Lauren, 29, is a software developer in Chicago and engaged to a professor at a local college who’s $110,000 in debt from student loans and credit cards. She doesn’t have any debt; her parents paid for her college education, and she’s always spent less than she makes. She has $67,000 in savings, half of which is in an investment account. She really loves this guy, and they’ve been living together for eight months, but she’s worried about what his financial situation might mean for a future together (she would like to buy a house and start a family at some point). What’s the best way for her to help him out of debt without compromising her own savings? How can she help secure their financial future as a couple?
Debt is a lot like HPV. Lots of people have it. Many contract it during college. There are different types, but most are treatable — the sooner, the better. And when you’re in a relationship, your respective statuses are something you should bring up and discuss, preferably early on. Because if you get married, then you’re signing up to share this stuff on some level, perhaps literally.
Lauren, before you marry this guy (and congratulations, by the way — he’s probably smart, funny, kind, and many other positive things besides his bank account), you should do what you must already know is a good idea: Sit down with a lawyer and discuss how you can protect yourself legally. In other words, put a condom on your bank accounts. It’s unsexy and stressful, but just do it. (I consulted a lawyer before I got married, and wound up adoring the one I found. She was tough and sassy and assertive about my rights, and then got all misty-eyed and huggy when she eventually met my husband. She later friended me on Facebook and posted nice comments on our wedding photos. It was an unexpectedly love-affirming experience.)
I posed the dating-a-person-in-debt question to Sallie Krawcheck, a financial wizard who has been on practically every Wall Street “Top 10” list, held top positions at multiple firms (she was the CFO of Citigroup and later the head of Merrill Lynch’s global wealth management division, among other big titles), and most recently founded Ellevest, an online investment platform that caters to women. She paused for several seconds and then sighed. “Oy,” she said. “That is really tough. Particularly when half of marriages end in divorce, and this partner is male, and you’re female, and your lifespan will be five-plus years longer than his — and that’s if you’re the same age — oy!”
What she means is that you should be cognizant of the reality of your own economic disadvantages, purely owing to your gender, and regardless of whatever trouble the professor is in. To return to the HPV metaphor, the ramifications of debt are harder on women than men, broadly speaking — on average, we live longer, take more time out of the workforce, and make less money. Just because you’re on top of your finances now doesn’t mean you’re in a better situation than the professor in the long run.
But while Krawcheck is a realist, she’s also a romantic. “Look, both times I got married, I got married quickly. I could not have been more in love,” she continued. (Should you be interested, her second marriage is still going strong after 20-plus years.) She echoed the importance of talking to a lawyer, as well as somebody with financial expertise, about your fiancé’s situation. Better yet, sign a prenup: “I recognize more than anybody how emotionally fraught and difficult a prenuptial agreement can be, but in this instance, you have to look through the passion and the initial blush of love to the hard dollars and cents of what can happen if you end up not together, for whatever reason, in the future,” she said. “And if your partner won’t sign a prenup, what is that telling you?” Also: “Once Jay Z cheats on Beyoncé, all bets are off, right? None of us are safe.”
Prenups are a rich topic for another day, and in the interest of moving on to the rest of your question, we’ll leave it at this: Find a lawyer you like, and make sure your savings remain yours and yours alone, at least for now. Marital property laws vary state by state, so get a professional opinion, even if it means forking over some of your savings to do so. (A boilerplate prenup starts at around $2,500.)
Now that the awkward stuff is out of the way, decide exactly how much you can (or want to) help the guy out. Here, let’s turn to my friend Maya, who is a therapist and more enlightened than most when it comes to money, love, and practically everything. She got an inkling of her now-husband’s debt a month after they started dating. “I asked very early on about student loans. But then his credit-card debt came out really awkwardly about four-ish months into our relationship,” she told me. “I said something privileged-sounding like, ‘I don’t understand credit-card debt. What are people thinking?’ And he was totally silent. I was like, ‘Wait, do you have credit card debt?’”
