Marriage and Family Life – Big Cowboy Hat But No Cattle

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by Michael Lodge

In Texas they have a saying about people who spend a lot, get into debt, but have nothing to show for it.  Thus, you have a big cowboy hat but no cattle to show for it.  When I see clients come into my office driving big cars and living in an apartment, they have the bling but no assets to call their own.  And with no cattle comes a lot of debt, some so far into debt that they are living paycheck to paycheck.  If an emergency comes along they have nothing to pay for it, because all their cash is in debt.  Sometimes the big old cowboy hat has got to go.  A recent study came out that said 70% of people are living paycheck to paycheck and 50% of those people are even worried about it.  That is a sad situation that needs to be addressed quickly – by you.  Especially if you are thinking about marriage.

Those of you who are about ready to ask the big marriage question had better start sitting down and getting to know each other financial debt and the stress that comes along with it.  Take your cowboy hats off and sit down and get into each others business before you walk down that aisle and say “I Do” to a lot of financial issues.

The first report you need to print out is your credit reports.  Print them out and start listing all the debt that each of you have.  If you know how to use excel make a spreadsheet and make two columns, one for each person.  His and her, or his and his, her and her.  This is needed by anyone considering marriage.  In the first column put the company that is owed a debt in the second and third column the amount owed (one for each person).  Total each column and identify how much debt each ofyou owe.  The next question is what to do about the debt, you don’t want to enter into a marriage where both are assuming debt from each other and the money just is not flowing in to support the debt.

First thing you want to do is pay down that debt before you walk down the aisle.  Do not enter into a marriage with a mountain of debt.  Sit down and make a budget.  There is a great free online budget www.everydollar.com, I love free stuff that make good sense.  Go online and create a budget and stick to it.  You both have to be on the same plan of attack.  If you are not going to work on this together it will only half work.  One person that I admire a lot is Dave Ramsey, he made this statement that makes a lot of sense, “One definition of maturity is learning to delay pleasure.  Children do what feels good; adults devise a plan and follow it.”  Makes a lot of sense, make a plan, make a budget and live it.

 Dave Ramsey has “The Seven Baby Steps” that I really like and feel everyone should start out together with as a newly engaged or wedded couple, and it goes like this.

THE SEVEN BABY STEPS – There is a process for winning with money over time.  No matter where you are today, whether you’re financially secure or financially distressed, these Baby Steps will walk you step by step toward financial peace.

  1.  Save $1,000 in a beginner emergency fund.  ($500 if your income is under $20,000 per year.)
  2. Pay off all debt (except the house) using the debt snowball.
  3. Put 3 – 6 months of expenses in savings.
  4. Invest 15% of your household income into Roth IRAs and pre-tax retirement plans.
  5. Save for your children’s college education using tax-favored plans.
  6. Pay off the house early.
  7. Build wealth and give!

Now as I read those seven steps they make a lot of sense, and they are baby steps you have to take in order to think about what financial path you are going to take.  The wealth building path or the debt path that gets you nowhere – except trouble.

Everyone in life is going to have an emergency.  Most couples are not prepared for this emergency, no cash in the bank.  So they go into debt by using the credit card that never gets paid down to zero and then chopped up.  Credit cards are the biggest debt builder out there, it is just too easy to spend money by saying “Charge It”.  If you create an emergency fund it will help you when that emergency actually happens.  Think of your emergency fund as insurance.  Unexpected events come along at the very moment you don’t have any money.  One lady use to keep an emergency fund, it paid for almost every emergency that came up, she called it the GOK fund – God Only Knows fund.  Makes sense!

So, let’s get back to pre-marriage financial planning.  So you have printed out the credit reports, entered the data into an excel spread sheet, and totaled the amount of debt you both have.  Next – take a deep breath and know that debt can be managed and paid down, but you may have to give some things up.  Giving up is hard, we are human beings and we like our stuff.  But that stuff got us into debt and debt is not acceptable when you are starting out living pay check to pay check.  Focus on the debt, build up an emergency fund.  Accomplish these two things before you walk down that aisle – but do it together.  I know there are couples where one individual has the financial strength to plan, but it doesn’t work if you both are not focused on the same goal.  Remember, we talked about this before.  Sit down and work together, no matter how busy you are it has to be done.

So, you have your first assignment.  Before marriage sit down and go over debt and then get out of debt before saying “I Do”.  Debt is the stress that breaks you down, but a plan and a budget give you the momentum to succeed.  I am sure that some of you have already started to think – really?  I have to do this all before we get married?  I think that when you walk down that aisle it would be nice to know your debt and financial future in on the right path.

I am not associated with Dave Ramsey group, but I encourage anyone who is going to get married or who is married, even single, to take advantage of his seminars that he gives around the country.  Debt is evil, and if you focus on getting out of debt with good advise from other people with the experience – do it.  I am always willing to look at ways to help my tax clients to get their financial house in order.  I believe that we have to be good stewards of our finances, in fact it is demanded of us.

“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has. – Proverbs 21:20.  Don’t devour so much that you get into debt.  Control your finances with planning and budgeting.  Be good stewards over your finances and there will be rewards.

If you have a big cowboy hat and no cattle – change it.  Eliminate the debt, work together and build a budget, stick to it, and walk the path of financial success for your life together.

If you need to sit down with a tax professional and a financial adviser, call our office at:  877.778.1770.