Dear Quentin,
This past year has brought a ton of changes to my personal life. Most notably, the love of my life has agreed to marry me. Amazing! Shortly thereafter, we found out that she was pregnant. I am over the moon and cannot wait to start my family! This will be the first child for both of us.
Already staring down the barrel at the cost of a wedding, my mind went into overdrive with the news that a little one will be on the way. I have begun to restructure my personal finances to anticipate this new “adventure” of ours. My soon-to-be wife has asked that I do the same for her in the near term as she is, self admittedly, not the most financially literate.
We are both in our early 30’s, and both earn over six figures per year — though my fiancée earns about 30% more per year than I do. She began working right out of high school so she carries no student loans. She has some debt, but nothing substantial. I owe a very small amount for my student loans (less than $10,000) and a small amount on my car (around $7,500).
My question is: how and when should I pay off my debt? I do not want to necessarily pass my debt to my future wife, as we will eventually have to purchase a home and I do not want it to hurt her credit history. I have a budget to pay off all of my debt in full before the baby arrives.
However, I will be getting married before I am able to satisfy the entire amount I owe. My fiancée, who has more liquid cash than I do, has offered to help me pay off the debt entirely since we will be joining all assets once we are married anyways. I just want to make the most prudent decision for the new additions to my family, as well as for myself.
Does the timing of any of this matter? Or am I making mountains out of mole hills?
Soon-to-be-Married
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Dear Soon-to-be,
This is a happy story indeed! There are so few around these parts. I’ll tell you what I would do, and then I will add what you could do. They differ slightly, as I would like to answer your question — without being too prescriptive or presumptuous.
If I were in your shoes, I’d have the smallest, least expensive and intimate wedding in my backyard, a friend’s backyard or a restaurant with a backyard, and put all of the money I was going to spend on the wedding towards my loans.
Later, I would throw a wedding party when people could socialize more freely, and when my finances were more on an even keel. It would allow me to celebrate the wedding with family and close friends, and have a more public party later.
The average cost of a wedding is somewhere between $12,400 in Arkansas to $30,400 in Massachusetts, depending on the survey. Of course, people can and do spend even far more for their special day. A lot of money for a lot of stress.
“ It makes sense to rid yourself of both loans, even in this low-rate environment, but only if it does not delay other goals such as saving for a house. ”
It makes sense to rid yourself of both loans, even in this low-rate environment, but only if it does not delay other goals such as saving for a house. You could then set up a joint account, using your existing payment plan with the aim of saving $17,500.
You have little reason to worry about your wife’s credit score. A credit score is based on payment history, how much you use of your available credit, whether you take out new credit, the length of your credit history, and your credit mix.
This is a very exciting stage of life. You are young enough to have the best part of your life ahead of you with a fraction of the average student-loan debt, and you are old enough to have the agency and energy to make it all happen. Enjoy the ride!
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