Experts help engaged couples navigate their financial relationships
Should you pay your fiance's debts? Are you obligated to? Is it even a good idea?
I have recently come across several advice columns that dealt with the issue of helping a fiance pay off their debt. Having never been affianced, this totally blew my mind thinking that I could just get married and share my debt with another person. I always understood the idea of marrying rich, but never actually expected that someone I marry would be obligated to help me financially with student loans that I had accumulated before they even knew I existed.
To help understand the different perspectives, obligations, and customs surrounding debt and finances during an engagement, we asked experts in several fields for their advice. Here's what they said:
Consider both perspectives
"While there isn’t a standard form of etiquette that I’m familiar with when it comes to paying off your fiance’s debts, I do know that it's a general rule of thumb to keep some degree of separation between yours and your fiance’s finances. That isn’t to say that you should be hiding aspects of your finances with your future husband or wife.
It’s a valid question to ask, and the answers will vary quite significantly, I’d imagine. It can be especially tough to ignore the elephant in the room which is the increasing rate of divorce. If an engaged friend came up to me asking me this question, I’d instinctively not want to bring up the possibility of a divorce, because that pessimism can drive wedges between people. Having said that, I’d also feel obligated to say something along the lines of 'I know you two plan on having a healthy marriage, but don’t you think the possibility of divorce should be taken into consideration in this particular scenario.'
There is another side to this coin. Let’s say you were in a financially stable place in life that allowed you to help your fiance out with his/her debt. You wouldn’t do this unless you would still be in good financial standing after said debt has been paid off.
So worst-case scenario is you help him/her pay off the debt, there is a divorce down the road, and you helped somebody pay off some debt. It doesn’t damage your credit or any other aspects of your future finances.
Yes, there will be a sense of bitterness about the money you used to help with the debt, but in terms of financial health, the consequences are far less severe. Any relationship (even familial ones) can be severed and/or neglected by either party, so if you bring money into any of those relationships, there is always going to be a little more risk to it. It’s something that should not be decided on in a moment’s notice and needs lengthy discussions with both an advisor and your significant other."
Don't keep secrets
Tiiu Lutter has a master’s degree in psychology with a concentration in counseling and secondary guidance certification, and has completed the three-year ESFT Family-based Clinical Training, and writes for SR22InsuranceQuotes.org. Tiiu has worked in mental health for the last 15 years and co-owns a family and couples’ counseling center.
"So you’re in love and in debt, well, half of you are in debt. It’s still a great idea to get married, but you definitely should talk about the debt before the wedding so it doesn’t get in the way. Disagreement about money is the top reason for divorce, so you need a plan ahead of time.
If you are thinking of keeping your debt a secret, you should re-examine your relationship completely. If you don’t trust your partner enough to talk about money, there are significant issues there.
As for paying it off, there isn’t really etiquette now that spouses are equal legal partners. However, the most successful money style (in terms of marital longevity) is the 'mostly ours, some yours, and some mine' method where most money is pooled, but you each retain a bit of your own to do with whatever you like.
This doesn’t necessarily address the debt. For that, you need to set your financial goals and look at the total amount you owe as a couple. Look at interest rates and see what payment strategy gives you the best progress toward your goals. It could be that the debt holder contributes less to the common pot, or that you both chip away at the debt.
Having a lot of debt doesn’t necessarily damage your credit rating, but if you have different credit ratings and you want to buy a house, it might be a good idea to keep everything separate so that you can get better interest on your mortgage. This assumes the better credit score also has enough income to get a loan.
One last word of caution, if you are keeping your credit separate, don’t lovingly get an extra copy of your credit cards for your spouse to have 'just in case.' The instant you give them a card, that entire debt profile will now be attached to both of you! Just be patient with one another and know that you fell in love with the other person both because of, and in spite of, their saving and spending styles. Just as you developed your own money habits as a child, you will also develop your own money habits as a couple."
Have open and honest discussions
"There’s no one-size-fits-all approach when it comes to discussing finances with a significant other because so much depends on the people involved. Nonetheless, it’s crucial to establish concrete, transparent rules that achieve tangible goals and not damage the relationship.
When discussing finances with a loved one, it’s essential to establish boundaries. For example, if a fiance suffers from poor spending habits, it’s disadvantageous for his or her future spouse to pay off that person’s debt as that will not solve the root problem.
Avoiding resentment is equally crucial when discussing finances. Too often, a person will volunteer to pay on behalf of their significant other and wrongfully expect a form of repayment in the future.
To avoid ‘financial resentment,’ it’s critical that both parties are transparent and forthcoming about their financial obligations early in the relationship.
