Avoiding Debt and Divorce in a Recession
Using Personal Budgeting to Save Your Relationship
Mar 4, 2009
In these tough economic times, how do you get your finances on track and save your personal relationships?
When couples enter into a relationship, many don’t discuss finances, how to budget or have a savings plan.
Elena Jara is the education coordinator at Credit Canada, a non-profit organization that provides money and credit counselling to people who are in financial difficulty. “Many of our clients have come in to our offices and due to financial strain are considering separation or divorce.”
One of the biggest problems, says Jara, is that more often than not you are dealing with two different personalities. “It’s very important that you sit down with your partner and figure out a style of money management.”
Jara recommends that couples follow these four steps to avoid household finances -- and relationship -- meltdown:
Creating Goals to Avoid Debt and Divorce
Once you are in debt, not talking about it does not make the debt go away. So it is important to find a way of working together. If one person is one way and the other person is not going to budge, you must find a way to tweak the budget that fits your styles. Couples can get stuck looking at things a certain way because for a long time you think about things individually. Communicating towards financial goals that you want to reach for the family as a whole could only benefit your relationship.
Tweaking the Budget
Once you’ve decided on creating goals that work for you, now you can begin planning a budget. Couples are being told to save save save, but what they have to understand is that debts have to be paid off first - especially the debt with the highest interest rate. What blindsides couples is the impact that the debt has. For example, if you owe $1,300 on your credit card and the minimum payment is $35, only a couple of dollars goes towards the principle and the rest goes towards interest. Jara recommends fixed payments rather than the suggested minimum payments. It will make a huge difference.
Creating a Budget That Works for You
Once you liquidate debts, it’s time to focus on a savings plan. Couples can ask the bank to take out funds and place them in a savings account automatically. To have your own personal account is fine, but have a joint savings account as well. A personal account can be used for grooming, clothes and entertainment. The joint account should be used to pay bills, debt, household expenses and contributions to a savings account.
Consistently Working on the Budget
This is the secret to success. Just because a budget plan worked for one month does not mean you stop the plan. Couples should review their goals consistently in order to get out and stay out of debt. Big businesses always review their budgets to make sure they are in line with their expenses. So if big businesses do this, why shouldn’t the average consumer?
Anticipate Changes
Life happens. Therefore life has to be incorporated into your budget. Couples have to anticipate changes such as job loss, or wage cuts and will have to learn how to live with less. By setting aside money for unexpected changes, it will allow you enough time to tweak your budget so that you can start reducing monthly expenses and live within your new income.
In spite of a roller coaster economy, your relationship doesn’t have to suffer wild ups and downs. By following these four steps, your relationship can weather stormy economic times.
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