With This Debt, I Thee Wed

By JEFF D. OPDYKE

How Couples Should Handle Debt

Sour economies don't just destroy jobs and wealth. They can tear apart marriages, often because of the debt that couples accumulate and, when times get tough, have trouble repaying. In this adaptation from his new book "Financially Ever After: The Couples' Guide to Managing Money," Wall Street Journal reporter Jeff D. Opdyke describes the challenges couples face when dealing with debt and how they can begin to address them.

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If there's a money matter more likely to cause conflict for couples -- maybe even divorce -- it's debt.

Being in love and in hock is no way to go through a marriage, because being in hock might just put the kibosh on the love, particularly in the early years. Debt, it turns out, is a leading cause of family strife during the first few years of marriage, according to Creighton University's Center for Marriage and Family.

That doesn't mean debt will necessarily send you to divorce court, but it does mean the accumulation of debt can undermine your marriage and cause the type of discord that can dissolve a marriage.

That's of particular concern these days, as families struggle with the worst economy since the Great Depression. Fadi Baradihi, president of the Institute for Divorce Financial Analysts -- a group of financial planners who help couples plan the finances of a divorce -- says that demand for the institute's services is up 15% in the past year. Couples "contemplate divorce more than ever" when good economies turn sour and finances grow strained, he says.

The result of all this financial stress: marital conflict that can blow out of control.

To deal with debt effectively requires some effort from you and your partner. The goal is to determine how you employ debt in your life together, the rules by which you each use debt separately, and your plan to pay it off so that it never has the chance to corrode your relationship.

What's your debt philosophy? For couples who regularly struggle managing their debt, start by formulating a debt philosophy. This is nothing more complicated than devising a financial mission statement, the structural foundation of your family's beliefs when it comes to debt. It needn't be profound, just something simple like the following:

"We agree to live below our means, not to pursue material wants without the money to afford them, never to use emergency savings for consumer purchases and to take on debt only when it benefits the family's long-term goals or needs."

Now, don't just adopt the philosophy above and call it done. Every family has its own specific needs, so fashion your own philosophy together. You'll want to answers questions such as:

• Will we pay cash for everyday purchases or maintain a monthly balance on a credit card?
• Will we pay off our credit card every month, or are we comfortable carrying a balance -- and, if so, how big?
• Will we refrain from spending more than our monthly income, or can we occasionally overspend to afford a big purchase? With large purchases, how soon will we pay them off?
• Will our savings account remain untouchable except for emergencies, or can we dip into it to pay for certain expenses?
• What defines an emergency expense?

Couples on the same page should have little trouble designing a debt philosophy. Couples with sharply divergent views are far more likely to suffer problems. For them, success comes through compromise.

For instance, when deciding whether savings remain untouchable except for emergencies, one might answer "absolutely," while the other says, "no way." Split the difference by, possibly, creating an agreed-upon level below which the savings account will not be allowed to fall outside of a true emergency. Or agree on the amount that can occasionally be spent for purchases that benefit the family broadly. But you must define "occasionally" and "beneficial."

One example: Emergency savings could kick in up to $1,000 to help cover the costs of a vacation the family's monthly finances can't cover alone -- so long as it doesn't push the account below some minimum level.

CONTINUED ON PAGE 2 | WITH THIS DEBT, I THEE WED

Related Pages:
Personal Financial Goals (by The Vermont Agency)