Start Your Marriage Off Right-- Wise Up About Debt, Spending
Question: My fiance and I are getting married in November and we have to pay for the wedding ourselves. It is going to cost us in the neighborhood of $20,000. We also have combined credit card debt of about $18,000. We are confident that we can save $20,000 by the wedding, but should we put that money in the bank or start using it to make some large payments on the credit cards? Of course, using the wedding money to reduce the debt might force us to start using the credit cards again, but we thought it would look good to the creditors if we were to occasionally send in more than just the minimum.
Answer: Maybe you should start thinking less about looking good and more about being smart.
Honestly, people. You’re already deeply in debt before you’ve even started your life together. Why in the world are you considering spending another small fortune for a one-day blowout?
Pay off your credit cards and either postpone your wedding or have a small affair that you can pay for upfront. You can find suggestions about having a great, affordable wedding on the Dollar Stretcher Web site at www.stretcher.com.
If you’ve really got your heart set on a bash and you don’t want to postpone the nuptials, have an affordable wedding now and save up your shekels for a big party on one of your anniversaries.
Your creditors, by the way, generally don’t care whether you pay more than the minimum on your credit cards. In fact, they would prefer you didn’t--that’s how they make their money and keep you in financial chains.
Consider that you’re paying about $3,000 a year just to carry that debt--$3,000 that’s eating away at your financial health. If you were to invest that money each year instead, you could have more than $400,000 in 30 years, assuming a 9% annual return. Think about that--you’re giving up nearly half a million dollars just because you’re unwilling to live within your means.
Give each other the best wedding present possible: Pay off your debt and pare down your spending. Remember, if you have to pay for something with credit--and it’s not something that will appreciate in value, such as a house--then you can’t afford it.
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Credit Will Still Take Hit From Bankruptcy
Q: My wife and I filed for bankruptcy eight years ago. Our lawyer told us it would solve all of our debt problems and give us a new start. Well, it has affected us big time. We’ve managed to slowly rebuild our credit over the years, and the credit cards we managed to keep from before the bankruptcy have rewarded us with steadily higher credit limits. But every time we try to apply for new credit, we get rejected and they list the bankruptcy as the reason. Why don’t all credit card companies play by the same rules?
A: Because they don’t have to.
Credit card companies have different ways of trying to manage their risk and maximize their profits. Most issuers, for example, try to avoid people whose credit records show a history of late payments, delinquencies or bankruptcies. Others relish the chance to get their hooks into such “subprime” customers, who probably will give the companies plenty of opportunities to charge late fees and punitive interest rates.
You’re still viewed as damaged goods by the companies who want only “prime” customers, so your best recourse is to wait until the bankruptcy drops off your credit report before applying again. That will take two more years, because bankruptcies remain on your report for 10 years. Other negative items, such as late payments, generally disappear after seven years.
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It’s OK to Give Number Out--This Time
Q: You’ve written several times about the phone number to call if you want to opt out of credit-card solicitations. I called this number--(888) 5 OPT OUT or (888) 567-8688-- and they wanted to know my Social Security number. With all of the “identify theft” these days, how can we know that this is a legitimate service and not just a way to get Social Security numbers? Who runs this service? I enjoy your articles. If you could put my mind at ease, I would be grateful.
A: Yours was one of several letters from people disturbed that they were asked to punch in their Social Security numbers when they called the opt-out number.
It’s true that you shouldn’t reveal your number, or any other personal financial information, willy-nilly. But your Social Security number is essential for any transaction involving credit, including this opt-out number--which is a service provided by four major credit bureaus. You can feel safe giving out your Social Security number on this line.
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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at money talk@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times’ Web site at www.latimes.com/moneytalk.