Although it may seem obvious, the essential step to a healthy, productive discussion about finances is to give it the time it’s due. Proposals and marriage constitute a significant commitment; therefore open and honest discussions are all the more crucial. How else would a couple be able to move in a unified direction?
While discussing financial matters can be complicated, many people are surprised by how simple they can be when they sit down and simply talk about them."
Follow the rules of L.O.V.E
"Finance is the number one root cause of failed relationships and marriages. It's important for couples to effectively manage their funds.
I have four tips to understand your partner's finances called LOVE:
- L- Learn/List as much as possible about your partner's financial obligations including monthly payments, spending, and debts. You need to understand the depth of liabilities that are owed. Document your monthly and annual bills, and any items that is reduced from your income. Make a decision about how will you conduct your banking either from a joint account or separate account. Budget management will soon become your responsibility as a married couple.
- O- Be Obedient in your planning and preparation of the household's planned budget. It's essential for couples to plan the household budget to allocate available funds appropriately. Think of it as the 'Bank of the House.' One of you will act as the CEO overseeing the budget and the other as the Operating Officer in care of all day to day financial transactions. You both should agree and approve your finances.
- V- Be Vigilant in your approach to managing your funds. You must become watchful financial stewards over your finance. Your finances will become a puzzle to you both, if you're not knowledgeable about what's being spent or what funds are coming into the household. It's always best to seek mutual approval prior to make purchases or spending the dedicated funds on anything outside of the budget. There will come a time where challenges like an illness, job loss, etc. will affect your relationship. Your vows of 'in sickness and in health' and 'for richer and for poorer' are created in love and honesty. Your finances should embody those principles too. Make sure to set a plan to save for an emergency. The emergency fund can start off as three months of your salary and then increase to six months of your salary. Define a plan for your future life events including wedding, auto purchase, home purchase, child(ren), retirement. Consider investing to diversify your income.
- E-Make the Effort to encourage each other that you're in this together. All financial decisions should be a mutual decision and not one controlling all. Keep all lines of communication open and regularly schedule time to discuss your budget. You are one team!
LOVE is all about you and your relationship. Keep the Love in it to maintain a happy, loving, and enjoyable marriage."
Set financial goals together
"According to Insider, 36 percent of divorcees cite money as the cause. The key to any successful relationship in life is communication, especially about money. Effective communication solves most problems and prevents unclear motives. Communication also allows couples who are engaged to have healthy and productive conversations about their finances.
The first order of business for couples who are engaged is to have an open and honest discussion on the level of education regarding financial matters such as saving, money management, budgeting, taxes, investing, and retirement planning. This open and honest discussion will allow each person to potentially to see areas of strengths and weaknesses as it relates to their knowledge on financial literacy. One person may have a stronger financial background than the other individual. Hopefully, this open line of communication will allow the couple to agree on who should take the lead as it relates to their finances and provide a platform for effective goal setting.
One of my favorite lines to quote to clients is that you are only as strong as your weakest link. Debt can become a weak link in any marriage. The best method in approaching this is to have open communication that will allow engaged couples to discuss and develop a plan to deal with debt issues. I can’t stress how important and critical having this discussion is as it relates to debt before marriage. Let’s assume that one person has accumulated very high credit card debt and other debts, such as student and car loans. There should be an agreed-upon plan to eliminate that debt. This agreed plan should include discussing salaries and which debts will be eliminated first. In my opinion, the person with less or no debt should help their partner reduce their debt. Marriage isn’t always a 50/50 deal, it’s each person giving 100 percent. Having both individuals working towards the same goal will reduce the couple’s overall debt-to-income ratio and improve their ability to develop a savings strategy for their future.
One other important point of emphasis for engaged couples is not to go into debt before the marriage even starts. Couples need to communicate effectively on minimizing the cost of the wedding itself. Most couples start off the marriage in debt due to paying for expensive weddings. My recommendation to engaged couples is to seek a financial advisor who specializes in budgeting and debt management. This will set the tone for the success of any relationship. My firm has perfected a debt management program to help couples not get into massive wedding debt, and one of the things we recommend is to set a dollar amount that both individuals can pay for with their savings. Resist the urge to acquire loans and to use credit cards to pay for weddings."
Keep your debts seperate
"No, it is not your job to pay your fiance’s debt that occurred before you met.
Make sure when you divide who pays for what, that the fiance has enough money to pay off their debt, but don’t make yourself responsible for it. It is not your debt."
Don't let resentment enter the picture
"There's no one best way to organize or handle finances within a couple. What's most important is that each partner feels good and that it fosters a healthy dynamic. What's healthy is determined by each partner and what moves the couple towards the future they want.
Even if there is a predominant custom etiquette-wise, I would be wary of it. Financial stress remains a top cause of fighting and divorce; our norms and ways of handling it need an overhaul.
