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What Happens to Debt When You Divorce? 

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what happens to debt when you divorce

For every two to three new marriages in 2014 there was at least one divorce, according to the latest Centers for Disease Control and Prevention data — a grim statistic that could easily kill deflate your inner romantic.  

Breaking up a marriage is hard to do and it’s made all the more difficult by the financial implications. 

The average price of a divorce, from start to finish, lands at around $15,500 (including $12,800 in attorney’s fees), according to a 2014 survey put out by Nolo, a publisher specializing in legal issues. If the legal expenses are one side of the coin, figuring out what to do with your joint financial assets and debts is the other.  

We’ve talked about what happens to debt after you’ve married. Now it’s time to ask what happens to debt when you divorce. 

Here’s everything you need to know, plus some tips for protecting your finances when a marriage ends. 

Where you get divorced 

When it comes to splitting up debts, the state you live in can sway the outcome in a big way. A majority are considered equitable distribution states, where the judge uses his or her discretion to divide up debt in a way that’s deemed fair and evenhanded. 

Each state has its own set of laws and procedures, but Vikki S. Ziegler, a longtime matrimonial law attorney licensed in multiple states, says the court generally has more leeway in an equitable distribution state.  

Simply put, the judge has the freedom to take multiple factors into consideration. This might include everything from one spouse’s income to another’s employment status.  

The situation could play out much differently if you live in a community property state. These states are listed below, and in them, debt is viewed a bit differently. 

  • Alaska* 
  • Arizona 
  • California 
  • Idaho 
  • Louisiana 
  • Nevada 
  • New Mexico 
  • Texas 
  • Washington 
  • Wisconsin 

*Alaska has an optional community property system. 

Community property states typically split all marital debt right down the middle, regardless of who actually accrued the debt. This means that if your spouse racked up hidden balances during the marriage, you’ll likely be on the hook for half. In community property states, the divorce process is typically more cut and dried than subjective. 

“The most important thing for someone leaving a marriage to understand is how the law applies in each state that they are getting divorced in,” Ziegler told MagnifyMoney. “How are you going to allocate debt, and who’s going to be responsible for what?” 

An experienced divorce attorney can help fill in the blanks. 

The type of debt 

The type of debt you have is another biggie. Let’s first zero in on secured debt, like a mortgage or car loan.  

According to John S. Slowiaczek, president of the American Academy of Matrimonial Lawyers, whichever spouse decides to keep certain assets — such as the house or a car — will also assume whatever debt is left over.  

“Debt associated with an asset will ordinarily be allocated to the person acquiring the property,” Slowiaczek tells MagnifyMoney. 

Your mortgage: The loan will likely be the responsibility of both parties equally, unless it’s only in one party’s name. If you both co-borrowed the mortgage, you’ll have to decide who will keep the loan and who will exit if one partner wants the house. One way to get one name off a mortgage loan is to refinance the debt and put the loan under just one person’s name.  

The equity built up in the home usually belongs to each party 50/50 as long as the title is held as joint tenants with right of survivorship or tenants by the entirety; don’t be intimidated by the legal jargon. All this means, essentially, is that you legally own the home together.  

If you decide to sell the house, either the couple or the court will likely compel that process, after which you can divide the proceeds equally after paying off the debt.  

If you’re planning on staying in your home, refinancing your mortgage before you divorce can help ease the financial blow. With divorce being as costly as it is, finding ways to trim your budget can better prepare you for a single-income lifestyle. Refinancing could do just that, lowering your monthly payment and potentially your interest rate, assuming you have good credit.  

A lower bill may also make it financially possible for you to stay in the house, if that’s what you want. Plus, if you apply before splitting, you’re more likely to get approved since a combined income will likely make you more attractive to lenders.  

Your car loan: The same usually goes for car loans — if one spouse wants to keep the vehicle, he or she could refinance the loan under his/her own name. Or you can sell altogether and divvy up the cash. As Slowiaczek mentioned above, remaining debt follows the asset, so whoever keeps the car will assume the debt. 

Credit debt. The way nonsecured debts, like credit cards, are handled goes back to individual state laws.  

In a community property state, Ziegler says the courts usually take a 50/50 view of marital debt. But equitable distribution states typically look at who contributed to the debt, how much money each party makes, and other statutory requirements that allow them to potentially allocate the debt differently. In other words, things aren’t as black and white, and the courts have more interpretive wiggle room.   

Barbara, a 36-year-old sales professional in Tampa, Fla. is eight months into the divorce process. Florida is an equitable distribution state, meaning the debt she and her husband accrued could end up being split any number of ways. One of the toughest parts of her experience has been the $35,000 of credit card debt she says she shares with her ex. 

“It was mostly accrued by [my husband], but mostly in my name,” she told MagnifyMoney. The couple also have a $202,000 mortgage, and deciding who will assume the mortgage (and the equity in the home that comes with it) has been a point of contention.  

Ziegler says Barbara probably has more leverage than if she lived in a community property state.  

Student loans. Generally speaking, Ziegler says the court is required to look at the purpose of the degree each spouse pursued to determine whether it’s marital or non-marital debt. Again, it really depends on the nature of the debt, who benefitted from it, and what state you live in, among other things.  

For example, a student loan may be in your spouse’s name, but who’s making the payments? And which one of you is the primary earner? These things matter and could potentially play into your divorce agreement. 

When you acquired the debt 

One bit of good news: no matter where you live, Ziegler says premarital debts are off limits. Where divorce is concerned, the court is only interested in debts that were accrued during the marriage. The same generally goes for debt acquired post-separation.  

How the debt was used 

Every case is different, but the reason behind the debt can sometimes be argued. If, for example, debt was taken on for one spouse’s personal use, the other spouse might argue against being on the hook for it, depending on the property laws in the relevant state. 

“Credit card purchases to buy groceries or make a car payment are obviously marital, but what about debt that was racked up for personal use, like [cosmetic surgery] or gifts for someone your spouse was having an affair with?” asked Ziegler. “It can be argued that those expenses are not marital debt and should be assumed by the individual.”  

This underscores the importance of parsing out individual versus marital debts. To help make it easier, Ziegler recommends that couples maintain two different types of accounts: joint for marital expenses, and individual for personal spending. It’s also wise to keep your statements handy.

How to financially protect yourself during a divorce 

Divorces don’t usually come cheap, but there are steps you can take to soften the blow. 

Sign a prenup

Prenuptial agreements aren’t as taboo as they once were. According to a survey released by the American Academy of Matrimonial Lawyers (AAML) in 2013, “prenups” are on the rise; a whopping 63 percent of divorce attorneys cited an increase in recent years. This is because they serve as a loophole against state rules, dramatically simplifying the fight over debts and assets. 

“Most prenuptial agreements say that if the debt is in either party’s name, it’s separate debt that cannot be allocated or redistributed for payment,” said Ziegler.  

If you’re already married, it isn’t too late to protect yourself. As of 2015, 50 percent of AAML members reported an uptick in postnuptial agreement requests. 

