Paying Off Debt as a Couple: 6 Tips for a 2-Paycheck Household
For better or for worse is a well-known mantra that applies to couples — married or partnered. And when it comes to financial matters, for two-paycheck households, this means greater income, but it also translates into potentially having to pay debt together.
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As Steve Sexton, CEO of Sexton Advisory Group, noted, paying off debt as a couple is a deeply personal process that looks different for everyone.
“When it comes to debt, you’re dealing with more than just the numbers — you’re also contending with potential feelings of guilt and shame associated with debt,” Sexton said. “The first step to establishing a healthy line of communication between you and your partner is to be transparent about the debt you both share. Without a full picture of what you’re up against, it will be difficult to tackle debt together as a team.”
Here are some additional tips to pay debt for two-paycheck households, according to experts.
Have an Honest and Open Conversation
The first thing is to get on the same page, several experts said.
“Sit down and have a conversation about your finances as a whole as well as your debt, expenses and current budget,” said Bri Conn, investment advisor representative at Childfree Wealth. “Being on the same page from the start can help make this go more smoothly.”
Other experts said it’s important to remember that not everyone has the same relationship with money, and you don’t have to agree on everything.
“When couples can be honest about how they feel, think and behave around money and communicate that experience safely, many stressors and triggers don’t have the same power to damage relationships,” said Nathan Astle, client counselor at Beyond Finance. “In my experience, money issues are so often an inside job.”
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Tie It to Goals and Set a Realistic Timeline
Paying off debt, through whatever method you choose, will be more successful if it’s tied to goals in your life — the things you really want to do and that are important to you — said debt expert Sean Fox, president of debt resolution at Achieve.
Yet, deciding on those with your spouse/partner is harder than you may think, he added, noting that it means setting and agreeing on (and often compromising on) individual goals and “together” goals.
“Short-term together goals might be things like buying a new TV or taking a trip; short-term individual goals might be buying equipment for a favorite hobby you enjoy,” Fox said. “Longer-term together goals might include sending a child to college; combined individual and together ones could be retirement. Getting clarity on these will make sure you are making your debt payoff savings important and personal.”
Another useful tip, according to Fox: Establish realistic timelines. For instance, if your goal is to pay off credit card debt and you are looking at a personal loan with a term of 24 months, can you be sure you can do that in time?
“If you’re doing it on your own with the snowball or avalanche method,” he said, “you’ll need to create, review, update and commit to living by your budget — together.”
Set a Budget and Track Your Expenses Weekly
Regardless of how many paychecks you bring in, how much you make or how far in debt you are, you need a budget to help you figure out where you can cut spending and how much you can put toward paying down that debt, said Todd Stearn, founder and CEO of The Money Manual.
“Fortunately, apps like Rocket Money and YNAB are simplifying the act of setting up that budget and then helping you track your progress along the way,” he said.
Tracking expenses and re-adjusting your budget to assess where you can save more money should also be an ongoing process. In turn, many experts recommend having regular check-ins.
Indeed, based on these calculations, you can begin to determine which financial sacrifices you’re both willing to make to reallocate funds to debt repayment.
“This can include preparing more meals together at home instead of eating out, consolidating phone plans, shopping around for competitive auto insurance plans for the both of you and minimizing impulse purchases,” Sexton said. “Monthly check-ins or money dates are a great opportunity to hold each other accountable and make sure you’re both on track.”
Pay the Highest Debt First and Set Up Automated Payments
Another helpful tool is to prioritize debts with the highest interest rates across all your debts.
“Paying off debts with the highest interest rate first helps you reduce interest payments and get out of debt faster,” said Andrew Latham, CFP, managing editor at Supermoney. “You can maximize the benefit of this strategy by prioritizing debts across all the debts you and your partner owe instead of just focusing on individual debts.”
In addition, with two paychecks, Latham said, couples have the flexibility to align debt payments with their income streams, which can help in managing cash flow more efficiently.
“Setting up automated payments just after each payday ensures that payments are never missed and can also reduce the temptation to spend the money elsewhere,” he said.
For example, he said, scheduling payments right after each deposit can make the process seamless and reduce the likelihood of incurring late fees.
Try To Live on One Income
According to Sexton, with some aggressive budgeting methods, some couples may find they’re able to survive on one partner’s income. In this scenario, you may consider living off one person’s income and allocating the other person’s income to paying down debts.
“This approach isn’t for everyone,” he said, “but can certainly fast-track debt repayment and help a couple achieve financial freedom expeditiously.”
Celebrate Milestones
Finally, experts said celebrating milestones helps keep each other motivated.
“Paying off debt is a marathon, not a sprint, and keeping morale high is essential for long-term success,” said Michael Hills, financial advisor at Apex Wealth.
He added that you can set up small rewards for reaching milestones, such as paying off a credit card or reducing your overall debt by a certain percentage.
“This not only makes the process more enjoyable but also reinforces the habit of working together toward financial health,” he said. “By using these strategies, couples can make significant progress in reducing their debt and setting a solid foundation for their financial future.”
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This article originally appeared on GOBankingRates.com: Paying Off Debt as a Couple: 6 Tips for a 2-Paycheck Household
