Getting engaged kicks off one of the most exciting times in life. Amidst all the celebrations, however, couples should be preparing to merge their finances.
“It’s crucial to have a conversation about debt before getting married, as it is a common issue for many couples,” Levon Galstyan, a CPA at Oak View Law Group, says.
“Seven out of 10 individuals enter marriage with debt, so it’s important to discuss existing debt, interest rates, timelines and the sacrifices that may need to be made,” he says.
Not sure where to start? Here’s a closer look at debt after marriage and three key things to discuss during a financial check-in with your fiancé.
How Do Debts Impact Spouses After Marriage?
You often won’t be liable for debt that your spouse acquired before you got married (and vice versa) but that doesn’t mean it won’t affect you. Debt payments impact a person’s disposable income and what they’re able to contribute toward shared expenses.
[Related:Best Budget Apps for Couples in 2024]
Additionally, any debt management mistakes someone has made during the last seven to 10 years can negatively impact their credit score.
“Your credit score is a critical aspect of financial planning, as it can impact your ability to purchase a car, rent an apartment or buy a house,” Galstyan says.
If one spouse’s credit is poor, the other spouse can end up overextended. Credit problems can also impede a couple’s path to goals like buying a home.
It’s only fair that both partners are aware of the full financial landscape before the wedding day — no one wants to be blindsided.
And many people agree.
In Achieve’s 2024 Valentine’s Day survey, 85% of respondents said people should be up front about their debt and spending habits early in relationships. Further, 71% of respondents said that if their significant other had debt, they’d want them to pay it down before getting married.
Prenuptial Financial Check-in Topics
A prenuptial financial check-in can be uncomfortable and nerve-racking.
“Instead of immediately diving into the conversation about money, take the time to individually write down your financial goals for the near future, such as one year and five years from now,” Galstyan says.
From there, you can share your goals and transition into a conversation about how you’ll manage outstanding debts to achieve them. While it’s important to disclose any and all debts during this chat, three types deserve a bit of extra attention: student loan, credit card and tax debt.
Student Loans
Student loans often represent sizable debt and can have a significant impact on a couple’s finances. Consider that approximately 43.2 million borrowers have federal student loan debt and the average balance per borrower is $37,087.
To understand the impact of student loans on your future with your spouse, Galstyan recommends asking questions such as:
— How much student loan debt does each person currently have, including the total amount of all loans, plus the interest rates and monthly payments?
— How long will it take to pay off the student loans and is either person consolidating them or using an income-driven repayment plan?
— How do you plan on paying off the student loans and will you be prioritizing paying them off over other financial goals?
— Will you be combining your finances or keeping them separate after marriage? How will that impact paying the loan(s) off?
— Is either person planning on taking out additional student loans to continue their education in the future?
[READ Best Student Loan Refinance Lenders]
Credit Card Debt
Credit cards are another common source of debt. More than eight in 10 U.S. adults have at least one credit card and the average balance per borrower is $6,088, according to the Q3 2023 Transunion Credit Industry Insights Report.
To prevent potential problems, Galstyan recommends asking the following questions:
— How much credit card debt does each person currently have and what are the interest rates associated with each card?
— How much is each person currently paying toward their credit card debt and how long will it take to pay it off?
— How does each person plan on paying off the credit card debt and will they be consolidating it or using a debt management plan?
— Will you be combining your finances or keeping them separate after marriage? How will that impact your credit card payments?
— How does each person plan on using credit cards in the future — and will you include any spending limits and plans for paying off balances in full each month?
Tax Returns
“It’s also important to consider how changes in your income, deductions and filing status will impact your tax liability, and to seek the advice of a tax professional if needed,” Galstyan says.
[Related:Filing 2024 Taxes: What’s My Tax Bracket?]
Make sure you disclose any outstanding tax debts either person owes. The government is often willing to work with taxpayers to settle the debt or set up a payment plan.
You and your spouse can work together to figure out the best course of action, which might include getting help from a financial advisor or tax debt relief specialist.
Dig Deeper Into Your Money Beliefs
“After you’ve gone over these basics, take time to dig deeper with your potential life partner. Debt can ruin relationships, but bad money habits can ruin your entire life,” Howard Dvorkin, CPA and chairman of Debt.com, said in a press release.
“Couples looking toward marriage need to learn about their partner’s money stories from childhood. Were they told certain things about money that make it hard for them to save, spend wisely or avoid debt? These types of conversations will help couples plan for bigger financial milestones like kids, homeownership and retirement,” he said.
More from U.S. News
Private Student Loans vs. Federal Student Loans: What’s the Difference?
Survey: Nearly 82% Worry About Their Credit Card Debt
A Guide to Tax Deductions for the Self-Employed
3 Essential Financial Check-ins for Newly Engaged Couples originally appeared on usnews.com
Update 02/21/24: This story was previously published at an earlier date and has been updated with new information.
