'Til Debt Do Us Part

Taking on shared debt before you tie the knot is a bad investment, experts say

By Anna Sachse
CTW Features

If you and your live-in sweetie are thinking of capitalizing on plummeting home prices and the $8,000 credit for first-time buyers, Jeff D. Opdyke, a reporter for The Wall Street Journal and author of "Financially Ever After: The Couples' Guide to Managing Money" (Harper Paperbacks, 2009), has some old-fashioned advice for you:

Wait until after you're married.

"It doesn't matter how in love you are," Opdyke says. "Going into debt as a couple before you get married - whether it's sharing a mortgage, getting a car loan or opening a joint credit card - is a recipe for disaster." The same advice applies even to the newly betrothed.

The problem? As much as you may think your shared love of "Lost" and Teddy Pendergrass songs will keep you together forever, splits happen. Shared pre-marital debt means you would still be tied to the financial whimsy of your ex. As unpleasant as it may be to consider, perhaps he or she will be too busy with a new beloved to bother with personal finances. As a result, you could find yourself suddenly saddled with $25,000 in credit card debt that you can't afford to pay solo, thus ruining your credit or forcing you into bankruptcy.

"It's even worse with a house," Opdyke says. Unless you're willing to sell the house in the current dismal housing market, potentially at a loss, you'd be forced to work out renting arrangements and continue paying the mortgage with someone you likely can't stand.

There's also the chance that your debt could contribute to your relationship troubles in the first place. With less forgiving lenders, rising healthcare costs and record-high unemployment rates, individual Americans are already struggling with the worst economy since the Great Depression. To wit, the number of consumer bankruptcy filings in August reached 119,874, a 24 percent increase from the same month one year ago, according to the American Bankruptcy Institute (ABI), Alexandria, Va., based on data from the National Bankruptcy Research Center; and consumer filings are expected to top 1.4 million by the end of 2009, says ABI Executive Director Samuel J. Gerdano. When everyone's financial future is so uncertain, adding the stress of a hefty mortgage or exponentially increasing credit card balance into your personal mix is a quick and easy way to sour cohabitating harmony.

Of course, similar strife over debt can also pop up even after you've tied the knot. "But being married makes you legally bound in ways you aren't when you're just dating or engaged, so just wait" Opdyke says.

In the meantime, if you do foresee spending your lives together, you can improve your chances of working as a winning team by having an honest and thorough discussion about your current individual debt and plans to pay it off. Do you have a student loan? If so, what are the monthly payments? How about back taxes? How long until they are paid off? Although, once you are married, creditors typically cannot come after assets that are only in your name for debts that are only in your spouse's name, if your relationship is a true partnership, you will likely be paying off the debt together.

"Even if you are the only one making a$1,000 payment on your own debt, at the end of the day, it's still the family unit that's paying it off," Opdyke says. "That's $1,000 that isn't available for a new car, family vacation or remodel."

In addition to discussing the state of your personal balance sheets, Opdyke advises examining how you each use debt to live your life. For example, one of you might feel comfortable going into credit card debt only in so far as you are able to pay it off each month before it accumulates interest, while the other one is OK with allowing the balance to rollover for a few months, as long as the total remains beneath "X" number of dollars. Or one of you may prefer to pay down all debt before starting a savings, while the other feels it is imperative to set aside a small savings as a cushion for emergencies, regardless of present debt.

Before entering into a marriage, it's important to acknowledge these differences and find a way to compromise.

And you'll go a long way toward achieving this goal if you resist inferring that your partner's spending style is a personal affront. Don't assume that if your sweetie really loved you, she'd rather take a trip to Hawaii with you than make balloon payments on her student loans, or he wouldn't be so cavalier about your financial future. "Financial behavior usually predates the relationship and has more to do with a how a person was raised," says Jonathan Rich, Ph.D., an Irvine, Calif.-based psychologist and author of "The Couple's Guide to Love & Money" (New Harbinger, 2003). To achieve a middle ground, he recommends setting aside a specific but brief time each month to determine a budget that allows for small splurges, and map out how to achieve long-term goals, such as a down-payment on a house - after you're married.

Comments	Date

Name:
Email:
Comments :

Copyright © CTW Features