Household Debt; HE SAYS–SHE SAYS

You and your spouse may share the same values and dreams, but when it comes to finances and managing household debt do you ever questions some of his or her actions or decisions? 

A recent consumer debt survey found that Canadian homeowners disagree about who manages their household debt.  In fact; 56% of men and 36% of women stated that the household debt is managed by “mostly me” or “only me”.  Conversely, only 10% of women and 4% of men indicated that household debt is managed by “mostly my partner” or “only my partner”.  Differing perceptions about who is responsible for debt management within the relationship could reflect a lack of communication, which could make it more difficult for homeowners to become debt-free.  If this sounds familiar, the good news is; that with a few simple effective changes you and your partner will become better communicators regarding your debt.

First, Start Talking

When we are in our 30s the most common goals are to pay down debt quickly, save for retirement and have enough money to pay the bills at the end of the month.  Overall the survey tells us that Canadians want to be debt-free, but that we are not actually talking to our partners about how to become debt-free.  To achieve your goals, it is important to work together and put a cash flow management plan in place.  Once you have a plan in place; review it regularly and track your progress.

Address Discretionary Spending

One of you may love to splurge on an extravagant evening out once a month, while the other would prefer to buy the latest and greatest tech gadget.  Both are fine, however if you’re looking to trim your monthly expenses you may disagree on what to cut back on.  Identifying and then agreeing; which non-essential expenses can be reduced is a great first step towards tackling your debt.

Streamline Your Finances

Another good strategy is to make your money work harder by organizing your finances more efficiently.    The survey found that nearly 31% of homeowners listed the interest they pay to carry their debt is a major factor that makes it difficult for them to become debt-free.  Given our current low interest rate environment, an easy way for homeowners to reduce their interest costs might be to consolidate their debt at a lower rate.  An all-in-one account is an example of a debt consolidation product that may help you achieve this goal.

Be Honest About Priorities and Concerns

In general, women appear to be more concerned about debt than men.  Women are less confident about being able to reduce or eliminate their debt, and even though men and women place relatively the same importance on being debt-free at retirement; women are less confident they will achieve their goal. 

In many households there is a discrepancy between couples in attitudes, perceptions and expectations with regards to debt, likely because each partner is managing personal debt separately or they just aren’t talking enough to one another about finances.  The key is to work together and discuss the emotional side of money as well as the actual numbers.

Work With a Financial Professional

Research shows that nearly three in four people who get debt and cash flow advice from their advisor have a plan for becoming debt free.   Developing a cash management system will allow you to focus on what you can spend; while managing your debt, and ultimately help you achieve success in your overall financial plan.

As always, if you need help getting started, give me a call.

Have a Great Weekend,

Tracey

 

Source:  Original article published in Solutions, spring/summer edition 2013, Manulife Financial.