When my wife and I graduated from university, we started searching for jobs so we could kickstart our careers. We had big dreams to travel before starting work full time, but our finances held us back from travelling.
I managed to graduate with no debt, but my wife had about $10,000 in student loans.
I knew we had to make it a priority to pay them off before making any other significant purchases. The interest rate on the loans wasn’t too high (around 4%) and the interest was tax deductible, but getting rid of the monthly loan payments would make it easier to start saving.
Even though we weren’t married at the time I still viewed both our finances as one rather than separate. Her debt became my debt, and I wanted it gone.
We maintained separate bank accounts and paid for our own expenses, but we both took the view that our finances would eventually be combined.
I started making payments towards her debt as soon as I could. Sure, I could have left the entire amount for her to pay off, but I viewed our finances as combined.
When we eventually applied for our first mortgage the lender would look at both our financial situations, not just mine, so I figured it would be best to get rid of any debt – regardless of who had it.
Types of Debt
I’ve spoken to other couples who don’t pay each others credit card debt, but help out with student loans whenever possible.
I think all debt is bad and should be eliminated, it just so happens that credit card debt is much more damaging. If my wife had credit card debt rather than student loans, I would be even more motivated to pay it off immediately.
Obviously it’s worth having a conversation about spending habits and maintaining a budget to make sure any other debt is avoided in the future; there’s no sense in working hard to pay off debt only to keep spending beyond your means and accumulating more debt in the future.
Disparity in Income
Right now there’s a significant gap between what I earn and my wife earns. For some couples this would mean as the higher income earner, I should be entitled to more spending that my wife.
I view our finances as pooled together and we work as a team to save and spend our money diligently. It makes no difference whether I make more than her (or vice versa) since the money is combined into one bank account and allocated as a team. Any other source of income – Christmas bonuses, extra work on the side or tax refunds all end up in the same bank account and it makes no difference who it comes from.
There will eventually come a point where my wife will stay home when we start a family, and I’ll be the sole source of income. We’ll still work together to manage our finances even though she won’t be earning an income.
Conclusion: Gail Vaz Oxlade, a popular finance blogger, believes when it comes to paying off a partner’s debt – “he who spent it pays it back.” I couldn’t disagree more. I view our finances as a team effort and we pool our money together into one bank account where we both have a say in how it gets spent. Obviously it doesn’t make any sense for one partner to spend significantly more than the other to go into debt, but assuming both partners are on the same page about spending – couples finances should be a team effort rather than two individuals keeping their finances separate from one another.
What do you think? Should partners pay off each others’ debt?