Safeguard your credit

Take steps to safeguard your credit before you divorce. As soon as you begin the separation process, do yourself a favor and make a list of all your individual and joint debts to get an idea of what you’re dealing with. Are you or your spouse listed as authorized users on any accounts? If so, cancel those straight away to avoid accruing any new joint debt. To make sure you don’t miss anything, pull your credit report and take a thorough look at your open accounts. 

Ziegler also suggests making it clear in the divorce agreement who’s responsible for which debts — but that doesn’t always protect you. 

“The reality is, if your name is still attached to the account, and your ex-spouse defaults on payments, it’s going to negatively impact your credit,” she warned.  

If your ex agrees to pay off any debts, you can protect yourself by transferring the balances fully into the former partner’s name. 

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What Happens to Debt When You Get Married?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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According to the New York Federal Reserve, total student loan debt in the U.S. has reached $1.3 trillion, while more than 44 million Americans have student loan debt. Between these figures and soaring credit-card debt, paying off all we owe can take some people years, if not decades. 

The problem can seem particularly acute for young couples, more and more of whom are getting married with tens or even hundreds of thousands of dollars to pay off. In many instances, one partner has significantly more debt than the other. 

When Jeff and Cassandra Campbell of Austin, Texas.,  got married in 2006, Jeff was $61,000 in debt — his was a combination of credit card debt, a second-home mortgage and a car loan. Cassandra was debt-free, but the couple immediately agreed that with marriage, his debt was now the burden and responsibility of both of them.   

“I believe that successful couples combine everything when they say, ‘I do,’” says, Jeff, 53. “It’s no longer my income or your debt, it’s ours.”

Deciding how to tackle a single spouse’s or partner’s debt is no simple thing. It might be nice to chip in to help pay down your beloved’s debt, but in the eyes of the law, marriage doesn’t necessarily mean you have to. 

What happens to debt when we marry? 

Adam S. Minsky, a Massachusetts-based lawyer and expert in student loan law, says that although it varies by state, most of the time debt brought into a marriage only affects the spouse who brought it in.   

“Generally speaking, certainly where I practice here in Massachusetts, there is no way to make a spouse liable for a debt,” he says.

An exception might be if the couple did a form of refinancing once they got married and now jointly own the debt together. But if one spouse brought a debt into the marriage and both spouses paid off the debt together, the other spouse would not be liable for the debt, and that debt wouldn’t affect his or her credit score.

“As long as [the debt] only stays in one of their names, it’s only going to be reported for one of them,” Minsky says. 

There are, of course, slightly different rules when it comes to couples who are divorcing. For example, if a spouse helped pay off the other’s debt in marriage, that circumstance is often taken into account in divorce proceedings, Minsky notes. 

Learning the legal nuances of spousal debt, having necessary premarital conversations and understanding  optimal strategies for paying off debt can allow a couple to avoid the uncomfortable and frustrating conversations that might accompany one spouse having significantly more debt that the other.

Here are some tips on how to tackle debt as a couple:  

Have those tough (but essential) conversations before getting hitched.

Minsky says his greatest piece of advice for couples in which one partner has significant debt and the other doesn’t boils down to this: Talk about it openly before marriage. 

“Communication is the most important thing,” he says. “Because you don’t want to get married and then find out there’s a bunch of debt you didn’t know about, or you didn’t fully understand the nature of the debt, or you didn’t have a plan. I’d say develop that communication and be comfortable talking about it.” 

Eric Bowlin, 32, a real estate investor based in Worcester, Mass., says he and his wife, Jun — whom he met during graduate school—always approached their finances as a team. Eric says Jun accepted his roughly $85,000 debt ($60,000 of which was related to student loans) before they got married in 2009. But a tough conversation ensued when Eric wanted to make a large real estate investment before they had paid off the debt.  

“I deployed to Afghanistan” around 2010, he says, “and when I got home, we had saved about $100,000. We could have easily paid off all my student loans, car and half the multifamily house we owned, but I told her I wanted to use every dollar to invest in more real estate and I wanted to drop out of our Ph.D. program.” 

He says despite Jun’s hesitation, she agreed. “To this day I’m amazed she ever agreed to let me do that,” Eric says. He spent all of his savings, maxed out all his credit cards and borrowed about $40,000 from friends.  

“She was crying at night and I couldn’t sleep because of the stress,” he says. But his decision paid off. He has since built up a successful real estate portfolio, and the couple paid off their debt in 2016.

Employ strategies for paying the debt off together.

Once you and your partner have agreed to tackle the debt together, come up with a solid plan.  

“I’ve seen trouble happen when married couples never really talked about [debt], and then it’s a thing,” Minsky says. “Or they didn’t really come up with a plan and now there’s complicated feelings of resentment or guilt or shame.” 

The plan a couple employs will vary based on an array of variables: the amount and type of debt, income level, housing situation, location and more. The Campbells, for example, didn’t decide to pay off their debt until the birth of their first daughter. 

Shortly thereafter, they discovered the “snowball method,” popularized by personal finance personality Dave Ramsey, and decided to pay off their debts from smallest to largest.

They put retirement savings and vacations on hold, paid cash for everything except bills and generally limited their eating out and social activities. They became debt-free about five years ago.

Jeff’s advice for newly married couples is to agree on a budget before each month. 

“Some spouses will naturally be more of the spender, saver or math nerd,” he says. “So while it’s not crucial that both be involved in doing everything, the discussion should happen prior to the start of each month about where ‘our’ money is going to go, and what out of the ordinary expenses may be happening.” 

Don’t forget about your taxes.

Minsky advises giving thought to how you will file your taxes, especially in the case of student loan debt.

For example, if one spouse mostly has federal student loans and is going to do an income-driven repayment plan, there could be incentives for filing taxes as an individual as opposed to making a couple’s joint filing. That way, the income of the spouse without student loan debt won’t be factored in.   

We have previously explored the nuances of deciding whether or not to file jointly or single when spouses have student loan debt. 

Have a story to share? Send us a note at info@magnifymoney.com.

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File Taxes Jointly or Separately: What to Do When You’re Married with Student Loans

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Married couples with student loans must make a difficult decision when they file their tax returns. They can choose to file jointly, which often leads to a lower tax bill. Or they can file separately, which may result in a higher tax bill, but smaller student loan payments. So which decision will save the most money?

First, let’s discuss the difference between the two filing statuses available to married couples.

Married filing jointly

Married couples always have the option to file jointly. In most cases, this filing status results in a lower tax bill. The IRS strongly encourages couples to file joint returns by extending several tax breaks to joint filers, including a larger standard deduction and higher income thresholds for certain taxes and deductions.

Married filing separately

Because married couples are not required to file jointly, they can choose to file separately, where each spouse is taxed separately on the income he or she earned. However, this filing status typically results in a higher tax rate and the loss of certain deductions and credits. However, if one or both of the spouses have student loans with income-based repayment plans, filing separately could be beneficial if it results in lower student loan payments.

For help figuring out which filing status is better for married couples with student loans, we reached out to Mark Kantrowitz, publisher and Vice President of Strategy at Cappex.com. Kantrowitz knows quite a bit about student loans and taxes. He’s testified before Congress and federal and state agencies on several occasions, including testimony before the Senate Banking Committee that led to the passage of the Ensuring Continued Access to Student Loans Act of 2008. He’s also written 11 books, including four bestsellers about scholarships, the FAFSA, and student financial aid.

