One of my favorite readers just told me that her son was concerned about a potential girlfriend since she has a lot of debt, and this sparked off an interesting exchange on Twitter between several people, all coming at this from slightly different angles, for the abbreviated response to this conundrum, the answer is ‘Maybe, Maybe Not’.
Despite it appearing a modern phenomenon to consider debt between young people today, wealth, and Net Worth has long been a consideration between potential matches, it is very common to find people who would seek to marry upwards by ‘Marrying Money’ and the tradition has happened for Centuries. Avoiding those with debt today is just the same principle.
When Debt Matters
If you are considering even dating someone with a tremendous amount of uncontrolled debt then you should go into the relationship realizing that there will be additional stress on money related matters (and lets be honest most dates seem to cost money) and it might become awkward at certain times. However the real problems that are associate with debt will likely not start appearing until more serious steps are taken in the relationship. One of the ‘tipping points’ for a couple is the first vacation together, as travel is stressful, and exciting, and you are suddenly cohabiting, all in one concentrated period of time. If one side of the relationship is struggling to meet the minimum payments on their debt, then even the idea of a holiday will cause conflict and could stop things progressing any further.
This will also occur when considering joint financial decisions, such as moving in together or getting married. So yes, debt will be a factor when things get serious. However, not all debt is created equal, and it is the person who matters, and their ability to manage the debt.
Is the Debt Healthy?
Whilst college students should seek to be frugal and graduate with the minimum amount of debt, if you were to graduate from NYU with a JD in Law you could easily have six figure debt and zero assets, other than the fact that Big Law starting salaries are $160,000 and lock step up to $280,000 each year, and can increase many times that number once you have Equity Partner status. Therefore, if your potential mate has taken on even a little too much on the debt front but achieved this, they are pretty healthy still. However, if they have a six figure debt and dropped out of that class – that is an alarm bell.
But is the Alarm because of debt without the simple career path to high paying Attorney or is it that they dropped out and are a flake? Not all dropouts are failures, just look at Bill Gates who dropped out of Harvard, went on to found Microsoft and now has a Net Worth of around $59 Billion USD, which even I have to say is not too shabby.
But at the time, how would you have known?
It’s only a Date!
The only way you will start to learn about a person is by spending time with them, dating is a chance to ‘test drive the Ferrari’ though often Daddy won’t like it if he finds out you put the key anywhere near the ignition.
When you date you can get a grasp of the persons spending habits, are they in control of their money, are they facing debt from many years ago that they don’t have the financial intelligence to eradicate correctly? Are they awesome people, who make you happy, but aren’t too savvy with money? These are the questions to ask. Personally, if someone has debt it doesn’t matter, it is what they are doing about it that matters. If they are oblivious to the risks of debt and continue high levels of spending then that is a dangerous person to be around financially, but if they can control their debt, or be receptive to ideas about getting a plan to fix it then it should be just fine.
Conclusion
When I met my wife I had debt that was dragging over from my College days, primarily in the form of Credit cards, I was working away from home so wouldn’t see the bills and late payment notices and my credit score must have been terrible. We didn’t really talk about the debt at the time, it wasn’t really an issue for us. The age of my debt and my new found position in life would have made it perfect for me to declare bankruptcy and just walk away from it in full, but I decided instead to pay everything off, and start over again. We have been debt free for 6 or 7 years now, and bought and renovated our apartment with cash. Not what you would expect if you went purely on the decision looking at my credit score back in the day.
The secret, a decision, formed from getting to know one another, that we would be a good match, and that we had big plans – when it comes to two people, a Credit Score is not the way to make a life decision.
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