So before you stand at the altar, it's important to know where you stand financially as a couple. You're joining more than your hopes and dreams --- you're also combining your money habits, spending patterns and sometimes even past debts.
As both the student debt load and average marriage age rise, it's increasingly likely that at least one partner will enter into wedlock with significant debt. The average student loan debt is now more than $25,000, and average credit card debt is almost $5,000 a cardholder. Such debts can cause significant stress on a new marriage. Revealing all your debts to your partner early can ease that pressure and help your start paying them down as soon as possible.
Getting married doesn't automatically make you responsible for the debts your spouse incurred before the marriage. Your partner's debts will show up on your credit history only if you are added to the accounts. But those debts will still affect you, because money spent to pay down debts is money not spent on saving, paying other bills or enjoying your life together.
Here are 10 financial tips for newlyweds:
Compare spending habits. Don't assume your spouse shares your beliefs about money; your partner's spending and saving habits may surprise you. Watch how he or she uses money. A free spender before marriage will probably still be a free spender after tying the knot.
Before the wedding, reveal everything in your financial closet. Be honest about your income, debts and money problems. Bring out your bank statements from the past year to show what you did with your money. Discuss your financial strengths and weaknesses.
Each of you should get a copy of your credit reports from the three credit major bureaus. This will give you a clear picture of your credit accounts and debts, as well as how creditors will judge you. Aim to get both your scores higher than 750 so you can land the lowest interest rates for your mortgage and other shared loans.
If your partner has been married before, discuss any financial obligations related to the ex-spouse and/or children.
Have a wedding and honeymoon you can pay off in a year. The wedding of your dreams can become a nightmare if you are still paying interest on it years later.
Avoid credit card debt. The best rule of thumb: "If you can't pay for something with cash, you can't afford it."
If you have a credit card balance, pay as much as you can above the minimum each month. If you receive gift money, a bonus, income from a second job or a tax refund, use this to pay down your debt. You can even make multiple payments during the month to pay off your balance faster. Eat a meal at home and immediately apply the money you saved to your credit card balance.
Before the first bills come in, decide who will pay them and when. If you have separate accounts, know which account pays each bill. Also notify creditors of your name change and new address.
Reduce your debt-to-available credit ratio. This will help improve your credit scores. Your monthly debt, including your mortgage, should not exceed 35% of your gross income. This is also commonly referred to as the credit utilization ratio.
Make sure each spouse has a credit card in his or her own name to build individual credit. Keep that card for a long time. Use the card for several purchases each month and pay the bill in full immediately. Building a long-term payment history with one or two credit cards is an important factor in your credit scores.