Two Advantages to Filing Taxes Jointly:

  • Most education benefits are available only if married taxpayers file a joint return. This can affect the American opportunity tax credit, the lifetime learning credit, the tuition and fees deduction (which Congress let expire as of January 1, 2017, but is still available for 2016 returns), and the student loan interest deduction.
  • Couples taking the maximum student loan interest deduction of $2,500 in a 25% tax bracket would save $625 in taxes. But this “above the line” deduction also reduces Adjusted Gross Income (AGI), which could yield additional tax benefits (e.g., greater benefits for deductions that are phased out based on AGI, lower thresholds for certain itemized deductions such as medical expenses, and miscellaneous itemized deductions).

However, there is a potential downside to filing jointly for couples with student loans.

Income-driven repayment plans use your income to determine your minimum monthly payment. Generally, your payment amount under an income-based repayment plan is a percentage of your discretionary income (the difference between your AGI and 150% of the poverty guideline amount for your state of residence and family size, divided by 12).

  • If you are a new borrower on or after July 1, 2014, payments are generally limited to 10% of your discretionary income but never more than the 10-year Standard Repayment Plan amount.
  • If you are not a new borrower on or after July 1, 2014, payments are generally limited to 15% of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.

Because filing jointly will increase your discretionary income if your spouse is also earning money, your required student loan payment will typically increase as well. In some cases, the difference is negligible; in others, this can add up to a pretty significant cost difference.

“Calculating the trade-offs of income-driven repayment plans versus the student loan interest deduction and other benefits is challenging,” Kantrowitz says, “in part because the monthly payment under income-driven repayment depends on the borrower’s future income trajectory and inflation, not just the inclusion/exclusion of spousal income.”

Fortunately, some tools can help you run the numbers.

An example: Meet Joe and Sally

Here’s a simple scenario that shows how a change in filing status can save on taxes but cost more on student loans:

  • Joe and Sally are married with no children.
  • They live in Florida (no state income tax).
  • Joe is making $35,000 per year and has $15,000 of student loan debt with a 6.8% interest rate.
  • Sally is making $75,000 per year and has $60,000 of student loan debt with a 6.8% interest rate.

First, we can estimate Joe and Sally’s tax liability for filing jointly versus separately. TurboTax’s TaxCaster tool makes this pretty easy. Here’s what we get when run their numbers using 2016 tax rates:

  • Filing jointly, Joe and Sally would owe $13,249 in federal taxes.
  • Filing separately, they would owe $15,178.

So they would save just over $1,900 in federal taxes by filing jointly. But how would filing jointly affect their student loan payments?

We can use a student loan repayment estimator like the one provided by the office of Federal Student Aid to find out. Here’s what we get when we run the numbers and choose the Income-Based Repayment option, assuming they are new borrowers on or after July 1, 2014:

  • Filing jointly, Joe’s minimum required monthly student loan payment under a standard repayment plan would be $143, and Sally’s would be $571, for a total of $714 per month.
  • Filing separately, Joe’s minimum required monthly student loan payment would be $141, and Sally’s would be $474, for a total of $615 per month.

Over the course of a year, Joe and Sally would only save $1,188 on their student loan payments by filing separately. Even with the additional loan payments they would have to make, filing jointly would save them $712 more than filing separately.

What’s best for your situation?

Every situation is different. The simple example above comes out in favor of filing jointly, but you will need to run your own numbers to figure out what is right for you. Here are additional tips to help you figure it out:

  1. Know how much you owe. Make a list of all loan balances, interest rates, and the type of each student loan you have. You can find your federal student loans on the National Student Loan Data System. You can find information on your private student loans by looking at a recent statement.
  2. Estimate your student loan payment options. Using a student loan repayment estimator like the one mentioned above, determine your required payments when filing separately versus jointly.
  3. Calculate your tax liability. Use a tool like TurboTax’s TaxCaster or 1040.com’s Free Tax Calculator to calculate your federal and state tax liability when filing separately versus jointly.
  4. Be aware of long-term consequences. Filing separately might result in lower monthly payments today but more interest paid over time. If you make it to the 20- or 25-year forgiveness point, that could have tax implications down the line. Kantrowitz points out that “forgiveness is taxable under current law, causing a smaller tax debt to substitute for education debt. The main exception is borrowers who will qualify for public student loan forgiveness, which occurs after 10 years and is tax-free under current law.” Keep those long-term consequences in mind as you make a decision.
  5. Consider steps to lower your AGI. Your eligibility for income-driven student loan repayment plans depends on your AGI, which is essentially your total income minus certain deductions. You can reduce this number, and potentially lower both your tax bill and your required student loan payment, by doing things like contributing to a 401(k), IRA, or Health Savings Account.
  6. Keep the big picture in mind. These decisions are just one part of your overall financial situation. Keep your eyes on your big long-term goals and make your decision based on what helps you reach those goals fastest.

Other unique situations

There are a few unique situations that make deciding whether to file jointly or separately a little more complicated. Do any of these situations apply to you?

Divorce and legal separation

Sometimes, determining marital status to file tax returns isn’t cut and dried. What happens when you and your spouse are separated or going through a divorce at year end? In this case, your filing status depends on your marital status on the last day of the tax year.

You are considered married if you are separated but haven’t obtained a final decree of divorce or separate maintenance agreement by the last day of the tax year. In this case, you can choose to file married filing jointly or married filing separately.

You and your spouse are considered unmarried for the entire year if you obtained a final decree of divorce or are legally separated under a separate maintenance agreement by the last day of the tax year. You must follow your state tax law to determine if you are divorced or legally separated. In this case, your filing status would be single or head of household.

Pay as You Earn repayment plans

Pay as You Earn (PAYE) is a repayment plan with monthly payments that are limited to 10% of your discretionary income. To qualify and to continue to make income-based payments under this plan, you must have a partial financial hardship and have borrowed your first federal student loan after October 1, 2007. Kantrowitz says the PAYE plan bases repayment on the combined income of married couples, regardless of tax filing status.

Unpaid taxes, child support, or defaulted federal student loans

If you or your spouse have unpaid back taxes, child support, or defaulted federal student loans, joint income tax refunds may be diverted to pay for those items through the Treasury Offset Program. “Spouses can appeal to retain their share of the federal income tax refund,” Kantrowitz says, “but it is simpler if they file separate returns.”

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Guide to Handling Your Financial Life After Divorce

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Guide to Handling Your Financial Life After Divorce

Divorce is often a time of financial upheaval. Dan Burges, a financial adviser and Certified Divorce Financial Analyst (CDFA) with Ameriprise in Southlake, Texas, says, “Everything is different. Even if you are in the same house and same job, it is different. Your bills aren’t cut in half, but your income might be. You may even be spending more for child support and alimony.” So while it may be tempting to go on a spending spree to celebrate your newfound freedom – or go into hibernation mode and ignore your money altogether – it’s more important than ever to get educated about handling your financial life after divorce.

