Traditional wedding vows have a line that goes something like this: "To have and to hold, in sickness and in health, for richer or for poorer ..." Unfortunately, that "poorer" line can throw the rest of the vows into a frustrated limbo.
A New Life = New Debt?
Starting a new life with your loved one is a heady trip that is often shrouded in bills, payments and expenses. A few of these include the wedding, a house and kids.
- The wedding itself is the first major expense that most couples face, as the average cost of a wedding is now in excess of $25,000, according to the "American Weddings" study conducted by The Fairchild Bridal Group. Since it often falls to the couple to pay for the wedding alone, the bride and groom will often say "Charge it!" before they say "I do!"
- Furthermore, buying a house, the single greatest expenditure most people will ever make, is usually the next expense on the newlywed's debt-laden agenda. According to the U.S. Census Bureau, the average cost of a house stood at $299,100 in April of 2007, which can be up to 10-times a newlywed's yearly wage. Once the couple has bought a house, the couple will need to furnish and decorate it to create a home. Filling rooms with furniture is an expensive proposition, and even modest decorations can come with a hefty bill. Once again, credit cards are often the answer.
- Children, again, are the next big expense. There's simply no way around it, kids cost money. According to a 2004 study by the United States Department of Agriculture (USDA), parents who grossed at least $70,200 a year spend a total $269,520 to raise a child to the age of 18. Since the psychological and emotional benefits of having kids often outweigh the associated financial costs, many couples will swallow the debt load to extend their family.
Once you have a family, family vacations are another much-desired item. Unless your relatives have a house at the beach and are happy to host you every summer, this little luxury can put another serious dent in an already overburdened wallet. Yet again, credit cards often come into play.
For Richer: The Advantages of Dual Incomes
Despite the plethora of expenses that most newlyweds face, getting hitched doesn't necessarily lead to a one-way trip to the poorhouse. Smart couples realize that they now have two incomes, and done properly, living together generates only one set of bills. Let's take a look at the above expenses, and a few more, to see why two can be better than one.
- Avoiding a fancy, expensive wedding is an easy way to start a couple's new life together on the right side of the balance sheet. Friends and family will be just as happy at an intimate gathering in the park as they will be at an expensive shindig at the country club.
When the wedding is over, couples will be happy to realize that the costs of having their significant others living with them in an apartment won't really be that much more expensive than when they were living on their own. Most couples don't largely increase their use of utilities beyond what they were before the marriage, so they can save on one set of cost of living expenses.
- Nobody wants to live in an unfurnished house, so couples should consider hand-me-down furniture and items from thrift stores and yard sales to provide inexpensive ways to fill the basic need without racking up debt. When combining households, selling one set of the couple's furniture or certain pieces of artwork can often pay for the rest of the decorations and changes.
- Couples can sell one vehicle, or at the very least, carpool and use one vehicle as a main car and the other only when absolutely necessary. The sale of one car will not only bring in the bonus cash from the sale, but also the extra cash in insurance, maintenance and gas that the couple will forgo purchasing. In addition, getting married can often lower insurance rates, which would make keeping both cars more affordable.
Also, couples should make sure to skip the new cars until the old ones break down. This will save on car payments and on the depreciation that comes built into a new set of wheels. When in need of a new car, couples should consider leasing or at least buying a model that is a only a few years old.
- While it can be important to have a fantastic honeymoon, it may be wise to hold off on the exotic vacations for awhile. One of the best things about newlyweds is that they can just enjoy being together - regardless of the locale! This is the time to use it to your advantage and keep your money growing in the bank.
- On the issue of childrearing, waiting a few years and getting a firm financial foundation in place before taking on the costs that come with kids will reduce or eliminate the challenges that many cash-strapped young families face. Properly done, a little planning will even give the new parents a few bucks left over to splurge on the kids or start a college savings account.
Everything that a couple does now to minimize its debts will pay off in the long run through the power of compounding.
The Bottom Line
Instead of rushing out to buy a house and racking up tens of thousands of dollars worth of debt, most newlyweds could maintain their pre-wedding lifestyle and easily live on one income, exactly as they were already doing prior to marriage. The second income could be saved instead of spent.
A marital union has the potential to create financial security, and the process requires no special financial knowledge. Earning two incomes and living on one will provide a cushion against layoffs, reduce the stress on the couple's marriage, and enable the couple to save and invest for an early retirement. It's as easy as it sounds.