Debt is one of the easiest places to slip into, but one of the most difficult places to leave. The emotional burdens created by debt are far-reaching and can place enormous pressure on any relationship, particularly a new marriage. One of the greatest gifts you can give to your marriage is a shared commitment to reduce, and ultimately eliminate your joint debt as quickly as possible.
Debt reduction is something that needs to be undertaken and committed to by both partners. In addition to commitment, complete honesty and transparency is required to ensure that both partners know and understand the plan. We've chatted to Sue Torr, MD of Crue Invest (Pty Ltd) on how to tackle debt head-on:
Accept that from now on you are a team; and team mates don’t blame each other for past mistakes. Regardless of how the debt was incurred or who incurred it, it is now joint marital debt and you are both committed to making it go away.
There are literally hundreds of incredible online debt reduction calculators that help you track your debt. Basically, you will need to input the value of each debt, the interest rate payable and the term of the loan. The debt reduction calculator will then put a payment plan together with a timeline for repayment, allowing you to literally pin-point the date at which your debt will be paid off.
Commit to living simply and making sacrifices early on in your relationship so that you can reap the rewards later. In a nutshell, agree to live now like other’s won’t so you can live later like others can’t. Avoid the temptation of comparing yourselves with your friends and colleagues. Choosing more modest accommodation and smaller cars might be difficult when those around you are buying big houses and driving flashy cars, but your future self will thank you for your early frugality.
While you are young, and before you have children, it is a wise idea to use your spare time to generate alternative sources of income – particularly passive income. A passive income source will significantly speed up the debt reduction process and is something you will be very grateful for when you do have children.
Avoid the temptation to allow your partner to manage the household finances. Whether through death, divorce or tragedy, 20% of all women will find themselves solely responsible for the household’s finances at some point in their lives. Rather than have this sprung upon you, commit from the outset to managing the marital money as a team. Being jointly responsible for the household finances will bring you closer together, encourage you to talk about your future dreams and goals, and will allow each partner to feel supported.
Being frugal does not mean that there should be no room in your budget for fun and small luxuries. Encourage each other on your financial journey by celebrating the small victories together. Reward yourselves when you have settled your first debt, because it really is something to celebrate. Go on a date night and start planning how to finance your next dream – a new home, an overseas trip or new sports equipment.
Once your debt is settled, bear in mind that you may need to incur ‘good debt’ such as taking out a home loan or financing a vehicle, and this type of debt is often inevitable. On the other hand, unsecured debt (such as retail accounts and credit card debt) is expensive debt and should be avoided if possible. As with anything in life, using credit to finance one’s lifestyle is habit-forming and a difficult trap to escape. Going forward, commit to saving and paying cash for goods rather than buying on credit. Your future marriage will thank you for it!