They said "I do"... to a whole lot of debt
Q: We hate to admit it, but we started our marriage in significant financial debt. We spent more than we should have on our wedding and honeymoon and then we both had pretty big school bills. We hate the financial burden we are under and want to get out of debt. How do we do it?
A: Too many couples are drowning in debt. Each year, the average couple spends $400 more than it earns and 23 percent of the average American’s take-home pay is already committed to pay existing debt, not including the home mortgage!
The huge amounts of debt most couples carry should probably come as no surprise since the gospel according to Madison Avenue is buy now and pay later. So couples take bank loans, borrow money from relative, have past-due medical bills, and of course use the power of the plastic credit card.
The problem with Madison Avenue’s philosophy is that the debt of temporary freedom eventually puts us in financial prison. By legally obligating ourselves to meet our debts, we lose the freedom of deciding where to spend our income. Most financial experts agree that the only three reasons to go into debt are to buy a home, to finance a business, or to pay for an education.
So what do you do if you are carrying debt that is not healthy? We recommend starting with a written budget to help you analyze your spending pattern, plan ahead, and curb your impulsive spending. Next, determine whether there is anything you do not really need that might be sold to enable you to get out of debt more quickly.
Are you living beyond your means by having a certain car, for example? The next step is to make a comprehensive list of everything you owe and the interest rate your creditors are charging for each debt. You will want to pay off those charging the highest rate of interest first.
This will lead you to establish a debt repayment schedule for each creditor by noting the monthly payment, the months remaining, and the balance due. Put this in writing so you know exactly where you stand and where you have to go.
The next step may be to consider earning additional income. Earning a little additional income, even temporarily, may be a solution if you can do so without harming your marriage. Next, take special care not to accumulate new debt. This can be done through the proverbial “plastic surgery” of cutting up your credit cards.
The little cards are dangerous. It has been shown that people spend approximately one-third more when they use credit cards rather than cash, probably because they feel they are not really spending money. Pay for things with cash or check.
Along these same lines, delay your gratification and be content with what you have. If you persevere you will eventually become debt-free. It is hard work to get there, but there is no magic involved, no special tricks — just discipline and perseverance. So don’t give up. The freedom to be gained is worth the effort.
Once you have gotten out of debt, you can avoid getting back into it by saving in an interest bearing account for major purchases. Over the years, we all face major purchases such as buying an automobile, appliances or furniture. Prepare ahead by setting aside money for big-ticket items. You will then be able to pay cash for items that most people buy on credit.
You can even do this when buying an automobile (though only 30 percent of couples do). The average person keeps a car between three and four years. The average car lasts 10 years.
Here is how to escape using credit: first decide in advance to keep your car for at least six years; second, pay off your automobile loan; third, continuing paying the monthly car payment to yourself in a special saving account. Then when you are ready to replace your car, the savings plus the trade-in should be sufficient to buy the next car without credit.
With a little planning and a lost of discipline, you can live debt-free and enjoy countless benefits as a result.
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Les Parrott, Ph.D. is professor of psychology and founder of the Center for Relationship Development at Seattle Pacific University, and bestselling author of Love Talk, Your Time Starved Marriage and the new Crazy Good Sex.
Dr. Parrot has been featured in the New York Times and USA Today. He’s appeared on The View, Good Morning American and Oprah. His website features more than a 1,000 free video Q&A pieces. To learn more, visit RealRelationships.com.