Debt Consolidation for Couples: Crafting a Shared Financial Plan

Are you and your spouse struggling to manage your debts? Whether you are about to be married or have been married for decades, debt can significantly strain your marriage and financial future. Thankfully, there are ways you can get back on track to achieve financial freedom and pay off your debts. One of these ways is debt consolidation.

 

Debt consolidation is when you combine multiple debts into one payment. Instead of paying for various student loans, car loans, or credit card debts, you put all these payments into one to keep your finances more manageable. This strategy can be great for a couple in their journey to becoming debt-free. Debts can be stressful in your relationship, so having a plan in place can be a game-changer to help you work together as a team.

 

How Can Couples Create a Shared Financial Plan for Managing Debt?

When you grow in your relationship with your spouse, you build intimacy in every aspect of your life. Financial intimacy is a huge part of your marriage, and you must be on the same page with how you handle spending, saving, investing, and giving. If you haven’t already, create a budget to help you stay on track and manage your finances well. This budget will reveal how much you need to spend on your debt payments monthly, so it’s a significant first step in providing insight to what you owe overall.

Here is how to form your financial plan if your main goal is to tackle debt.

Know How Many Debts You Have

Before you begin assessing how to consolidate, list all the debts you both have. These could be:

• Student loans from college or graduate school
• Credit cards
• Mortgage or rent
• Car payments
• Personal loans (furniture, trips, kitchen appliances)

Analyze Interest Rates

Consider which debts have the highest interest rates as you look at your list. Since a higher interest rate means a higher payment, comparing each will reveal which ones you’ll need to be more aggressive paying off in your financial plan.

Look at Your Credit Score

As you’re developing your financial plan for managing debt, keeping an eye on both your credit scores is essential. You might have differing scores depending on your credit history as borrowers. Regardless of how similar or different your scores are, you must include a shared goal in your financial plan to improve your credit and raise your score. Improved credit scores could allow you to get better rates in the long run for your debt consolidation strategy.

Choose a Consolidation Strategy

Now that you have more of a grasp on your financial situation, it’s time to consolidate your debts together. If your debts have been separated up until this point, now is the time to say “our debt” instead of “your debt.” Debt consolidation is a joint endeavor in your marriage and your journey to financial wellness.

As you begin consolidating debt, you must choose which method will best suit your goals. These are different options for you to consider:

• Balance Transfer Credit Cards allow you to put all your debts into one line of credit that you can gradually repay. As you do, you have the potential to have a lower interest rate.
• Personal Loans are an option with your financial institution. Similar to balance transfer credit cards, they also have lower interest rates. It’s  normal for them to have a fixed repayment schedule and deadline for when you need to have it paid off, which can help you stay accountable and on top of your payments.
• Home Equity Loans or HELOCs could be the right debt consolidation choice if you own a house and are still paying your mortgage. Your home equity is the difference between the value of your home and what you’ve already paid off through your mortgage. These funds can be used as a line of credit that you can borrow from, especially if your home’s value is increasing.

These are just a few of the options for debt consolidation. Depending on your financial situation and goals, one of these debt consolidation strategies could be the best fit for you.

What Are the Key Steps in Consolidating Debt as a Couple?

1. Set Realistic Goals

Setting financial goals is a crucial step in your financial plan, but it’s important that your goals aren’t too vague or complicated. One strategy to ensure your goals are attainable is using SMART Goals, which stands for Specific, Measurable, Achievable, Relevant, and Time-Bound.

2. Discuss a Timeline

Once you’ve established your SMART goals, you’ll better understand when your debts could be paid off. It’s important that you and your spouse discuss how you’ll want to spend the extra money you'll have once the debts are paid. This conversation can help you both be on the same page for your financial future.

3. Pursue Accountability

Working to pay off any debts you have takes hard work, patience, and sacrifice. Always pay it on time and in full when possible, no matter what kind of debt you have. This could mean setting up reminders for each other around the time the payment is due. Also, encourage healthy saving and spending habits for each other. Before shopping, have a budget for your outing, and gently remind each other to stick with that price limit. Going in with an already established plan helps you both be proactive in making healthy financial choices and maintain clear expectations.

Another way you can hold each other accountable is by asking a trusted mentor or other couple to check in on your progress. Encouragement is important for your finances and marriage. If you both are looking for professional advice, reach out to your financial institution to learn about their options for financial wellness counseling.

What Are Common Challenges Couples Face When Consolidating Debt?

As you begin to implement your financial plan to become debt-free, a few challenges might arise. It’s important to be aware of them sooner than later, so you know how to respond.

Selfishness

Did you know that one of the main reasons couples fight is over finances? While there are various reasons why that is true, it isn’t actually money itself that’s the problem – it’s selfishness. Selfishness with your money can lead to reckless spending, controlling behavior, and disregarding your spouse’s needs. The best way to turn away from this mindset is by having a “me-for-you” mentality, where you choose to sacrifice for each other. This attitude is a game-changer for your commitment to each other in your relationship and your financial wellness.

Miscommunication

Depending on your family background, you might have been raised in an environment where your parents were not open about money, fought over it, or never spoke about it at all. Regardless of how you were raised, you and your spouse are now on the same team and need to be candid about your financial situation. This open communication can be a hard adjustment at first, but breaking the ice can help you build deeper trust and vulnerability.

How Can Couples Track Their Progress Toward Financial Goals After Consolidation?

As you and your spouse begin consolidating your debts, it is important to keep up with your payments and see how you’re doing. Several tools can help you manage your payments; it’s just a matter of finding the right fit for your goals.

1. Debt Payoff Forecasting

Whether you’re just starting to pay off your debt or have been for a long time, debt payoff forecasting is a helpful feature on mobile apps or online resources. It allows you to see the progress of your debt management plan and ensure that you’re on track to pay off your debt in time.

2. Automatic Payments

One of the best ways to ensure you’re dedicated to your debt payoff plan is to set up automatic payments through your account to go directly to your monthly payment. Using automatic payments helps you not to worry about accidentally using that money or missing your payment.

3. Set Reminders

Setting reminders is always a good idea, even if you’ve already set up automatic monthly payments. You and your spouse can set up recurring notifications on your phones through a shared calendar or financial app. When the due date for your payment rolls around, you’ll be prepared to either pay for it or ensure that it was paid correctly.

Craft Your Debt Consolidation with Leaders Credit Union

Are you and your spouse ready to achieve financial freedom by becoming debt-free? At Leaders, we want your finances to flourish, as well as every part of your life.

As you consider which debt consolidation options are right for you, don’t hesitate to contact one of our Financial Champions. We also have a free Credit Card Comparison guide to see which credit cards might be helpful in your debt consolidation plan.

Leaders is federally insured by the NCUA.