Marriage is a partnership, and those vows do say "for richer, for poorer"—which means if your partner has debt, it is now your business. But navigating debt isn’t quite so simple. Some debt is good, other debt is bad, and some debt can come after you, even if your partner’s name is on the account. If you’re getting married to someone who has debt (or you have debt yourself!), these are the things you need to know.
Getting married requires a little more financial planning than just managing your budget, which is where the pros come in. Matt Reiner, CFA, CFP, and CEO and co-founder of personal financial planning app Wela, has seen it all, and is here to help us figure out what you need to know about your partner’s debt, as well as what to do about it.
What is the difference between good and bad debt?
You read that right—not all debt is bad. “Good debt is debt you take on when purchasing something that has the ability to appreciate in value,” says Reiner. “A home mortgage, for example, is good debt because it allows you to buy a house which can appreciate in value over time.” Bad debt, on the other hand, is debt you take on when purchasing things that depreciates over time. “Credit cards buy things that don’t tend to appreciate in value, such as clothes or electronics. With credit card debt, you are paying interest for non-appreciating goods.”
How can I protect myself if my partner has debt?
“If your partner has bad debt, it makes sense to keep separate accounts,” says Reiner. “This allows your partner to focus on getting out of his or her own debt. Once their debts are paid off, you can begin looking at joining bank accounts.” Keeping an eye on your credit score is also key. “Pay off your credit cards in a timely fashion, and don’t let other debts build up. This will ensure your credit score continues to rise.”
What should I keep in mind if my partner has bad debt?
“The difference in approach to married finances here is to keep your financial accounts separate,” Reiner advises. “You want to ensure that you don’t put your name on your partner’s debts now that you are married, because this will impact your own finances over time.
What questions should I ask regarding my partner’s finances? How can I find out if my partner has debt, as well as the impact it could have on me?
“Discuss finances well before you are married to foster an open, trusting relationship as well as get a better understanding of each of your financial philosophies,” Reiner recommends. Knowing how you each approach money will help you find a compatible way to arrange your family finances, and doing so in advance enables you to adjust your styles.
“If your partner has substantial debt, be encouraging and motivate them to pay it off. Be a partner in the process by adjusting your lifestyle if necessary to help them not overspend. This will help your partner set aside money to use to pay down their debt,” says Reiner. “Paying down debt is extremely difficult, and is very much a mental challenge. Having a supportive team as you work to pay down debt can help your partner overcome that challenge.”
As you begin your conversations about finances and debt, here are some important questions to ask:
- What types of debt do you currently have?
- Whose name is the debt in?
- What is the interest rate on the debt?
- Have you been making regular payments on the debt?
- Have you always been making payments on the debt? If not, when did you start making payments?
- Are you paying just the minimum payment, or more than the minimum?
- How much do you have left to pay off?
These questions will help you understand what kinds of debt your partner has, as well as how much he or she owes. By getting you both on the same page regarding debt, you will be able to develop a plan that will help you pay off debts and put yourselves in a financially sound position for the future.