My fiance and I have been together for a year and half and are planning to get married this fall. A few days ago, we had a money talk (my suggestion) about where we both are financially and about our wedding budget. I just found out he is in serious debt — little over $50,000. That includes $25,000 in credit cards and $14,000 in student loans. The rest is a mixture of debt he owes to his parents and on 403(b) loans. He has zero savings. He makes $56,000 a year. He owns a house with another guy (shared mortgage) and can barely cover that and live. He has no interest in selling his house, either. Basically, he cannot afford anything and has been living beyond his means for some time (my opinion). He also doesn’t think he is in a lot of debt. His credit score is decent –720. We are both in our early 30s. I, on the other hand, have a car loan and $3,000 left in student loans — and my credit score is 777.
What is our best solution to get out of this debt? Is his debt considered “normal” for a 32-year-old guy? Also, after marriage, will his debt end up my responsibility? I’m feeling too stressed to move forward with getting married in eight months and starting out a marriage in more debt. – Becca
Unfortunately, yours is a common problem. Over the years I’ve received countless letters from people who are all going through the same thing. They’re in love, happy and ready to get serious. Then, BAM, one half of the couple finds out that other has bungled the bank accounts. Such a discovery is neither easy nor pleasant. “Oh no! What am I getting into?” is the first reaction, followed quickly by, “Can I change him or her before the wedding?”
And the answer is that you probably can’t — the way he behaves with money is completely up to him. You, however, can let him know that you will not accept an immature and harmful attitude about money. That is not too much to say and expect. While the debt that he has now will legally remain his after marriage, if he doesn’t pay it down and start living within his means, you most certainly will be affected during marriage — and perhaps be at risk if he defaults and you live in a community property state.
OK, now for what you should expect him to do:
- Have a change of (credit) heart: Your betrothed’s attitude adjustment must come from within, but you may be able to inspire it. It sounds like he’s being rather cavalier about the amount he owes, and that can come from denial. So give him give him this information: By paying only the minimum — around $625 — to his credit card companies (assuming an average APR of 18 percent), he’s throwing $375 away every month, since that’s the amount going toward finance fees! That’s a massive loss, particularly when cash is tight. Hopefully, looking at that fact alone will wake him up.
- Know how much he can pay: Eight months isn’t long, and with his income and obligations, it would be virtually impossible to get rid of all his debt by your wedding date. How much can he delete, though? That depends on how much he can send to his creditors. To maximize the payment, he needs to pare his spending down to the barest of basics and work as hard as possible (overtime, second job?). He should also sell anything that isn’t necessary in order to reduce the overall balance.
- Prioritize payments: Credit cards tend to have high interest rates, so most of the payment ought to go to those accounts while the others receive the minimum. After the cards are repaid, he can concentrate on deleting the next most expensive liability, which may be the retirement plan loan. Repaying his parents should come next, and, after that, his student loans.
- Stop stupid borrowing: Enough with asking mom and dad for loans. No more consumer debt that he (and you) can’t repay quickly. He must learn how to manage his money and credit so he can use that perfectly decent income intelligently. He can read all sorts of articles about how to do so on this website, but he also may want to schedule an appointment with a credit counselor for guidance.
- Plan for the future: Your concern about a lack of savings is totally reasonable. He’s already tapped into his retirement account and is setting aside nothing. After he pays the debt off, the money he had been sending to creditors ought to be rerouted to a savings account and back into his 403(b).
Can you force your betrothed to take these actions? No. But the good news is that he has a job and even some property, which is typically an asset. His credit scores are great, too, and that will help him if he needs to refinance the mortgage and maybe even lower the rates on his existing accounts. In short, he has the ability to turn this mess around. Now it’s up to him to do it.