Brides, grooms prepare for financial troubles
You'll probably find that the new credit card regulations and the reaction by credit card issuers to these regulations could have a long-term impact on your plans -- if they involve borrowing money or using credit cards.
"This is a difficult financial time where easy credit is no longer available to everyone. It is now more difficult to get loans for homes and credit cards. Your credit scores, history, even spending activities are now closely watched and you will have to prove to credit issuers that you are not a risk for defaulting on a loan. The sooner you start planning for this, the more prepared you will be. Your engagement period is a good time to start building a financial plan," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
You might not like to think about this but your fiance will not only be your life partner but also your "business" or financial partner. Your credit, good name and financial future will be tied to this person. Be certain to have a long, hard talk about financial goals and be sure you share the same beliefs about money. When you start asking questions you may find you don't have the same spending and saving habits.If you haven't talked about money management yet, you'll probably find it difficult to get started. It's difficult for all married couples and financial distress is one of the top reasons for divorce. So test this part of your relationship before getting married.
If you can't have an honest discussion about finances before the wedding, then this may not be the person you want to be with for the rest of your life. Since finances are a top stresser for married couples, you will be better off if you can confide in each other and create a financial plan.
Here are tips for avoiding the stresses of marriage and debt:
* Before the wedding, show your cards. Tell your spouse about your income, debts, issues you have with money, how your parents raised you to handle money, your strengths and weaknesses with money, and admit if you are a spender or saver. A good place to start is to use a budget or bank statements from the past twelve months to show how you used your money. Your monthly debt, including your mortgage, should not exceed 35% of your gross income. Make sure this is a two way street and your spouse is willing to share the same information.
* Have a wedding that you can afford. This is not the time to start running up huge credit card bills and still be paying for your wedding on your fifth anniversary.
* Each of you should get a copy of your credit reports. You'll get a clear picture of how each of you handle money and help you avoid any future surprises. Aim to get your scores over 750 to receive the lowest interest rates for your first mortgage and other planned loans. If one partner has a high score and one has a low score, avoid taking any joint credit until the partner with the lower scores rebuilds his or her credit score. Work together to fix the problems, but don't sabotage the good score.
* Avoid credit card debt. Cash is king, especially when you're just starting out and have big dreams. Don't fall into the trap of buying something with a credit card with the intent of paying it off in just a few months. It's a hard habit to break and will become much more dangerous as you build your assets.
* Get one or two credit cards and stick with them. Building a good payment history with one or two credit cards is a positive factor in your credit score.
* Each spouse should have a credit card in his or her own name to build his or her own credit score.
* If you or your spouse does have credit card bills to pay off use the snowball effect or round robin method to pay down debt.
* Before the first bills come in, make a plan for how the bills will be paid and who will pay them. If you have separate accounts, know which account pays each bill.
* When you go shopping, leave your credit cards at home to avoid impulse buying. You can buy the small things you need with cash. If you decide together that you want something larger for which you will need to use a credit card, then go back home and get the card.
Starting out with a money plan will reduce stress throughout your marriage. You must continue to have money talks on a regular basis. The worst thing for a marriage is lack of communication. If you believe your partner is straying from your money plan, talk about it don't just let your feelings build until you are ready to explode or your credit rating has been torpedoed.
Lita Epstein has written more than 25 books including the Complete Idiot's Guide to Improving Your Credit Score.