GOLDEN VALLEY, Minn. - Finances are cited as one of the top reasons for marital stress.
For those planning for their walk down the aisle and even for those who already have, understanding where you both stand regarding debt is an important topic to broach.
Dan Ament, Financial Advisor with Morgan Stanley Smith Barney in Wayzata, visited KARE 11 Sunrise with some pointers about how to discuss such a topic with your significant other.
- Determining your debt philosophy: Spend some time discussing your mutual philosophy towards debt. Will you save for your "wants" instead of buying with credit? Will you pay of your credit card every month or carry a balance? Is one partner bringing to the marriage a load of debt in addition to love? How will you jointly work together in managing this obligation?
- How will you use debt? Some debt is unavoidable for many people; student loans, car loans and home mortgages to name a few. Determine what types of debt are acceptable for your family. Where will debt management and savings rank among your financial priorities? Don't rely on debt to supplement your income. Just because you have a credit limit of $10,000 doesn't mean you should spend it to maintain your lifestyle.
- Good debt vs. bad debt - Is there such a thing? Some would say that there is no such thing as "good" debt. That said, one could argue some debt forms are better than others. For example, a mortgage on an affordable home would be considered "good" debt in my opinion. Most families, especially those starting out, can afford to purchase a home without the assistance of a mortgage. A reasonable amount in student loans to pay for a college degree could be considered good debt. Home equity lines of credit can be interpreted both ways. If used for an affordable investment in your home "relative to your income", it may be considered good. If used to supplement your income to meet lifestyle needs it would be bad. Carrying credit card debt seldom could be considered good. Take control of the credit card in your wallet.
- Watching your "debt ratios"
- Charting a course for your financial future: In addition to addressing any debts you bring with you down the aisle as well as your mutual philosophy about debt in your financial future, take time to begin building your financial plan fro the future. Get committed to spending LESS than you earn. Consistently saving for your future will better ensure you're that your golden years are exactly that.
Being wise with regard to debt management can pay off in a big way long-term. For a young couple, excessive use of debt can dramatically impact your ability to save for your future. Take the time in advance of walking down the aisle to chart your planned course for the future. It may just save you from a financial heart ache down the road.
(Copyright 2012 by KARE. All Rights Reserved.)