By Kimberly J. Howard
You found the one to start a life with. You now share home, love –– and your financial backgrounds with your new partner and family. Here’s what to know and how to tackle debt, budgeting and other aspects of your newly merged money matters.
Young couples and families often begin the journey together with a large amount of debt from student loans, car payments and perhaps one or both partners’ past credit card debt. The responsibilities of starting a family only deepen the hole.
If you are a young adult still looking for a high-paying job, who can’t afford a home or car and who constantly struggles with debt, then financial planning and effective debt management can help you. So can dispensing the following preconceived money notions common to young families.
We don’t need professional help: Young families with debt – especially those with children – need to think hard about meeting a financial planner to put finances in order. A planner can not only set a proper budget for you, but also advise you on how to invest for the best possible returns.
For example, planners can advise you on saving for a home, setting up a college fund for your kids and establishing a fund to handle unexpected emergencies.
What’s wrong with a little credit card debt?: The greatest financial blunder a young family can make is carrying too many credit cards – and the accompanying huge bills and balances.
Mitigating and managing credit card debt becomes particularly tricky when these balances typically carry one of the highest rates of interest (often more than 17 percent). Inexperienced young adults with fresh plastic frequently make the mistake of paying only the monthly minimum. Continuing to do this means paying off the entire balance – assuming a family racks up no more debt on a given card, which is unlikely – will take more than a decade.