In the past few months I have been prepping to join the ranks of the married. Through the process of bringing two lives together, my future wife and I have realized the power of dual incomes.
Harnessing the Dual Income Power
In many cases when people are first married they become DINKS (Dual Income, No Kids). This DINK time period can be a precursor to how a couple will manage their money for the rest of their lives -- you may continue to plan your finances as individuals (i.e. spend), or you may use your DINK status to close out debt and build wealth.
While we are not technically DINKS (we have one child) we have decided to go with the latter and pay down our debt and build our savings. Currently the average household credit card debt hovers around $7,000. Add to that a mortgage and student loan debt, and the number could be overwhelming.
Following a budget or spending plan is one way to make sure you stay out of debt in the first place, but how can we get rid of debt we might already have?
Creating a budget is still a good place to start. (Here are some useful links to get an idea of what it may look like.) With a budget you can see where you are spending money, and make changes to your spending habits as necessary.
When I analyzed my budget this year I noticed that I was spending more money on eating out than I had allocated. Now this may be fine, if I was spending less in another budget category, but I was not. In order to balance my budget, I needed to make a sacrifice. Should I eat out less or drop my satellite TV? I made the decision to eat out less, and keep my satellite TV (because I had to know what happened next in Breaking Bad). Following my budget and making sacrifices on spending are two high quality Debt Busters.
In our case we took the Debt Busting power of a budget a step further with our Dual Income. We have done our best to live off of one income, while using the second income to pay down our debt and build up our savings. I am not going to tell you it has been easy, but we have made the necessary sacrifices to make it work. We both drive seven-year-old cars. We have friends over to our house, rather than going out to restaurants or bars. We eat leftovers for lunch at work. We use coupons. Above all else, we avoid frivolous spending.
Doing these things has helped us to lower our monthly expenses and survive on one income. We have been using the second income to slowly pay down our debt (we will be completely debt free in less than a year). We have also been able to increase our contributions to our employer 401(k) plans. Not only that, but we have been able to start saving for the very elusive emergency fund. This plan has paid dividends for us, because we have been able to communicate openly about our finances and work together to bust our debt and build our savings.
Getting on the Same Financial Page
The internet is full of stories about why couples divorce, and the themes that seem to emerge are: lack of communication, and arguments about finances. With the sobering statistics in the back of our mind, we have been able to establish open lines of communication about our finances by deciding on rules and guidelines for how we handle money.
One of the first things we talked about was how to divide our expenses. True, we are trying to live on one income, but we still divide our expenses so that the person paying the mortgage is not also paying for preschool (our second largest bill). When we have larger purchases, such as replacing a door or cutting down a dead tree, we discuss from what source that money is coming from. In addition, we have put a spending limit on some purchases. If an item costs above a certain dollar amount, we need to discuss with the other person the need for that purchase. This one can be a little difficult to get used to, but it also helps ensure we do not take on unnecessary debt.
At this point, we have also had a conversation about combining accounts once we are married. We have decided that we will wait to do that until after our debt is paid off to ensure that we are both responsible for our own past financial mistakes. However, in the future we will have a joint account in order to maintain clear and open communication related to our finances.
Creating Money Goals and Staying on Track
The last thing we are doing is communicating our money goals. Our biggest money goal this year was to have a wedding that will be completely paid off by the big day. I am happy to say we will reach that goal thanks to some hard work and a little luck. Our newest goal is to ramp up on the retirement savings before we have more children.
One thing I have learned from others this year about marriage is that it is hard work. I love that my fiancé and I have taken some preventative steps before our marriage to tackle some of the tougher issues that might arise along the way. The emphasis on the same goals will help to keep us focused when we run into the temptation of buying the new PlayStation 4 or Louis Vuitton purse.
Do you have any marriage or debt busting tips to share with me before my big day? Please leave a comment!
Do you know someone who is about to walk down the aisle? Make sure you share this article with them!
This post was written by Chris Kamp from Colorado PERA.
(Would you like to write a guest post for The Dime? Email us at firstname.lastname@example.org.)