Millennial Newlyweds Bury Themselves In $100,000 Worth Of Debt
First things first, you never lose by marrying the right person. I don’t think there’s a value for that.
After chatting it up at length with my buddy Ecclesiaste Clee Guerrier on what was probably another lighting round of social events starting from Marvel Phase 4, Marvel Phase 5, and more Marvel Phase 3; we finally started to talk about actionable goals, the American school system, politics, and wedding costs? Yep, it really happened in that order. We also talked about cars.
However, this plot line was mathematically intriguing.
So here’s my theory. I think newlyweds are often shocked by the sticker price of their own debt after the first three months of being married. Once the bliss settled down, the median salary settles in, and reality happens.
For richer, or for debts. My guess is that an average American couple has on average $100k-$225k of debt waiting to derail their dreams.
This is not a topic written to dissuade people from marriage. The goal is to provide the real-world revelation that ends up being a sour spot in most marriages, and sometimes the poison that leads to divorce. When you realized that you are paying north of $750+/month at a minimum in liabilities for 12 yrs.
Others are paying closer to $1,500 per month on revolving debts and are shocked when they are denied the home loan… so yeah, we got to dissect.
Table of Contents
Ground Rules
The Average is a quantity, rating, or the like that represents or approximates an arithmetic mean. For example, 7 people in a class with scores from a test maxing 10 points, are represented as follows [9, 7.5, 5, 4, 2.5, 3.5, 1]. The average is the total divided by 7, i.e. 4.64. The Median is the “middle” value in the list of numbers.
In this example, the median is 4. I brought this up since the upcoming stats we will use must be consistent and timely.
The Total Debts cover credit cards, student loans, *full marriage costs from rings to honeymoon, and car notes (if any).
We will exclude housing ownership loans since most appear to wait until way after the fact to purchase.
For full marriage costs, we are considering all relevant costs associated with being married, no matter the source of payment. For this case, we have to consider the full timeline that starts from the engagement ring purchase, all the way to getting back home from the honeymoon which should include moving costs. Basically, all marriage cost is relevant since you would not have incurred them if you didn’t set out on that route. Phew.
Furthermore, because I know it is coming. These are national averages, not your personal averages. If your number comes in lower, that’s awesome. You might not be average.
Synopsis and Some Stats
In a piece called “I now pronounce you, in debt” by Erin Lowry; newlyweds admitted, “We weren’t living within our means – we ate out way too much, for example – and weren’t keeping as tight of a hold on our finances as we should have.”
In late 2017, (Dave) Ramsey Solutions, a leading company in financial education, conducted a study of more than 1,000 U.S. adults to gain an understanding of personal finance behaviors, attitudes, and how married couples communicate and relate about money. They found that the larger a couple’s debt, the more likely they were to say money is one of the top issues they fight about.
21% of divorcées cited money as a cause of their divorce.
And since women outlive men, not having enough money saved should be a huge concern for women. However, some good news, in some states, most debts incurred by either spouse during the marriage are owed by the couple, even if only one spouse signed the paperwork for a debt. But if you incurred a debt, such as a student loan, while you’re single, and then get married, it won’t automatically become a joint debt.
I wish I was bluffing with the numbers.
According to an annual survey of thousands of colleges by the College Board, two-thirds of students who earned a four-year degree in 2017 borrowed for college. Average student loan debt: $33,654 (monthly payments of $393). Department of Education statistics show that students take on more debt for advanced degrees. Average Graduate school student loans come up to $84,300. While average law or medical school student loans range upward from $186,600+.
According to the 2016 NerdWallet statistics, the average American household carries $16,061 in credit card debt. Millennials aren’t doing so hot. USA Today reported that on average, Americans owe $6,354 on bank-issued credit cards as of March 2019. The Motley Fool reports a national average of 16.46% in interest cost.
According to Balance.com, the average payment for 2017 was $515, for a new car with a loan of $31,100 for 68 months. The national average interest rate for a five-year car is about 4.9%. For a used car, it was $398 for $21,375.
According to Knot.com, the average 1-carat engagement ring will run you a pretty penny for $5,500 plus $1,000 for the wedding band.
I’m guessing this is added to the credit card balance at some point since the average American doesn’t have $400 for emergencies. Most cash asset in the checking accounts is already earmarked for current or past-due payments. Next up, the average wedding cost is $33,391 for a 100 to 150-guest list.
The average honeymoon cost is $4,466, with luxury going for upward of $9,954. Just for kicks, here’s the average venue cost of $12,343. “Even pre-wedding travel photoshoots have become a multi-billion-dollar business in the Instagram age — particularly for Asian couples — and the Greek island of Santorini is a favored setting.”
You don’t even have to be super rich to get into some serious spending.
The Final Debt Numbers
Newlyweds are often shocked by the sticker price of their own debt after the first three months of being married.
Here’s the final average total debt when the dust settles on a couple, netting about $75,000 before taxes;
I simply added student loans of $68,000 (approximately $34,000 per person) plus credit cards for$12,708 ($6,354 per) plus a Car loan for $31,100 plus average wedding costs for $33,391. Even if you factor out the car, that’s about $114,000. My original assumptions are pretty close (see below). I think I got pretty close since I also factored in some payments and some goodwill. I guess it all checks out since the average household debt is $137,065 with an income range is about $59,039.
Statistically, it would take the average couple over 5 years to pay for the wedding debt alone. The remaining amount will eventually be lumped into mortgage debt with the final payoff, a lifetime away. If you rather set up a multi-generational wealth, here is a better plan.
This article isn’t to dissuade anyone from marriage.
These numbers aren’t an exact science since some states are super metro accessible so car notes might not be an issue. Think of this as a heads up, so you aren’t shocked or aggravated at future payments. Buckle down, and get it done as a couple.
The solutions are simple. Communicate with your friends and family. Limit financial scope creep. And try not to live to outdo each other. Live within your means, exercise, communicate, plan, and succeed together. It’s all just numbers in the end.
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