No matter what direction you go, it's essential to watch out for resentment, which is the intimacy killer. This must be done actively over time, as well. For example, imagine the partner who paid off the other's debt later being unable to make a certain financial decision. They may resent that they put money toward their spouse's debt and see that as part of why they are now hamstrung.
I start my clients off by exploring their money story, i.e. their experiences and viewpoints around money growing up, as well as in prior and their current relationships. Each partner should then share what they discovered. This is a safer conversation, as it's more descriptive, leaving little to argue about. It also builds mutual understanding and helps get the money talk flowing.
Here are a few key strategies, action steps, and tips:
- Seek first to understand, then to be understood
- Ask open-ended questions that encourage your partner to give more than a 'yes' or 'no' response
- Build partnership around the emotional parts of money and your shared vision first; once that's in place, the tactical piece will be much easier and more likely to stick."
Learn about eachothers financial history
"Engaged couples should not only create an atmosphere of open discussions about their wedding plans or where they will live after they get married, but also about their individual and joint finances. The etiquette could be to have a date where they specifically discuss their finances — after all, this is about their future as a couple.
During such discussion, both parties should provide clear evidence of their financial circumstances in the form of their credit file. Doing it this way means that there are no secrets or surprises later on down the road. In addition, during these discussions, evidence should be provided of any repayment plan in place by way of a show of bank statements. These discussions should also happen over a period of time and on a regular basis.
The discussion should focus on being non-judgemental because it is about finding a solution as a couple. The environment and atmosphere where such a discussion takes place should be relaxed — perhaps after a nice meal or over a glass of wine at home. The ambience plays a vital role in such discussions.
If one party is financially stable and able to pay off debts, I absolutely suggest that they do so. This is because such a debt will eventually have an impact on them as a couple. For example, if the party with the debt is stressed out about the debt, it will have a knock-on effect on their relationship. It can cause a strain in their relationship. By the same token, if the party with the debt is paying off the debt, it will also have a knock-on effect on their financial contribution to household bills. It may be that they are only able to contribute a small amount towards bills whilst they clear such debts. Additionally, it makes perfect sense for the financially stable individual to pay off the debt because it will drastically reduce the amount of interest which is likely to accumulate over time. Why pay more towards interest when they can save that money for other things?
Again, the process for paying off the debt by the financially stable party should be asking the other party to put pen to paper by writing down ALL outstanding debt and any repayment plans. There should be evidence of this versus simply word of mouth! It is a known fact that some people with debt will underplay what they truly owe. Yes, accounts and credit profiles should be still be kept separate. Why? There is always the risk that the party with the debt can quite easily fall back into debt. There is, therefore, no point in dragging an innocent party down the slippery slope.
To summarise, I would say that it is a very risky task paying off a fiance's debt. This is simply because the financially stable party may not know if they are being taken for a ride. How can they be sure that they are not dealing with a gold digger? Furthermore, couples should really be having discussions about finances way before they even get engaged."
Whatever you do as couple, make sure you both agree
Lisa Mirza Grotts is the Golden Rules Gal, a warm and no-nonsense expert on the thorny subject of manners. She helps her readers and clients deal with tricky business, social, and political situations by always putting their best foot forward.
"There’s a reason why an engagement is a formal agreement to be married, as in pre-marital or pre-nuptial. Common sense would dictate not taking on someone else’s debt, as it's extra baggage! It can be a challenge combining money. There’s enough to deal with as a married couple; to start your life with this hanging over your head makes little sense. On the flip side, once you have the discussion, your spouse to be may be okay with taking on your debt.
If you’re not able to have the discussion about finances on your own, it might be time to think about a marriage counselor. It takes a village to be married, so if you can iron out this important detail you’ll be all the wiser in the long run.
Money Talks: Mergers and Acquisitions
- Agree to disagree about how you handle your monies. Separate or joint accounts etc.
- If one or both of you has means, then by all means, hire an attorney and get a prenuptial agreement! The keyword here is Pre, as in before you say 'I Do.' Marriage is a contract.
- Think we vs. me. You’re headed in that direction, so avoid the blame game and figure out how you will work through your finances.
- Communication is the key. Sometimes the un-discussion can do more damage. Assuming anything is asking for trouble and adding day to day expenses, investments, debts, retirement talks, saving and spending equals trouble when it comes to finances."
Establish financial roles and responsibilities
"Many of my premarital and postnuptial agreements involve these issues — one fiance paying off the debts of another, income/asset disparity, and how to best discuss and combine finances.
Interestingly, studies show that clarity about financial roles, responsibilities, and expectations may actually deter marital conflict and divorce. It's critical to have these conversations prior to marriage.
