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How to Stop Debt From Blocking Your Relationship Goals

November 05, 2019DMT.NEWS

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Practical Tips to Get Out of Debt as a Couple

Having a significant chunk of debt can feel debilitating, especially if you’re in a relationship. Double the debt? It feels impossible to get out of that! Brian and Lindsay Baldwin (both in their late 30s) had $130K in student loan debt from undergrad and grad school loans. Feeling frustrated with how long it was taking to chip away at their debt, the Baldwins decided they needed to do more if they wanted to take the next step in their lives and start a family.

RELATED: The Fastest Way to Pay Off Credit Card Debt

This couple, who met in China while in the Peace Corps, took drastic steps to make their debt-free dream a reality. They moved from Hawaii to Milwaukee, where rent and cost of living were much more reasonable, lived off of $500 per month and tracked every single dollar.

What’s more, Brian worked three jobs, biked to work, retrenched spending, refinanced with SoFi and erased their three-figure debt in under five years. We spoke to experts to see how Brian and Lindsay were able to get out of such a staggering amount of student debt so quickly, and the tips they shared will work for you, too, whether you’re burdened by student debt, credit card debt, or something in between. Here are some of the ways they did it, and how you can do it too:

Work Toward A Common Goal

If you’re in a couple tackling debt, work together toward a common goal. “Discuss and mutually agree to short-term financial goals,” says Todd Christiensen Education Manager at Money Fit by DRS. “Short-term goals can be more motivational on a daily basis than long-term goals. They are more relatable.” Christiensen suggests you take time to get them on paper; write them down and describe their specifics. If you need guidance, do some research around SMART goals, which make sure your goals are attainable and achievable without being lofty or unrealistic.

Don’t Forget Your Short-Term Goals

“Even though debt repayment may be a top priority, you should also start saving for those short-term goals,” says Christiensen. “If your debt payments total $500, make a simultaneous contribution to your savings of $20 or $50 a month. Savings is a commitment, not an amount. If you can’t save while paying off debts, you won’t save after the debts are repaid.”

Chip Away at Your High-Interest Debts First

“Credit cards often have higher interest rates than loans and other types of debt,” says Sean Messier, Credit Industry Analyst at Credit Card Insider. “Consider approaching your debts with the avalanche method, where you pay at least the minimum monthly payment on every debt, and then funnel as much additional cash toward your highest-interest debt as you can. Repeat this every month until that debt is gone, then work on the debt with the next-highest interest rate.” The avalanche method should ultimately decrease how much interest you’re paying over time, saving you more money than other debt repayment methods might.

Consider Consolidating All of Your Debts by Paying Them Off With a Single Loan

If you’re having a hard time keeping track with more than a handful of loans, you may want to consider taking out another, larger loan (with purpose!). “To consolidate your debts, you can take out a loan and pay everything off in one shot,” suggests Messier. “You’re left paying off just the loan, which will ideally have a lower interest rate than the debts you were dealing with previously. Not only will this save you money, but having to manage only one debt payment each month can make managing your finances considerably easier.”

Pay More Than The Minimum

“If you're only paying the minimum balance each month on your credit card, it's going to take a longer amount of time to completely pay off your bill,” says Nathan Wade, Managing Editor for WealthFit Money. “Paying more each much means that you'll be paying less interest as well. By adding extra cash each month, you'll be paying less money and paying off your debt faster.”

Pay off One Debt at a Time

If you own more than one card, you should focus on paying one off first. “Of course, you should be paying the minimum balance of each card every month, but one card specifically should be your goal to pay off,” adds Wade. “Start by paying off the card with the smallest balance, then once you've paid that off, you can start to pay down the next smallest balance card.”

Track Your Spending

If you're not tracking how much you spend each month, how are you going to know how to budget? “Take a look at your spending habits at the end of each month to see where your money is going. You might find yourself spending too much of your budget on coffee or snacks. Once you calculate the amount you typically spend, see how much money you're actually saving per month. Being aware of your spending habits will encourage you to spend less,” says Wade.

Keep in mind that your goals should be realistic and sustainable – so don’t worry about splurging on small treats every now and then. In fact, the Balwdins treated themselves to a latte bi-weekly as a low-cost treat!

Keep A Positive Mindset

“Debt isn’t bad, higher interest rates are bad. There’s no reason to be afraid of debt!” says Northwestern Mutual Financial Advisor, Ashley Russo. “What I see across the board is people have emotions to debt, but the most financially successful people on the planet leverage their debt to do greater things with their money. If you have student loans, think of it as a car payment. It’s something that got you to where you’re going.”

Meet Regularly

Christiensen suggests meeting for 10 minutes every week (at the same time, on the same day) to hold a couple’s “financial huddle.” Here’s how he suggests running your weekly check-ins:

Step 1: Review your mutually agreed upon goals Step 2: Identify the amount of cash you have on hand or in the bank for paying bills Step 3: Discuss what bills need to be paid in the coming two weeks, who will pay them, and how (online, cash, debit, etc.) Step 4: Return to your goals and brainstorm about how to come up with an addition $5, $50 or even $500 this week to accelerate your goals.

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Kaitlyn McInnis, Khareem Sudlow

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