With Americans holding about $1.12 trillion worth of credit card debt in 2024, it’s no surprise that Reddit threads are filled with users seeking advice on whether they should say ‘I do’ if their future spouse has significant high-interest rate debt. If you and your spouse are looking for ways to navigate credit card debt, you’re in the right place! I’m about to walk you through practical, effective strategies to tackle your debt and start your marriage on solid financial footing.
Understanding the impact of credit card debt
Credit card debt isn’t just a number on a statement; it can significantly impact your financial health and relationship, too. Here are reasons why addressing debt early in your marriage is crucial:
- Decreased Stress: Finances, in general, and debt specifically, can lead to increased anxiety and stress, which can strain your relationship. According to eMoney, almost 3 in 4 married or cohabiting Americans cite financial decisions as leading to tension in their relationship. Addressing debt early on can decrease this stress.
- Increased Financial Freedom: High-interest payments can limit your ability to save, invest, or even enjoy life as newlyweds. Tackling debt together and addressing debt early on can ensure you maintain financial freedom.
- Credit Score Impact: Carrying a high balance can lower your credit score, affecting your ability to secure loans for major purchases like a home. Making sure you are taming debt appropriately can ensure your credit score doesn’t take a huge hit.
Addressing credit card debt early can alleviate stress and provide more financial freedom for your future together.
Step-by-step strategies for managing debt
Now that we understand the impact of credit card debt, let’s explore practical steps you and your partner can take to manage and reduce your debt effectively.
Step 1: Open up about your finances
Before tackling debt, openly and honestly discuss your financial situation. It is always encouraged that couples schedule a joint money date where they take dedicated time to discuss their financial situation and concerns. Here are some ideas on what you can discuss:
- Financial Goals: Talk about your short-term and long-term financial goals to ensure you agree. For example, if one of you plans to retire at 40 and aggressively save and invest, that’s important to know.
- Share Your Credit Reports: Both of you can obtain and review your credit reports to understand the reality of your situation and the impact credit card debt has had.
- Create a Debt Inventory: List all your debts, including balances, interest rates, and minimum payments, in one place.
Step 2: Create a joint budget
A budget is a critical tool for managing and paying down debt. By creating a joint budget, you can allocate resources more effectively and see what joint sacrifices may need to be made in the short term.
- Track Income and Expenses: Record all sources of income and track your monthly expenses to identify areas where you can cut back.
- Prioritize Debt Payments: Allocate a portion of your budget specifically for debt repayment, focusing on high-interest debts first.
- Include Savings Goals: Even while paying off debt, try to allocate some funds toward an emergency savings fund. You don’t want to be forced into even more debt because of a lack of savings.
Step 3: Explore debt repayment strategies
There are several strategies you can use to pay down debt more effectively. Here are three popular methods:
- Debt Avalanche: Focus on paying off debts with the highest interest rates first while making minimum payments on others. This will save you the most money in interest.
- Debt Snowball: Pay off the smallest debts first to gain momentum and motivation, then move on to larger debts.
- Debt Consolidation: Combine multiple debts into a single loan with a lower interest rate. This can simplify payments and reduce the overall interest you pay.
Utilizing resources and tools
Taking advantage of available resources can make managing debt more manageable and less daunting. For example, financial counseling services, online tools and apps, and educational resources. Let’s dive into each below:
1. Financial counseling services
You don’t have to do this all alone. Seeking professional help can provide you with expert advice and personalized strategies to tackle your debt more effectively. Here are some ways to get financial counseling services:
- Non-Profit Credit Counseling: Organizations like the National Foundation for Credit Counseling (NFCC) offer free or low-cost counseling.
- Financial Advisors: Certified financial planners can help create a comprehensive debt repayment and financial management plan.
- Debt Management Programs: These programs negotiate with creditors on your behalf to lower interest rates and monthly payments.
2. Online tools and apps
Leveraging technology can streamline your financial management and keep you on track with your debt repayment goals. Here are some ideas to utilize technology:
- Budgeting Apps: Apps like Mint and YNAB (You Need A Budget) can help you track spending and stick to your budget.
- Debt Payoff Calculators: Tools like those offered by Bankrate or NerdWallet can help you visualize your debt repayment timeline.
- Automated Payments: Set up automatic payments to ensure you never miss a payment and avoid late fees.
3. Educational resources
Knowledge is power when it comes to managing finances. Continuous learning about personal finance can empower you to make informed decisions and stay motivated on your debt repayment journey.
- Personal Finance Books: Books like “Total Money Makeover” by Dave Ramsey or “The Witch of Wall Street” by yours truly provide valuable insights and strategies to manage your money best.
- Online Courses: Websites like Coursera or Khan Academy offer free personal finance and debt management courses. I also work with women from all over the world within The Wealthy Witch Online to support them in managing their finances with more confidence and success.
- Financial Blogs and Podcasts: Regularly reading blogs and listening to podcasts can keep you informed and motivated.
Frequently Asked Questions (FAQs) on crushing credit card debt
Let’s get into some more tips and tricks on tackling that pesky credit card debt.
Q: I have a secret credit card…what should I do?
A: You’re not alone. Financial infidelity – the act of keeping financial secrets – is more common than any of us would like to believe. Get the strategies to navigate this situation here.
Q: Should we pay off debt or save for a house?
A: It depends on your financial situation and goals. Paying off high-interest debt first usually makes more financial sense, but saving for future goals is also important. A balanced approach is often best.
Q: Is debt consolidation a good idea?
A: Debt consolidation can be beneficial if you secure a lower interest rate and are committed to not accruing new debt. It simplifies payments and can lower monthly costs.
Q: How can we avoid future credit card debt?
A: To avoid future debt, create a realistic budget, build an emergency fund, and use credit cards responsibly. Pay off your balance in full each month to avoid interest charges.
Q: How can I move beyond debt and better manage my money?
A: The best way is to invest in your financial education. Lack of awareness and knowledge is what leads most people and couples to end up in debt in the first place. Invest in your education now and save for the rest of your life as a result. Find out more about personal finance and investing courses available here.
Conclusion: Starting your debt-free journey
Crushing credit card debt as newlyweds might seem daunting, but with the right strategies and resources, it’s entirely possible. By communicating openly, creating a joint budget, exploring repayment strategies, and leveraging available resources, you and your partner can take control of your financial future. Remember, the key is to stay committed and support each other through the process.
Laura Tynan is the founder of The Witch of Wall Street, a personal finance and investing community, where women are shown how to manage, multiply and manifest money, using simple strategies. Laura holds a BSc Hons in Finance, is a Chartered Accountant, and is certified in EFT Tapping, Breathwork, and RRT. She has been recognized by the Financial Times as a Top 20 Future Female Leader and by Yahoo! Finance as a Global Champion of Women in Business. She is a multi-award-winning speaker who has spoken at, and been featured in, Forbes. Laura hosts The Witch of Wall Street podcast and is the author of the personal finance and investing book for women, by the same name, which is available now on Amazon.
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