That said, there are many, many combinations and options for couples when it comes to combining finances. Couples need to have open and honest conversations about their values and finances, consider the laws in their state, and engage professionals (whether attorneys, financial advisers, accountants, etc.) to make sure they know all of their options to make fully informed, empowered decisions."
You're in it together
"Ultimately this decision is up to every couple. Personally, my wife had three times the amount of debt as I did when we got married. But we firmly believe that what is mine is hers and what is hers is mine — that refers to good things and bad things.
When discussing the matter of finances with a fiancé or spouse it’s important to understand the underlying conversation: How do each of you view your relationship now and in the future? Are you one unit? Are you cohabitating? Do you depend on each other? What is your fundamental belief about marriage and what that means for a relationship? Having that conversation will lay a great foundation for handling many other issues that will inevitably come up down the road.
Regarding money specifically, be sure to come prepared with what you own, what you owe, and how much you make. Understand where each of you are in your financial journey, because your journey will become one. Understand that when you’re having this conversation, you’re both being vulnerable and that isn’t easy to do. Affirm your care and support for each other. Make sure they know that you don’t value them based on their financial picture — you care for them, not their money.
If you decide to pay off one another’s debts (either simultaneously or because one party is financially very well off) I would approach each debt as if it were your own. For example, it makes sense to pay off high interest debt as fast as possible. So if your fiancé or spouse has credit card debt, crush it right away. When it comes to lower interest debt, or debt with tax-deductible interest, it may not make sense to pay that off fast. Bring that debt into the relationship and budget it in with all of the other expenses — you’re now jointly responsible.
Some debts you cannot legally combine (i.e. student debt). Some debt you cannot combine due to credit — maybe one of you has a very low credit score. Practically, putting both of your names on the debt won’t provide any benefits unless you’re refinancing.
In the long run, the most helpful thing is to repeatedly reaffirm your commitment to one another and to never hang anything over the head of your spouse."
Talk about debts as soon as possible
Randolph (Tré) Morgan III is a family law specialist in North Carolina. He has a B.A. in Psychology and a J.D. from UNC-Chapel Hill. He regularly handles prenuptial agreements and divorces that take into account marital finances.
"In my experience, the large majority of couples treat all of their pre-marital debt (called 'separate debt' in my jurisdiction) as their joint obligation and pay these debts from funds they earn during the marriage. However, some couples feel a need to clearly delineate their obligations before they are married and enter into pre-nuptial agreements to clarify expectations as well as legal obligations. Typically, the larger the debt, the more interested one prospective spouse or the other (or one of their parents) is in addressing expectations and obligations before they are married. In my experience, three and four-figure debts don't trigger a couple's need to talk about the debt before marriage as much as five and six-figure debts.
There can be important and surprising legal implications based on how and when these debts are paid. These issues come into play in divorce and can even come into play when debts are paid and then engagements are called off. So it makes sense to address these things on the front end. My experience working with couples both before and after a marriage has taught me that it is always better to address expectations on the front end rather than to discover that your expectations differed down the road. Many people don't want to ruin the fairy tale feeling of being in love with practical, legal, or financial conversations. But, if you cannot have good, calm, productive conversations about these things before you are married, how will you have them when the really big issues come up during the marriage?"
Do not judge your partner
Darren Straniero is a certified financial planner with OnPlane Financial Advisors. Darren has more than ten years of experience in financial services and helps professionals and families plan for their financial futures.
"Couples who are engaged should certainly have a very frank, open, and honest discussion about finances. It should be a judgment-free zone and that's really all we can ask for here. Money is extremely emotional for a lot of people. If that requires meeting with a financial advisor, a therapist, etc. then make it happen. The first step is to lay out what each person has financially. Income, savings, investments, debts, and spending habits/requirements. From here, real conversations can take place in terms of how to accomplish financial goals as a team, as a partnership.
In my experience, couples who merge finances tend to experience better financial results. Not always, but more often than not. Having everything owned together makes it harder to hide things like credit card debts, spending habits, etc. And it can also diffuse the potential for resentment.
When it comes to paying off a fiance's debts, I think absolutely. You're about to come together as a team in all facets of life. Why not financially? Imagine your future spouse lost a job. Would you not support him/her financially? Or your future spouse unexpectedly lost a parent or a child. Would you abandon him/her during a time of severe emotional need? I don't think so. And so the financial journey should also be a joint or team effort. I don't think there's a right way to go about it. But I do think a wrong way to go about it is thinking of it in terms of 'Well, I'm going to do this for you so you owe me,' aka tit-for-tat. That can lead to resentment and harbor other ill-founded feelings. Unless we're dealing with things like income-based resentment on student loans and other factors, I think accounts should, for the most part, be owned jointly (save for a few exceptions) and credit profiles should also be shared freely."