Don’t make rash decisions

Many people who are still reeling emotionally from a divorce are prone to making rash decisions they later regret, such as buying or selling real estate, cashing in retirement assets, or changing jobs or even cities. Take time to process and get yourself together — financially and emotionally — before you make any large purchases or other big financial moves.

Avoid the temptation to indulge in “retail therapy” after a divorce, whether to dull the pain, prove to yourself that you can still maintain your same standard of living, or just replace the material objects in your life with ones that don’t remind you of married life. If you must spend money, at least try to avoid using credit cards. Otherwise, bad decisions will just make your problems worse.

Set up your finances for success

The first step to managing your finances after divorce is to create a budget. “It’s especially important to think beyond your monthly expenses, such as mortgage and electricity,” says Avani Ramnani, a Certified Financial Planner (CFP) and CDFA with Francis Financial in New York, N.Y. “Think about one-time expenses such as vacations, weekend trips, and emergencies. People tend to forget about them.” Ramnani says you should also remember expenses relating to your home. “If you own your own home, something is always breaking down or needing repair. You need to account for these,” she adds.

Burges agrees that budgeting is essential in your new circumstances, and he recommends looking at your cash flow daily. “You’ve got the app on your phone,” he says, “Don’t be scared to look at it.”

Budgeting can also help you avoid getting deep into credit card debt, a common problem when people are adjusting to a new standard of living after divorce. Burges says he sees too many people with debt piling up before they realize it.

In addition to budgeting, there are several steps you should take to get your finances in order after a divorce.

Get all assets in your own name

If you kept the family home after the divorce, you need to refinance the mortgage to have your ex-spouse’s name removed from the loan. Just as you did when you initially took out the mortgage, you will have to apply for a loan and go through the underwriting process. But this time, the lender will look only at your income and credit so you will have to be able to qualify on your own. If the refinance is approved, you can have your ex-spouse’s name taken off of the deed to the property by filing a quitclaim deed. An experienced attorney can help with this. If you cannot qualify to refinance the mortgage in your name alone, your best course of action may be to sell the home and move on.

Bank accounts that were owned jointly may need to be closed and the assets transferred to new accounts in your name only. Typically, your bank will not be able to just remove your ex-spouse’s name from the account, even if the divorce decree assigns the account to you.

Cancel joint expenses

Any credit cards issued in both names will have to be closed and accounts reopened in your name. Think about other costs that were shared jointly such as utilities, auto loans, and leases.

Even if the divorce decree specifies that your ex-spouse is responsible for a debt, if any joint debts still have your name on them, missed payments will continue to affect your credit score.

Before you close any joint credit card accounts, consider opening a few accounts in your name. Once you start closing credit cards, your credit score will take a hit. Opening a few cards in your own name before you close the old accounts will ensure you continue to have access to credit.

While you’re at it, change the passwords on all your account pages, especially if they were known to your ex-spouse or partner.

Rebuild your credit

If your credit accounts were jointly held with your ex-spouse, they might be closed as part of the divorce process, and you may need to start rebuilding your own credit.

Part of your credit score is based on the length of your credit history, so closing all of your existing accounts and opening new accounts will negatively impact your credit score.

You may have also racked up debt to pay attorney fees or other expenses related to separating and setting up a new household. Your budget can help you plan for paying credit card bills and other debt payments.

Get into the habit of checking your credit report at least annually by pulling a copy of your credit report from all three credit bureaus for free through AnnualCreditReport.com. Watch out for other services that promise a free copy of your credit report but require you to sign up for other services.

Once you get your credit report, review all information to make sure that there are no errors and that none of your ex’s accounts or information are on your credit report. If you do find any issues, contact the credit bureau to have the error corrected.

Prioritize paying off debt

If you come away from the divorce with a lot of debt, make it a priority to pay it off as soon as possible. If you are living on a tight budget, that may mean being more frugal or getting a second job to bring in extra money.

Save money

Make sure your budget includes setting aside money for the future. Ramnani recommends taking stock of all of the assets you have left after a divorce – retirement, non-retirement, and real estate – to figure out if they are enough to last for the long term. “If a woman is dependent on spousal maintenance, at some point that will stop,” she says.

That’s because spousal support payments are rarely permanent, unless the spouse receiving payments is elderly or has health problems. The courts typically award alimony on a temporary basis in order to allow a former spouse time to complete an education program or get back into the job market. “You may think you can just live off of savings after the maintenance payments stop, but is it really enough to sustain you long term? Those questions can be difficult to face,” Ramnani says.

If a woman receives spousal support from her ex, Ramnani recommends setting aside spousal support payments for long-term savings.

A financial adviser can help you model your financial situation based on income, savings, Social Security, and other assets to see whether you have enough to continue your way of life or whether you need to make other plans to support yourself.

Consider hiring new financial professionals

Married couples often share financial and tax advisers. Should you continue working with the same professionals after a divorce or hire your own to avoid conflicts of interest? Burges says that decision is very personal. “Consider how much you trust that person. If the financial adviser and your ex were college roommates, then you should find someone else,” he says. “You need to feel confident that whatever you say to your adviser isn’t being repeated to your ex-spouse.”

Ramnani agrees that people should make their own decisions about whether to stay with the same adviser or find a new one. “At the end of the divorce process,” she says, “take stock and think about what makes the most sense.”

In some cases, your ex-spouse may have handled all of the finances, and this is your first time managing them on your own. Make sure you have someone with experience to help you navigate your new reality. Ramnani and her firm specialize in working with women going through emotionally traumatic life events. She says many of the women that come to her felt like their adviser had lost track of them since their ex-husbands were more involved.

Burges also recommends working with a certified public accountant the first time you file your taxes after a divorce, even if you are used to doing your taxes yourself. “Your taxes may be super simple,” he says, “but a CPA will ask you questions about things you may not have thought of before.”

Change beneficiaries on all of your assets

Changing beneficiaries is another important step to managing your finances after divorce. Most likely, your ex-spouse was named as a beneficiary on life insurance policies, auto insurance, retirement plans, annuities, and bank and brokerage accounts.

Burges points out, “if you switch advisers, you’ll have to set up new beneficiaries, so that is one way to clean up.”

If you and your ex have minor children, talk to your attorney before you name a minor child as a beneficiary. You may need to set up a trust. Otherwise, your ex-spouse may get control over any assets left to your kids.

You should also talk to your attorney about updating health care directives, living wills, and powers of attorney, so your ex-spouse isn’t in control if you are incapacitated.

Handling joint expenses

Divorced couples with children often need to continue sharing certain costs, such as summer camps, college expenses, and field trips, long after the divorce is finalized. What is the best way to handle these ongoing conversations?

In these cases, it pays to plan ahead. Ramnani says most attorneys today consider those items when drawing up the divorce agreement, and a good financial adviser can help you make sure all of your bases are covered if you let them take a look at the agreement while it is still in proposal form.

