How Young Couples Manage Money: Hard Times Or Not

For many young couples, the current economic downturn represents a major test of their money management and to their ability to work together as partners. When money is tight and the ability to meet expenses is limited, their differing backgrounds and ideas on how money is to be spent can lead to sharp disagreements and marital tension.

Common money mistakes. What gets young couples into financial trouble?

- Expensive tastes. They often finance a new car without any awareness of how much it is going to cost them in interest or how long they are going to have to pay. They also don't think about the insurance costs. When they figure out they can't make the payments, they can't get out from under it because they owe more than it's worth. They don't read what they are signing.

They have the same tastes as their parents and try to live just as comfortably. Besides a new car, they buy sound systems and new furniture - and go out a lot for entertainment. They can't afford their lifestyle.

- Clueless. They don’t formulate a monthly budget and live within their means. They don’t budget or save money for anticipated annual and occasional expenses. They have no idea what their total indebtedness is.

- Credit cards. They acquire three, four or more major credit cards and maintain high monthly balances. They borrow money on credit cards to pay current bills including housing and food expenses. They charge everyday expenses or small items and can't keep up with the monthly payments. They watch their charge accounts grow each month. They borrow more money before old loans are paid off.

Their incomes are stretched to the limit without any margin of error. Then something happens. A layoff. A tight job market. Bam! They are behind the eight ball.

Taking control. Here are some ideas for new young couples on how to control their money and, if necessary, how to dig themselves out of debt.

1. Have goals. Plan out expenditures so that spending fits within your means. Decide between wants and needs, and take care of your needs first. "Keeping up with the Joneses" and/or starting out with the same standard of living as your parents are dangerous practices.

Work towards something instead of buying now and paying later. Don't be seduced by our culture that says you have to have everything now. Convenience has a price. Don't saddle your future and your spirit with crushing debt.

2. Make a budget. Put it on paper. Do it together. Merge your incomes and expenses. Don’t have a "his" and "her" money approach to finances. Negotiate and make agreements you will honor. It doesn’t matter who writes the checks as long you have merged your incomes and have agreed on the expenses.

Balance the checkbook. Spend time with the books. Shop for sales and bargains within your budget. Make

a game of it.

Figure in your occasional and annual expenses as well as your monthly obligations. Having a budget with goals builds in restraints on your impulse buying. Budget for discretionary spending for each of you. Set aside money for emergencies like job loss, accidents, illness, medical expenses and emergency travel.

Celebrate holidays, birthdays, and anniversaries with restraint. Put controls on gift-giving. Be patient. Someday you'll be able to afford the traditions you want.

3. No money secrets. Don’t have secretive spending habits or hide bills. Betrayal on money issues feels a lot like adultery. It destroys trust and security of the partnership.

4. Be responsible. Having one partner care about the budget and the other not cooperate or care about it sets up a parent/child dynamic and erodes equality and respect.

5. Save for goals. Start small but be regular. Saving can be addictive just like spending. Saving is a habit. Small investments early in marriage will reap huge dividends later.

6. Be smart about credit. There are two kinds of people - those who understand interest and those who pay it. Interest adds up and keeps you in debt. The minimum monthly payment generally covers the interest with little reduction of principal.

Buying with a credit card is paying top-of-the-line interest. Look for a credit card with the lowest interest rate and low or no annual fees. Pay your bills as close to the due date as possible to avoid finance or late payment charges.

7. Use discipline to get out of debt. Pay off one high interest loan and apply that payment to another. When one debt is satisfied, apply that payment towards another debt. Raises or additional income also can be used to reduce debt. Keep track of expenses. Chart your progress. Be persistent. The first six months will be the hardest.

If you ever consolidate debt to get a lower payment, do not add new debt or you'll be in deeper than ever. Learn to live within a realistic budget or your loan consolidation won't do you any good.

8. Go for help. If you feel you have unmanageable debt, contact the Consumer Credit Counseling Service. They teach money management skills, work with creditors, consolidate payments, monitor your progress, offer encouragement, and treat you with respect. Marriage counseling may also serve to help you communicate better and to sort out your differences.