With the average cost of a wedding ranging from $10,000 to $30,000, planning for the Big Day can become financially overwhelming before the marriage even begins unless strategies for debt reduction and budgeting are well understood and operational.
Entering into any partnership, but especially that of marriage, adds a new dimension to managing personal finances as a collective rather than as two individuals. Having individual debt under control is one of the key pillars on which to build a solid and lasting marriage.
The first step to managing debt is recognizing when it is out of control. Living from one payday to the next, expecting to borrow money from friends or relatives or using credit cards to bridge pay period gaps, paying interest or service charges rather than tackling the main debt itself, are all red flags that can lead to more serious issues.
Creating a budget together is a wonderful way to target financial stress before it can undermine a relationship. Start with the obvious: add up combined income and expenses from all sources to arrive at total revenue. Then total all outstanding loans (student, vehicle, mortgage, RSP), followed by individual credit card debt. Highlight creditors that are charging the highest interest rates and make those accounts the initial focus of debt reduction. Then add up all combined utility costs that will have to be paid. Make a habit of paying bills on time to build a solid credit rating and avoid interest charges.
Try to reserve about 10 per cent of combined income for investments and savings. The effort expended at the beginning of a relationship can pay exponential dividends when it’s time to enjoy retirement. The assistance of a trusted financial advisor can be helpful in guiding investment and retirement planning. Life insurance, and possibly disability insurance, can prevent unforeseen injuries or accidents, and in some cases chronic illness, from crippling personal financial plans.
With the regular monthly commitments out of the way, and a savings or retirement plan in place, determine how to parcel out remaining revenue to cover a nutritious and healthy food program. Then factor in fuel or transportation, personal expenses and entertainment, including vacations.
Use simple personal accounting programs to keep the budget accounts balanced, but also as tracking tools to identify problem-spending areas. Many programs are fun to use and offer colourful graphs that illustrate spending, debt reduction and savings trends visually.
Finally, sit down together and collectively identify and agree on immediate and longer-term needs and wants to eliminate impulse buying.