Burges recommends getting the divorce decree to explain, in detail, what child support covers. “Some people see child support as strictly covering a roof over their head, food, and clothing,” he says. Consider who will be responsible for paying for medical care, school fees and supplies, child care, extracurricular activities, music or dance lessons, your child’s first car, and even entertainment and travel expenses. “Try to get your lawyer to define what the child support is for. It may be something you argue about during the divorce process, but it will be worth it in the end. Set yourself up for success,” Burges says.

Ramnani also recommends keeping very detailed records of any joint expenses in case of disagreements. In the end, though, she says, “that’s the reality of life. If you share children, you still have to deal with each other. Hopefully, it’s at least a cordial relationship so you can speak openly.”

Dealing with college financial aid

Applying for college and navigating financial aid can be a stressful time for divorced couples. No matter your financial situation, you have to complete a Free Application for Federal Student Aid (FAFSA) in order for you or your child to access assistance from federal, state, and college financial aid programs.

Your FAFSA is used to determine your family’s ability to contribute funds for college. In order to arrive at that calculation, the application requests household income.

A divorce decree may allow one parent to claim the child as a dependent, even if the child lives with the other parent 90% of the time. For FAFSA purposes, who the child lives with matters because that parent’s income will be used to calculate their financial aid need. If maximizing college aid is a priority, it might make sense for the child to reside with the parent with the lowest income. In that case, the lower-earning parent should claim the child as a dependent on their tax return in the year before the child applies to college.

Gray divorce presents unique challenges

“Gray divorce” is the term for the divorce trend of Americans age 50 and older, and a 2013 study by researchers at Bowling Green State University found that the divorce rate among couples age 50 or older doubled between 1990 and 2012. While divorce can be a blow to the finances of couples at any age, it can be especially damaging for older couples who are close to retirement.

Burges says many retirement plans are made based on the couple not getting divorced. “Pensions, 401(k)s, annuities. You’ve been putting a plan together, then your assets get cut in half but your expenses in retirement don’t. That can be a massive setback on your retirement plan. He says the knee-jerk reaction is that you won’t be able to retire when you thought you would. “And that’s often true unless you’re able to really step up your retirement savings. If you’re 10 years or less out, that’s hard to do.”

The bottom line

Handling your financial life after divorce starts with a realistic evaluation of your current situation. That can be difficult to face if you are still reeling emotionally from the split or find yourself with more expenses and less income than you are used to working with. If you find it too difficult to do on your own, consult with a CDFA who will take the time to figure out where you are, where you want to go, and how to get there.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Janet Berry-Johnson
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Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here


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Life Events

10 Things I Wish I Knew about Money in My 20s

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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For all you 20-somethings out there, know this: We 30-somethings, we get it. We get what it’s like to be a 20-something struggling to find your way and make ends meet financially. We get that your baby-boomer parents don’t always seem to understand the social and financial pressures 20-somethings face nowadays. We get that times have changed, and that financial advice from folks 30 years your senior – folks who themselves grew up in a dramatically different era – doesn’t always seem relevant. We get what it’s like to be you because we so recently were you. In many ways, we still are you.

That said, while the gap in years between your 20s and your 30s isn’t all that large, the life changes that often occur in that time period tend to be dramatic. And whether it’s marriage, children, or the fact that some of us are now closer to 50 than we are to 20, most 30-somethings, myself included, suddenly find themselves looking back at a long list of financial moves we’re either glad we made or wish we made when we were in our 20s.

So, without further ado, here are 10 pieces of financial advice I wish I had known in my 20s.

1. Live at home for as long as you can.

If the offer to live at home is on the table, then consider yourself lucky and take it. Even if only for a year or two, the savings are significant. I know living with your parents might not seem hip, but take it from a 30-something, there’s nothing hip about paying thousands of dollars in rent unnecessarily. If you do live at home, be mature about it. Help out around the house when and where you can, and don’t be surprised or offended if you’re asked to chip in financially.

2. Pursue a postgraduate degree only if you’re sure you’ll need it and use it.

The world is littered with 30-somethings who piled on additional student loan debt to pursue an expensive postgraduate degree they’ve never put to use. Not knowing what you want to do is fine. Paying for graduate school on account of it is not.

3. Don’t make money-driven career decisions … yet.

Now, I’m not saying money shouldn’t be a consideration when weighing job offers and career paths. But I am saying that for a 20-something, it shouldn’t be the only consideration. There will come a day when, out of necessity, financial considerations guide your career decisions. Your 20s shouldn’t be that time. Instead, use your 20s to explore, learn, and find a career you find fulfilling and, hopefully, enjoyable.

4. Keep credit card debt out of your life.

By the time your 30s roll around, you will regret every penny you spent paying interest on a credit card. Use your credit cards to build your credit history and earn rewards, but be sure to pay them off in full every month.

5. A 401(k) match is your best friend.

Regardless of what decade of life you’re in, free money is free money, and it’s never to be passed up. If you’re lucky enough to work for a company that offers a 401(k) match, then be sure to sign up and start contributing from day one.

6. A Roth IRA is your second best friend.

One of the best ways for 20-somethings to put themselves in a great financial position come their 30s is to start investing in a Roth IRA as soon as possible. If you’re not familiar with a Roth IRA, there are many great resources available to help you learn. But it really is pretty simple. You contribute after-tax money, and your investments grow tax free and cannot be taxed as ordinary income if withdrawn during retirement.

7. Automate everything.

One of the major advantages you have as a 20-something is your comfort and familiarity with modern online tools and technology, a growing segment of which is being built specifically to help you get a head start financially. Perhaps the best thing modern technology does is help you automate everything. Automation is the easy button for managing your finances as a 20-something. So, whether you’re talking about credit card payments, bill paying, 401(k) contributions, investments in your Roth IRA, or anything in between, automate it and know it’s done.

8. Skip the wedding of the century.

Yes, I know, easy for us to say. We 30-somethings all spent a fortune having grand weddings. But that’s exactly the point. We spent a fortune. And trust us, your wedding day will fly by, and you won’t remember every last detail about place settings and flower arrangements. What you will remember is how much you spent on it. There’s no limit to the good use to which 30-somethings could put all that money spent (or should I say, blown) in one day.

9. Spend on experiences, not things.

As we 30-somethings can attest, you’ll never look back and regret the things you didn’t buy (they go out of style fast anyway), but you will regret the experiences you never had. Which is why it’s no surprise so many millennials prefer to spend money on memorable experiences, like traveling the world, over things, like the hottest smartwatch. 

10. Understand that time is on your side now, but it won’t be forever.

The biggest financial advantage you have as a 20-something is also the most fleeting – time. Hard as it may be to believe now, your 30s aren’t that far off. Whether it’s planning, saving, or investing, the sooner you start, the better off you’ll be. 

If there’s one thing you take away from this long list of advice, make it that last point. There are few absolute truths in the world of finance, but in all aspects of money management, if you get started as a 20-something, you’ll be glad you did once you’re a 30-something. Trust us on that one.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Brian Smith is a writer at MagnifyMoney. You can email Brian here

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3 Smart Money Moves to Make Before You Get Divorced

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Smart Money Moves

Ending your marriage is both difficult and life-changing. There are many things to think about, from deciding where you’re going to live to learning to deal with the realities of being newly single.

What you may not think about is how best to protect your credit from the adverse effects of a divorce.

