Whether you or your spouse owed creditors money before meeting each other or went into debt to have your dream wedding, newlyweds should go into their marriage with a plan to eliminate debt. Married couples often argue about money and debt is a major source of financial worries, especially when spouses are trying to build a life together.
Here are ways to reduce debt quicker:
1. Request Your Credit Reports
As a first step, couples should request their credit reports from the three main credit reporting bureaus. The credit reports will list not only your credit score, which could serve as a gauge of your financial health, but also your debts. By going over each of your credit reports, you can discuss any issues in your credit history that could hold you back from accomplishing your goals as a married couple, such as high levels of student loan or credit card debt. You could also see whether there are mistakes in your credit reports that you should take care to correct as soon as you can.
2. Consolidate Your Debt
Often, student loans are split between several accounts or even multiple lenders. Additionally, the loans could each have different interest rates. These factors make it difficult for borrowers to keep track of the interest that's accumulating, due dates and how long they have left until they completely pay off their loans. To make it easier to monitor how much you still owe, consider consolidating your loans.
When tackling debt individually, it may help to consolidate money owed, especially student debt. In the case of student debt, you could consolidate to take advantage of low interest rates or simplify paying your loans if you have multiple accounts or lenders. The advantage of consolidating is you could even end up with smaller interest rates for your loans, which could save you money in the long run and get you debt-free even faster.
3. Create Your Budget
When you make a budget together, you can compare or combine your incomes and expenses to determine how much money you will have in disposable income. In calculating the amount you have left each month, you could decide a percentage that will go toward existing debt. Determining exactly how much you will have remaining could allow you to split this money between paying off debt and saving to meet financial goals, such as purchasing your first home together.
4. Pay More Than the Minimum Payment
If you are in debt and paying a high interest rate because you're carrying a balance on your card, this could pile additional stress on your marriage. When you are trying to get your marriage on the right foot, it helps to pay more than the minimum for your credit card bills and loan payments. Paying a greater amount than the minimum will further reduce your debt.
5. Target Accounts with the Highest Interest Rate
In marriage and finances, you have to learn how to prioritize. When you have multiple credit accounts with various interest rates, put a higher priority on paying off credit obligations with greater rates. For example, if you are juggling credit card bills and student loans, choose to place paying off your credit card bills above your student loans as these cards often have a greater interest rate than student loans. Paying off accounts with higher interest rates will continually reduce the amount of interest you pay in order to allow you to put more toward the principal balance.
6. Correct Credit Report Mistakes
Although you'll have more credit obligations to look over, you should stay vigilant about correcting any mistakes on you or your spouse's credit report. Credit errors are not uncommon and this could result in debt collectors or creditors going after your money. If you are one of the many people who have credit mistakes that could prevent you from opening up new lines of credit, you could seek out professional help. In researching credit repair services, choose a company that will work carefully to comb through your report for mistakes and guide you in the right ways to right them.
7. Establish Automatic Payments
As you're probably caught up in married life, it takes a while to get used to paying bills for two, especially if you choose to combine your expenses. When it's hard to pay attention your expenses and credit obligations, there's the risk that you could fall behind on payments. However, couples have the option of using automatic bill pay for their regular monthly bills and loans. For debts like student loans, there are some loan services that will offer small discounts, such as a 0.25 percent rate reduction for paying off your loans on time each month.
With these debt reduction tips, you and your spouse can enjoy your marriage without having money woes overshadow your life together.