If you’re a recent or upcoming newlywed, congratulations! This is an exciting time, of course, and there’s so much ahead! You’ve got many things to look forward to. However, if you’re like many newlyweds, debt is a part of your life. Nobody likes debt, but most of us have it. Here are some tips for newlyweds in debt.
Hopefully, by now, you know everything there is to know about each others finances. But, if you don’t, it’s never too late. Make sure you both come clean about all of your debt. You have to know where you’re starting from.
Rank Your Debt
Newlyweds in debt should make it a goal to get out of debt, or reduce it as much as possible. Once you have all of your debts listed, start ranking them. Figure out which ones you would like to get rid of first. A variety of factors can tie into these decisions. Do you have some debts with small balances that you can get out of the way easily? Are there high interest rate debts? Or, do you owe money to family that you’d like to pay back? Each couple will rank their debts differently, but it’s important to have a plan.
Create A Budget
Once you’re married, it’s important to create a budget. If you’ve never done a budget, the first step is to simply track your spending. Make sure you know where every dollar that you spend is going. Also, understand every dollar that’s coming in. Then, you can make a budget based on this information. Sometimes you’ll have to adjust your budget as seasonal changes can create variances throughout the year. The idea is to have money left over that you can use to pay down your debt faster.
After you’re in tune with your budget, look at ways you can cut spending. Every dollar you don’t spend is money you can allocate toward your debt. Can you go out to eat less? What about not having drinks while out for dinner? Could you make your coffee at home? A few dollars here and there may not seem like much, but it adds up quickly.
Increase Your Income
While cutting spending can free up money, so can bringing more money home! Work hard at your job. Apply for promotions. Look for new opportunities. In addition to your regular job, look for side hustles. Can you tutor? Would you enjoy driving for Uber or Lyft now and then? Can you house sit or clean a house or two? When you have extra money, throw it right to accelerating your debt payments.
Have An Emergency Fund
Before you attack debt, make sure you have $1,000 set aside for unexpected costs. It may be tempting to put every dollar to debt, but you need a cushion. Life throws things at you, and if you have an emergency fund there, you won’t have to worry about adding more debt to your life should something unexpected happen.
Don’t Ignore Retirement
You may be tempted to put every dollar you can toward debt, even if you forsake retirement savings. I would advise against that. Even if you put just a couple percent of your paycheck toward retirement, it’s building a good habit for a lifetime of savings. More importantly, if your employer offers a match, make sure you contribute at least the amount necessary to get the full match. Otherwise, you’re leaving money on the table.
Newlyweds in debt may find themselves with a great plan if they follow the steps above. However, it’s important to look ahead. Make sure you understand where you think you’ll be in a few years time. If you plan on starting a family, have a plan on how that will impact your finances. These decisions could alter the priorities you set earlier. You may find you’ll balance things out differently if your long term and short term goals diverge, which they probably will.
These are just a few tips I have for newlyweds in debt. Will they get you out of debt instantly? No. It’s often a long road. But, the point is to make progress, and these tips will hopefully help.