In my two-plus decades in the credit environment I’ve heard countless disaster stories about how divorce has ruined both spouses’ credit reports and scores. If you wait until after your divorce is final to take stock of your credit health, it may be too late to undo the damage.

There are a few steps everyone should take to protect their credit before they get divorced. This strategy will help limit your credit’s exposure to your divorce will almost always allow you to re-enter the world of being single with the cleanest credit report possible.

Here’s how…

Close joint credit card accounts

Divorce may allow you to sever ties with your spouse, but you could still be on the hook for shared credit debt. Even if a court assigns payment responsibility to one spouse or the other, your creditors do not have to recognize the assignment because they were not a party to the divorce settlement agreement.  That means any joint credit cards will still be the responsibility of both spouses even after your divorce.

Any use or abuse of the joint credit cards will blow back and harm the credit reports and scores of both spouses. It’s because of this potential harm that all joint credit cards should be closed prior to your divorce. Normally this would be poor advice because of the potential damage you can cause to your credit scores by doing so, but the downside of continued liability on a credit card that isn’t being paid is even more problematic.

Optional: Before you close any account, it’s a good idea to open a few new cards in your name. Once you start closing credit cards you’re going to lose the buying power that comes with plastic and you are going to need cards to use in their place. Opening a few cards in your name prior to closing your joint credit cards will allow you to continue functioning as efficiently as possible during and then after your divorce.

Sell or refinance your joint assets (house, car, etc.)

If you have joint loans secured by either your home or your car then you will still have liability for the debt even after your divorce.  This is problematic for two reasons. First, if your ex-spouse is assigned payment responsibility in your divorce settlement and he or she starts missing payments then your credit reports and scores will suffer. Second, even if the accounts are being paid on time, the large amount of debt will harm your debt-to-income ratios, which are important metrics considered by lenders when determining how much you can qualify for when you apply for loans.

You will not be able to convince your lenders to simply take your name off of joint loans, just like you won’t be able to convince your credit card issuers to remove your name from joint card accounts. That means the only way to separate yourself from the joint loan is to either sell the house or car, refinance it into your name alone, or buy the home or car from your spouse. Of course, some of these options may not be feasible.

You may not be able to afford to buy or refinance the loan into your name alone. You may not have a job or you may not be able to qualify for the loan amount needed to do so. And, you may simply not want the house or the car for whatever reason. In these cases the best move is to simply sell the house or the car, divide the proceeds with your soon-to-be ex-spouse and move on with your life.

Protect your credit from identity theft

Identity theft continues to be one of the fastest growing white collar crimes in the United States. And because your spouse likely has access to your personal information, he or she could easily apply for credit in your name during or after your divorce. This is not unheard of, especially if the divorce becomes contentious.

Thankfully, there three ways you can minimize the risk of this type of fraud, each with varying difficulty and expenses.

For free: MagnifyMoney’s Identity Theft Guide is free and breaks down all the ways you can protect your financial identity. You can check your credit reports once every 12 months at annualcreditreport.com at no cost. But this once-a-year checkups are hardly sufficient when you’re trying to protect your credit reports from fraud. To keep a closer eye on your accounts, sign up for a site like CreditKarma.com, which will ping you anytime there’s new activity on your account.

On the expensive side: There are costly credit monitoring services that you can buy that will passively monitor all three of your credit reports for changes that could be indicative of fraud and alert you via email if there are any potential problems. You’ll be paying roughly anywhere from $9 to $15 per month in perpetuity for those tri-bureau monitoring subscriptions. Some are certainly better than others. Check out MagnifyMoney’s review of monitoring services here. 

The best low-cost option: The best, most cost-effective option is to place a security freeze on your three credit reports. That essentially removes them from circulation until you choose to make them available again. It also prevents anyone from opening new credit under your name. The security freeze, or credit freeze, is not free but the cost is a fraction of credit monitoring subscriptions. The cost is different state by state but it is usually less than $30 to place the freeze on all three of your credit reports and in some states it’s less than $10. The freeze prevents any disclosure of your credit reports to new lenders until you’ve given permission to the credit bureaus to provide them.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

John Ulzheimer
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John Ulzheimer is a writer at MagnifyMoney. You can email John here

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Life Events

The Financial Consequences of Changing Your Name

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Your wedding is around the corner, and you take a romantic date to the Register of Deeds office to get your marriage certificate. As you walk towards the windowless building, you realize that you must finalize the decision to change your name.

Will you take your spouse’s name, hyphenate your names, keep your name or change it to something new?

If you change your name, are you stuck with it forever? Are you going to spend money on new IDs? Will your credit score suffer? Will you have trouble selling your car or house?

Before you change your name, these are the things you need to know.

Changing your name isn’t always free

If you change your name at the start of your marriage, your name change comes free with the cost of obtaining a marriage license. You will show your signed and sealed marriage certificate as evidence of your name change.

Similarly, if you change your name in an uncontested divorce, most states allow you to add a name change provision within the divorce complaint. The judge’s seal and signature on the divorce decree provide proof of your name change.

Outside of marriage and divorce, changing your name is more arduous. You must file a petition for a name change at the courthouse in the county where you live. Within the petition, you’ll state pending criminal charges and that you aren’t seeking to avoid unpaid debts. You may also need to provide letters from character witnesses.

At that point, you’ll pay a filing fee that can range from $150 to $350. On top of the filing fee, you may need to pay attorney’s fees and courtroom fees before you complete your legal name change. Fees and processes differ in every county.

[How to Effectively Combine Money as a New Couple]

How do I inform institutions of my new name?

Once you legally change your name, you must provide evidence of your new name to the Social Security Administration. This step needs to be complete before you file your taxes. If the name on your tax filing differs from the name on record the SSA, the IRS may delay processing your filing and sending your tax return.

Once you’ve gotten a new Social Security Card, you can update the following:

  • Driver’s license
  • Employer documents
  • Utility companies
  • Telecommunications providers (phone, internet, cable)
  • Car title
  • Home ownership deed
  • Will
  • Insurance policies
  • Bank accounts (don’t forget online banks)
  • Credit cards
  • Mortgages
  • Car loans
  • Any other debts
  • Brokerage accounts
  • Health savings accounts
  • Retirement accounts
  • Pensions
  • Voter registration
  • Doctor’s offices
  • Passport
  • Rental contract
  • Other people’s wills
  • Frequent flier programs
  • Other points programs

These changes are free and easy to make. Just present evidence of your name change and fill out a form specific to that institution.

[Money Lies that Could Ruin Your Relationship]

What if I forget to change my name somewhere?

Forgetting to change your name on an account isn’t a major issue, but you will incur some headaches down the road. For example, I couldn’t buy new car insurance until I changed my name with my existing insurer. In order to present evidence of prior coverage, my name change had to go through first.

You should expect to file additional paperwork when you refinance or sell a house if you keep your former name on the deed or mortgage.

A friend had to fill out a name change form for a pension from a job that she left 37 years earlier. She didn’t realize her mistake until she received a check made out to her maiden name.

Whether you’ve forgotten for four months or four decades, filing forgotten paperwork is all that is required to fix mistakes and re-quire old assets.

