Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).
Dear To Her Credit,
I am 28 and my husband is 30. Until I got with him three
years ago, everything was going great. I had my own house, where we live now,
no credit card debt and a nice savings.
We have refinanced the house twice to pay off credit card
debt that he brought into the marriage, and we still owe another $30,000 in
credit card debt. We both have different jobs that pay less than what we were
making before. We can't make the house payment that has doubled with the
refinancing.
I don't know how much student loan debt I have (it is being
deferred for now). My savings are wiped out. My husband brought no money into
this marriage -- just debt.
What should we do? He has been looking for a second job, but
due to his past and the current job market, he is unable to get one. Please,
any help would be great. -- Jen
Dear Jen,
I'm assuming you knew about your husband's "past"
and his financial situation before you married him. (If not, that's another
issue!) Apparently, his great qualities won you over despite his financial
problems. I've known women who married men they knew were less responsible
financially, and based on their experiences I know this problem is not
insurmountable. By working together, couples can get back on track. In fact, sometimes nothing makes a man get serious
about money like marriage and responsibility!
In retrospect, refinancing your house so it made your
payments unaffordable was a mistake. Debt he racked up before your marriage was
your husband's responsibility. He may have been able to settle his debt or even
file for bankruptcy; now the debt is attached to your house. You could lose
your house unless you and your husband make changes soon.
Not knowing how much student debt you have is a danger sign.
Whenever we're afraid to find out where we really stand, we have passed the
point of just being stressed. We're afraid to look!
You and your husband must immediately take three steps to
regain control of your finances. You must do this together -- or it won't work. And you surely do not want to fall
into the common trap of one person taking a somewhat parental role. If you've
ever seen people do that, you know it won't help your finances -- or your
marriage!
Here are the three steps:
1. Find out where you
stand. Make a list of all your debts, including those dreaded student
loans. List every credit card and debt -- even back taxes or personal loans. Add
up the total amount you owe and your minimum monthly payments.
Make another list of your assets, including cars, motorcycles
or boats, your house. Add up the total value of things you own.
Subtract the total amount you owe from the value of things
you own. This is your financial net worth.
Now, make a third list and add up your income and expenses.
If your expenses, including your debt payments and the bare minimum it takes
you to buy food, insurance and other necessities, are greater than your
take-home pay, at least now you know. You can make the best decisions only when
you know where you stand.
2. Find more income.
Looking for second jobs is a start. Jobs are not the only way to make money,
however. Perhaps your husband can start a moonlighting business. I recommend a
low-investment service business. For example, he may be a handyman, a musician
or a computer genius. Find something where he can maximize the use of his
skills.
You might want to find a business you can do together;
otherwise, you won't see much of each other.
3. Cut expenses.
I hope you don't have to sell your house. But houses are expensive. If you're
having trouble making the payments, it can't be easy paying the taxes, insurance
and maintenance expenses either. It's better to sell your house, even in a
depressed market, than to lose it to foreclosure.
If you are making payments on one or two cars, sell them and
buy an older car with the proceeds. Resolve never to make car payments again.
Agree on a budget you can live on until you get back on your
feet. This doesn't have to be so bad when you're in it together. A home-cooked
meal and a movie from the library is better than a fancy restaurant meal and
overpriced movie that puts you further into debt.
It's too late to point fingers about the financial mess the
two of you are in. However, you are still young. Think of this as your fresh
start together. It's not too late to get your financial life going great again --
this time, together.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: November 13, 2009
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