriage. Each new loan including a home mortgage, financing new furniture, opening new credit cards, auto loans, etc. is reported on your credit report. Too many loan applications at once will be a red flag to creditors and could lower your credit score and increase the interest rates that you pay.
7. If you apply for a credit card, don’t apply for the first card offer you receive in the mail. Shop around for the best offer that meets your needs. A good place to start is the LowCards Complete Credit Card Index that compares rates for over 1300 credit cards.