What won’t change if I change my name?

Your assets and liabilities remain yours if you change your name.

You still own your bank accounts, houses, cars and more, even if you forget to change your name on the account or title. Down the road, you may have to fill out paperwork to legally sell or withdraw money, but you remain the legal owner.

Likewise, your liabilities follow you when your name changes. Despite your name change, you must continue to pay current loans and credit card balances, and your credit history will remain unchanged. It will continue to show positive information (like on time payments) and negative information like debts in collections and judgments against you.

When it comes to assets and debts, you will not see long-term consequences from changing your name.

[Getting Your Money Straight After Divorce]

What about my career?

The biggest consequence to consider before executing your name change is whether it will change your earning potential. If your name has brand equity, you may find that it’s easier to advance in your career if you keep your name.

I intended to use my married name at work, but to keep my access rights, I had to keep my email address, which includes my maiden name. To avoid confusion, I continue to use my maiden name at work.

However, you can use your name change to your advantage. Sometimes well known public figures change their names, and they (and their marketers) find a way to make a splash with the new name, and use the opportunity to advance their careers.

Whether you want a big splash or a quiet transition, you can handle name change if you have a solid name transition plan in place.

Should you change your name?

Once you know about the hassle and costs associated with changing your name, it’s easier to decide if changing your name is right for you. I changed my name over three years ago, and I am glad that I did. However, my name changing adventure wasn’t quite complete. While writing this post, I learned that I had three accounts still set up under my maiden name. It took ten minutes, six sheets of paper and three stamps for me to fix the accounts.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Hannah Rounds
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Hannah Rounds is a writer at MagnifyMoney. You can email Hannah at hannah@magnifymoney.com


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Life Events

How to Effectively Combine Money as a New Couple

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Young couple calculating their domestic bills

The divorce rate in America continues to stay around 50 percent with couples frequently point to money as a contributing factor in their split. Don’t wait until you say, “I do” to have the tough talks about finances. Instead, you can start off on the right foot (or get back on track) with your finances and remove money as a cause of stress in your relationship.

How can you do that? You can begin by having a financial plan for your life as a couple. If you’re a new couple that is just combining finances – whether that’s through marriage, living together, or for some other reason – you can take the six actions that I’ve listed below to get control of your money as a couple and move toward financial success.

1. Talk about your financial past

Before you combine finances and start making decisions as a couple, it’s a good idea to talk about your financial past. Opening up about your individual experiences with money will help you understand each other because you’ll learn why you each make the decisions you do.

Tell your partner the good, the bad, and the ugly. Credit card debt, student loans, bankruptcy – you name it. Get it all out there. Ask each other what your beliefs are about money. Do you want to be rich? Do you hate rich people? Did you grow up poor? Ask questions that help you learn about each other’s deep-rooted beliefs about money. Whatever you think is relevant for your partner to know, tell him. This doesn’t all have to come out in the course of one conversation either. But keep in mind; if you talk about your financial past and really get to know each other, you’ll be better equipped to make decisions as a unified team.

2. Decide how you’ll combine money

Discuss and decide how you want to actually combine your money. There are several ways to combine your finances that you can consider. You can combine everything and have completely joint accounts. You can keep everything separate. Or, you can do something in between.

There is no right or wrong answer here. In fact, I hear people say all the time that they started out keeping their finances separate and later combined, or vise versa. Feel free to start one way and change later based on how things are going. This is just one of the many reasons it’s important to have regular money check-ups with your partner.

3. Set financial goals

Set financial goals for your short-term (less than one year) and long-term (more than one year) future. I like to set goals using the SMART method, but any method will work. The SMART method has you create goals that are specific, measurable, attainable, realistic and timely. This means that when you create goals, they should be narrow, in writing, achievable, and have a deadline.

To set financial goals; ask your partner about what he or she wants your financial future to look like. Maybe you need to get out of debt in the next year, or maybe you want to save for a down payment on a house and retire at age 55. Whatever the case may be put your financial goals in writing. It’s pretty much agreed upon that writing down your goals makes it much more likely that you’ll accomplish them.

Continue to reflect and change your goals as time goes on. The point of having goals is to live intentionally – it’s not so that you have to be rigid. Consider any life changes and circumstances and adjust your goals as need be. The point is to work together and accomplish what you want for yourselves as a couple.

4. Make financial decisions together (as a team)

When you combine finances as a couple, commit to making financial decisions as a team. Managing your money as a team means that you always consider and respect the other person’s financial wishes, make financial decisions together, and don’t hide anything from the other person. When you make financial decisions as a team, you set yourself up for success. This will intuitively make finances easier for you as a couple.

It’s really hard to fight about money if you make financial choices that are for the benefit of you and your partner as a team. Keep this in mind with every decision you make.

5. Have finance meetings

Schedule weekly (or monthly) finance meetings. This is a practical tip that will pay huge dividends. Schedule 30 minutes to an hour every week to go over your finances together. During this time, discuss whatever you want to with respect to money. This may be updates on purchases, budget discussions, big purchases that are upcoming, etc.

The point of having a scheduled meeting time is to avoid awkward and unpleasant financial discussions periodically. Whenever you have something meaningful to say about finances, you can be certain that you’ll have your partner’s undivided attention at your upcoming financial meeting. It’s comforting and helpful.

6. Be transparent

One of the most important standards for any new couple is to have total transparency with your finances. When you talk about money, be open an honest about your past, present, and what you want in your future. If you make a financial mistake – tell your significant other. Start off together by committing to total transparency, even if money is in separate bank accounts. You should also be open and forthcoming about financial decisions so money doesn’t become a taboo topic in your household.

Start the Process Early

When you’re a new couple, it’s extremely important to start out on the right financial foot, so to speak. You can do that by being completely transparent, talking about your financial past, setting financial goals, committing to making financial decisions together, regularly having financial meetings as a household, and deciding how you’ll combine money. Life will throw wrenches in your financial plan and goals, but open communication and help you work through the unexpected.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Natalie Bacon
Natalie Bacon |

Natalie Bacon is a writer at MagnifyMoney. You can email Natalie at natalie@magnifymoney.com


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Life Events

How to Effectively Combine Income and Debts After Marriage

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Your wedding day is likely one of the best, most memorable days of your life. You get to celebrate your commitment to your spouse and the promise of a wonderful future amongst friends and family. The cake, the dress, the music – every detail goes into making it the perfect day. But after the honeymoon ends and life resumes, you’re suddenly left with a hard dose of reality.

Many find that sorting out the finances of living life with another person can be confusing. Two incomes become one, and debts pile together to create what could potentially be a monumental undertaking. In fact, discussing finances can be one of the most challenging aspects of marriage in general and can even contribute to divorce if you’re not careful. Combining your resources – the good and the bad – takes effort and organization, but knowing where to start can help set you on the course to success.

Merging Finances

There are many ways to go about merging incomes, and many couples choose to maintain separate bank accounts to avoid the issue altogether. There are benefits to combining bank accounts into one, though, so we’ll take a look at a few options.

