How to Reduce Debt and Communicate About FinancesApr 21, 2017
Do you and your partner have a shared vision when it comes to reducing debt and splitting household expenses? Are you both saving adequately for retirement? Gen-X couples with kids face some unique challenges in today’s economy. Many are home-owners and fully employed, but may have high consumer debt loads and leftover student debt to contend with, in addition to the costs of raising a family. Although they may be more financially stable than younger millennials, they also have less savings and more debt.
Compounding the stress of financial worries may be conflicting financial agendas. One spouse may be a saver, the other a spender. Or, money management may be a conflict (who pays for what?), which can be complicated further when one spouse in the sole earner or there are differing incomes. While it is optimal to work out financial wrinkles before marriage, only 35 per cent have “the talk” before their wedding day. Unsurprisingly, money conflicts are cited as a major factor in Canadian divorces, so it is in most couples’ best interest to find some common ground.
How to start the conversation
Whether you want to schedule a formal financial “date night” or dedicate some time on the weekend, it is important to eliminate distractions. You may even want to set some ground rules beforehand since money conversations can get heated. In this scenario, a public place may be preferable because you’ll be less likely to make a scene and keep things civil. Some important topics may include:
Your budget – It’s impossible to plan for upcoming events or create financial goals if you don’t know where your money is going each month. Creating a comprehensive family budget can help you plan your next steps and get on the same page when it comes to finances.
Your overall debt – Print off credit card statements or online loan transactions beforehand so each component can be discussed openly. If your debts are separate, your spouse can do the same so you can both discuss how to deal with your consumer debts and find help when necessary. You can also take this time to discuss your mortgage terms and interest rates. Download the Assets and Liabilities Worksheet for Couples from the Financial Consumer Agency of Canada (FCAC) to help get started.
Financial goals and priorities – Your goals have likely changed since the beginning of your marriage, especially if you own your home and already have children. Your priorities now may center around saving for retirement, children’s post-secondary education and reducing consumer debt to free up money each month. Which common goals do you share? What are your individual goals? Use this financial goal calculator to help with this step.
Options for debt relief – Depending on your current debt load and goals, you may wish to discuss your options for getting help with your consumer and student debt. A credit counsellor or Licensed Insolvency Trustee (LIT) can assist you in finding a debt solution to help reduce debt and get back on track. An LIT can also offer a consumer proposal as an alternative to bankruptcy for those with significant debt. Also, a consumer proposal can combine and reduce your current debts, along with student debts, providing you have not attended school for 7 years. Find more information about consumer proposals by visiting the Office of the Superintendent of Bankruptcy Canada website.
How will you and your partner reduce debt and save for retirement? Join the conversation and share your tips by searching the Twitter hashtags, #LetsTalkDebt #BDODebtRelief