Nick Clements – “Debt Free Forever” (Part 2)

During today’s Oxygen365 podcast, host Noel Meador talks with Nick Clements, author of Debt-Free Forever. Nick spent over 15 years in consumer banking and recently led one of the largest credit card companies in the world. He is the co-founder of MagnifyMoney, an online resource for making smart financial decisions. In his free e-book, he helps readers develop a debt-free plan within 30 days, launches them on to the road to debt recovery in as little as 3 months, and guarantees a major life change within 24 months.

During today’s podcast, you will learn:

1. What should be the #1 financial priority for new married couples?

Every married couple should make it a priority to get on the same page about today’s, as well as tomorrow’s, finances. Sit down together and ask yourselves the following: a.) How much are we spending each month, and where is that money going? b.) Does our spending outweigh what we earn? and c.) Where do we want to be tomorrow, financially?

The longer you wait to establish these priorities in marriage, the more susceptible you are to the trap of debt. Take charge of your finances early in your marriage. Spend the time and energy to figure out your financial future together; otherwise, as Nick states, “If you’re disagreeing at the goal/objective level, then it’s going to be all-out warfare when it comes to how you’re spending.”

2. How should couples handle disagreements over money?

Even the strongest marriages experience money troubles over the years, but the way you choose to handle these challenges makes all the difference. Instead of approaching your financial issues with an accusatory attitude—“Why did you buy those shoes?”—try focusing on your financial goals for the future. For example, if you decide your priority is to save for retirement, figure out how much you need to set aside each month and stick with it.

Keep in mind the need to have fun with your money. Ask yourselves, “How much do we want to spend to have fun?” and then decide not to micromanage or question each other about how you choose to spend it.  Your spouse may enjoy getting a good haircut each month—that’s okay! Nick states, “My wife and I agree on the big goals and objectives, and then we empower each other to spend where we want to when we want to have a little bit of fun.”

3. What are the steps to creating a budget?

Most married couples consist of one saver and one spender. The saver is focused on paying off debt and making wise financial decisions; the spender is focused on having fun with their well-earned money. Decide together how to maintain a balance between the two. For example, allow the spender to have the control they crave, but also allow the spender to spend a reasonable amount of money each month.

Set aside some time to do the following exercise: write down what you would like to do in 5, 10, and 20 years in terms of money. Show each other your answers, then talk through any disparities. For example, if your spouse would like to take an annual vacation, and you would prefer to save for college instead, flesh out what it will look like to save money for both goals or find a way to compromise.

One way to make budgeting easier to manage is to set up as many automatic features as you can. Fill out a direct deposit form that automatically deposits a certain amount of your paycheck into your savings account each month. Set up automatic payments for recurring bills such as utilities and internet, and make sure you account for these items in your budget beforehand to avoid overdraft fees.

4. How can a couple get out of debt?

Start by asking these questions:

  1. Does our income cover the cost of our fixed expenses (i.e., mortgage, utilities, car payments, etc.)? If one or more of these expenses may be too large for your income to handle, then you have a choice to make.
  2. Do we have a healthy credit score? If you make your payments on time every month, you will develop a good credit score, which can be used, in turn, to negotiate a lower interest rate with your creditor.
  3. How much debt do we have? If your debt is equal to or greater than 50% of your yearly income, negotiate with your creditors for a lower interest rate or a settlement.

5. How can a couple stay out of debt?

The first step is to make sure you set aside a certain percentage of your income every month for savings. Talk through what that amount should be based on your present debt and your future goals. Decide how and when to balance your checkbook and keep a close eye on your accounts.

Second, agree to celebrate the milestones together. After you pay off the first chunk of debt or lower your interest rate, treat yourselves to something you love—go see a movie, get ice cream, or have dinner at your favorite restaurant. If you do not celebrate and get excited about the little accomplishments along the way, chances are you will never make it to your end goal.

Lastly, hold each other accountable. Set up automatic alerts on your bank’s mobile app to alert you when your balance is low, or when you or your spouse is approaching the agreed-upon budget for the month. That way, instead of one spouse becoming the “budget police,” the accountability system acts as an objective third party.

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