Combine Accounts

You and your partner may have to separate checking and/or savings accounts through potentially two different banks. If you opt to merge those into one, you’re agreeing that bills will all be paid through that joint account. There’s no “you pay for this and I pay for that” mentality, but rather the mentality of “what’s yours is mine and what’s mine is yours”. This can help cut out the need to split bills and delegate payments.

Maintain Separate Accounts

Some couples opt to forego merging their accounts altogether in favor of sticking with the status quo. In this scenario, you’ll want to consider splitting bills so that each spouse can pay for different utilities, rent/mortgage, and so on. There are two ways to go about doing this:

  1. Split bills equally: In this scenario, you’ll add up the total amounts of all your bills and split them in a way that each spouse pays an equal amount of dollars, regardless of income. You can either allocate full bills with the totals equalling about half of the full amount of all bills, or you can split each bill right down the middle. In that case, you’ll need to find a way to have both parties contribute to a common fund, or have one spouse pay the other.
  2. Split based on income: Because you’re choosing to keep incomes separate, you may want to opt for a compromise where bills are split but in accordance with the amount of income each person makes. For instance, add up the incomes of both spouses and then find the percentage of the total that each spouse makes. So if one spouse makes $60k/year and the other $40k/year, the total is $100k/year with one spouse bringing in 60% of the income and the other 40%. Thus, splitting the bills would leave one spouse paying 60% of the total and the other paying 40%. Incomes are still separate, but payments are tailored to suit both parties equally.

Maintain Separate Accounts but Add an Additional Joint Account

A middle-ground would be to maintain each spouse’s original accounts while creating a joint account to pool money for bills and other joint expenses. It’s a common way to maintain individuality while catering to the more pragmatic requirements of living with another person.

Combining Debts

With the good comes the bad, and most times at least one – and maybe both! – spouses will bring debt with their income into a marriage. Depending on the situation, there are a few ways to go about handling the debt:

If only one spouse has debt, then you’ll have to decide whether or not that spouse is solely responsible for that payment or if both parties are making a team effort to pay it off. This could be a decision based on whether or not you’ll both be combining accounts, tailoring bill payments to percentages earned, or keeping all accounts separate and splitting everything 50/50. Typically those with the ‘equal bill pay’ mentality will lean further towards ‘pay your own debt’ while those who are combining incomes into one joint account and paying everything from that singular account will be more likely to consider paying debts together as a team, regardless of who acquired them in the first place.

If both spouses have debt, you can again go about paying that debt in a variety of ways:

  1. Combine all debt and pay together: Rather than each spouse accepting responsibility for their own debt, both spouses accept responsibility for both debts as a whole and pay them off together.
  2. Keep debts separate, pay for your own: Even if both spouses have debt, many will opt to simply pay for what they’ve acquired. In this manner, one spouse may pay theirs off before the other, and then it’s a matter of deciding whether or not to team up to pay the rest off quickly.

Remember that even after deciding on how to combine income and debt, you’ll want to continue the conversation as both parties evolve and their incomes change. It’s very likely for things to change from year to year, and a great time for discussion is when any major event comes up (baby, promotions, etc) or on a yearly basis around tax time. ‘Til death do us part – and that includes your financial obligations!


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Stephanie Mialki
Stephanie Mialki |

Stephanie Mialki is a writer at MagnifyMoney. You can email Stephanie at stephanie@magnifymoney.com


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Life Events

Money Lies that Could Ruin Your Relationship

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Money Lies that Could Ruin Your Relationship

Over the past few years of being a personal finance blogger, I’ve heard some pretty incredible stories about money lies.

One story that stands out is my friend’s husband who one day admitted to her that his work hadn’t been paying him for months. The only way he could pay their mortgage was by withdrawing money from their retirement funds. His employer kept promising the money was coming, but the company simply wasn’t doing well. He didn’t tell his wife anything about the situation and drained all of their savings while she went about her normal routine of bringing kids to school, shopping, and spending time with her friends. When he finally hit rock bottom and told her, it wasn’t pretty. This is definitely an extreme example but highlights how bad money lies can get in relationships.

If you aren’t careful, even small money lies can ruin your relationship for good. Here are some to avoid:

1. Hiding Credit Card Debt

Many people hide their credit card debt from their significant others. A couple I know worked hard to get out of debt together, and the husband was so proud of all their accomplishments. The only problem was that his wife, feeling constricted by their budget, took out another credit card and quietly used it. She kept intending to pay it off quickly (it was used just for one large purchase initially) but as it happens with most credit cards, the interest and the costs just kept rising. Keeping separate debt and separate cards can ruin the trust of your significant other. It’s best to come clean and have transparency with your spending.

2. Lying About the Price of Something

“How much did that cost?” “Oh it was only about $20.00.”

Does that sound familiar?

Many couples lie about the cost of their extra spending. For example, women might fudge just how much their highlights actually cost while men might say they got a great deal on their 50” plasma. It might seem harmless, like a white lie, to adjust the price slightly when reporting back to your significant other, but again it’s best to be honest. If you feel constricted in your spending then perhaps it’s better to have separate accounts where you each get a certain amount to spend without having to divulge the details. 

3. Lying About Helping Friends or Family

If your significant other has a friend or family member who always experiences hard times, you might get tired of helping them out. Whether they never pay you back or always show up at your house asking for money, a needy person like this can wear on a family’s finances. Even if you and your significant other are well off, there is definitely a limit to generosity. If one person forbids their partner from helping in one of these situations, but they do it anyway, it would be a breech of trust.

4. Lying About Bad Habits or Addictions

I thought a friend of mine had the perfect family. They lived in a beautiful home, her parents had great jobs, and she and her brother got along really well. The problem was that her dad had a hidden addiction to gambling. He was the most upstanding person imaginable, and needless to say, the addiction was quite a shock to their family. He finally admitted it when he started being late on his house payments, but luckily he got the help he needed. His employer was very generous with giving him time off so he could get help, and his wife helped him figure out how to get back on track. Now I’m sure this would have been the downfall of most relationships and I’m sure the conversations were very tense in their house, but I admired this family for sticking together because a secret addiction would likely ruin most relationships.

5. Lying About Time Out With Friends

My husband often goes out with his guy friends to catch up and grab a beer. Most of them are in medical school with him, so I enjoy the fact that he can bounce ideas off of them or ask them questions about exams without me having to be there to hear about it. He always goes with a budget and occasionally buys a beer for his friends. The point is, I don’t really mind how the money is spent, so long as he doesn’t go over budget.

Significant others who lie about how money is spent when they’re out with friends can erode trust. For example, if they tell their partner that their friends will pay them back or that they only bought one drink (and it’s not true) their partner will be less and less likely to encourage them to go out, which will make one person feel constricted and controlled.

It’s About More Than Money

You see, money lies are never just about money. They are about trust. The reasons people lie about money are actually more important than the lie itself. Getting to the bottom of why your partner lied, whether they feel scared to tell you the truth because of your reaction or controlled by your rules, is important to know. Money lies don’t have to be the end to a relationship, and learning why they happen can actually strengthen your bond. The point is to come clean and work on things and not let lies about money control the future of your relationship.

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Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com