As it turned out, Maya’s husband had quite a lot of consumer debt, but being the emotionally healthy, open-minded, and in-love couple that they are, they kept talking about it. (Maya: “I’ve since learned that people can have credit-card debt without being idiots.”) About a year into their relationship, she asked him about the exact amount of his debts, and before they got married she hauled him to Bank of America to meet with her financial adviser. They’ve since embarked on a routine of money gymnastics through which she can help him pay off part of his debt and defer the rest of it onto a lower-interest credit card, all without putting any of it in her name. “I know he wishes that he could do this all himself,” she said. “But the truth is, his debt is already ours. In a couple, one person’s financial situation affects the other’s, especially when you don’t have a lot of money. I want to support him. I feel privileged in doing that. This is a way to give to someone I love.” (Like I said, she’s more enlightened than most.)
Most important, though, Maya hasn’t formally assumed any of her husband’s debt. “I have no individual stake in it,” she said. “My credit score is not tied up in it, etc. We made sure of that.” Maya has also kept her all-important emergency fund, which contains six months’ worth of living expenses in cash, in a separate account that remains entirely under her name. Lauren, you should follow suit. Your $67,000 in savings? Don’t change a thing — besides continuing to contribute to it, of course.
An even more creative (and cautious) way to help pay down your partner’s debt is to extend him a personal loan. This suggestion came from Pari Hashemi, a Philadelphia-based financial adviser at Wells Fargo who specializes in women’s money matters (90 percent of clients are female). “You might consider giving him a personal loan rather than money as an outright gift. Then, there’s a better likelihood that you would get that money back, worst-case scenario — say, if you break up,” said Hashemi. She also advises keeping everything you currently own — savings, investment accounts, any inheritance, your car, whatever — completely separate: “Once you move assets out of your name and into a joint account, you are giving up half of them, in most cases.”
And now for an upbeat ending: a divorce! A few years ago, my friend Samantha — a smart Wharton grad with a good job — married a charming, brilliant man when he was in the throes of a financial meltdown. “I was in love, and people aren’t rational when they’re in love,” she explained. She helped him get back on his feet, and is now divorcing him — quite happily, I should add, and without incurring any financial damage, because she was careful.
Samantha’s ex was always good at making money, but bad at keeping it — in addition to racking up credit-card bills, he’d bought a house that he couldn’t afford at the height of the market. Samantha booted out his deadbeat tenants and short-sold the property before things got worse. They lived in her small studio for 18 months while he paid down his consumer debt (she didn’t contribute to his payments, although she did cover most of their household expenses), and she helped him buy a car by putting it under her name — her credit was excellent, so she was able to get 0 percent financing, and he used the car to get more work. “That was fine, because he actually paid for it, and worst-case scenario, the car was technically mine to sell,” she said.
“In retrospect, there were a ton of red flags, and our divorce could have been so much worse,” she added. “Now he’s in great financial shape, and he dresses well — I take full credit.” As for her own savings: They emerged unscathed, partly because of their mutual goodwill, but also because she wisely kept her finances separate. She just bought a house of her own in L.A.
The lesson here, Lauren, is that there are many ways you can help your fiancé without risking your own savings. However, take note: Financial incompatibility can be a big, blinking, lighthouse-size warning sign, and you’d better be sure your partner is on your same page in longer-term goals (in your case, it’s buying a home, supporting a family, and saving for retirement) as well as how you will get there. And not just, “Yeah, a house sounds good” — we’re talking, “Yes, I will put down $230 extra per month toward my consumer debt so that it’s gone in 14 months.” You might be in different financial places now, but you want to make a solid plan for how you’ll wind up in the same place, together. “I think any couple with a risk-averse person and a risk-loving person are going to have issues,” said Samantha. “Nowadays, if I’m on a date with someone and I learn he doesn’t have his finances together, I’m out.”