Debt Reduction 101 Article by Michelle
With the wedding coming up next month, Future Husband and I need to put the finishing touches on our wedding registry. For us – opinionated but somehow indecisive – this has been almost a bigger hurdle than splitting up the guest list between who gets to come to the wedding and who is on the reception-only list. (It’s a small church. Very small and I think I already have sent out too many invites for the ceremony.)
FH and I are both in our 30s. We came to our relationship and our first home with one of everything – Corelle dishes, toasters, hand mixers, silverware, glassware, towels, blankets, pillows … the only thing that didn’t come in pairs was my cat and for that, FH and I are truly thankful.
I was trolling on MSN.com the other day and saw this article by Suze Orman offering tips for spending wedding cash. Since our registry is something on the skimpy side and since FH and I fell into the habit of buying gift cards for weddings a long time ago, I’m assuming that there is some green in our future. So what are we going to do with it?
The following was taken from "Suze Orman’s 5 tips for spending wedding cash: Should newlyweds buy a house? Pay down debt? Splurge on a vacation?"
… I’ve included my thoughts in parenthesis.
“1. Take care of your immediate needs first, says Orman. For most newlyweds, this will involve some aspect of nesting, like putting down deposits on a rental apartment, buying basic home appliances, or purchasing a bigger bed. (M: Ah … nesting. We already have a nest – that nest is Spartan, but not because that’s our style. FH and I don’t really have style, which duly surprises and disappoints us. If we do get cash, FH and I are thinking that it could go toward flooring in our kitchen or toward a new bedroom set. The headboard that my folks bought us at a garage sale was actually a footboard …)
2. Next, work out how to decrease your monthly expenses. That usually means addressing the D-word — debt — accrued from credit cards, car loans, or student loans. “Line up your debt payments from the highest interest rate to the lowest,” advises Orman. “Pay off bills with the highest interest rate first.” (That usually means credit cards.) If you both have debts, pay them off equally — after all, you’re in this together. (M: Luckily – or unluckily for me – I’m the only one who is in debt right now. I don’t see using our wedding money for paying down debts. We’re in this together, but it’s not FH’s fault that I had a shopping addiction in the early part of this century.)
3. Set up an eight-month emergency fund. Even two happy, healthy newlyweds need one. To determine how much to save, calculate what you spend every month on necessities like gas, rent, utilities, and food, then multiply that figure by eight. Socking away cash in an FDIC-insured account (checking, savings, money market) means you’ll be able to pay your bills if one of you loses your job, without resorting to drastic measures like taking a credit card cash advance or dipping into your retirement account. (M: I do like this idea … might need to bounce this one past FH.)
4. Start saving for a house. “The smartest goal a couple could have, bar none, is to own a home sooner rather than later,” says Orman, “especially given that the price of real estate has gone down dramatically in certain areas, and interest rates are still relatively low.” If you intend to make a purchase within the next five years, put your wedding money in a bank account, she suggests. Shop around to find the one that pays the highest possible interest rate. “As long as it’s FDIC-insured,” says Orman, “it doesn’t matter whether it’s an online bank or brick-and-mortar.” (M: Heh – we got you beat Orman. Now we just need to refinance our mortgage to take advantage of a lower interest rate.)
5. Fund your retirement. “Invest in a 401(k) or a 403(b) if and only if your company matches your contribution,” says Orman. Or put your wedding money in a Roth IRA. That way, the money you accumulate over time won’t be taxed when you withdraw it later on. After all, the best way to start married life is not being just young and fabulous, but solvent, too! (M: Confession time – I signed up for my company’s 401k last year but somehow I either botched my paperwork or the company did not process my application because right now I do not have a 401k. OK Greek Chorus – start howling now. I guess I’d rather put any wedding money into CDs rather than put it at the mercy of the skittish stock market. But I’ll probably still be blogging when you, dear readers, are enjoying retirement. :))
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