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How to Keep Debt From Wrecking a New Marriage

Some couples enter marriage with a big secret: their debt. But that secret can create major problems for the relationship.

It isn't surprising that people feel uncomfortable discussing debt going into marriage. One, or both, may be embarrassed by it, fear the other person will end the relationship over it, or think it is something they can manage without involving their partner.

However, keeping debts hidden can be a precursor to ongoing money and marital issues.

Financial incompatibility is often a big reason for divorce, and "when you have outside pressure of debt and money issues coming into a marriage, it makes it even harder," says Aviva Pinto, managing director of Wealthspire Advisors, an investment adviser based in New York.

There is, however, a three-step approach couples can take to prevent debt problems from derailing a marriage, say financial advisers who help clients with debt issues. First, communicate. Second, create a game plan. Three, execute.

STEP 1: Put everything on the table

Couples shouldn't wait until a ring is in hand to begin having conversations about debt; rather, they should start having these discussions as soon as the relationship gets serious, advisers say.

"You don't want to be dating somebody a year and find out it's the one thing they weren't telling you," says Angie O'Leary, head of wealth planning at RBC Wealth Management-U.S. in Minneapolis.

Couples need to be honest about their respective incomes and liabilities, including mortgage debt, credit-card debt, medical debt or student-loan debt. It might be tempting to exclude small debts from these discussions, but it isn't advisable, says John Hill, president and chief executive of Gateway Retirement in Rock Hill, S.C. "Even a little bit of debt can chip away at your financial situation," he says.

Sometimes people keep debt secret because they believe they can manage it on their own and like to feel in control. But as a couple's expenses grow, it can be hard to keep on top of things, making common goals such as saving for a house or a child's education more difficult, says Norm Champ, a partner in the Investment Funds Group at Kirkland & Ellis LLP in New York. "It reduces the odds that you're going to come up with a plan if both people don't have all the information," he says.

Conversations around debt can be challenging and emotionally charged, so it is helpful to set some ground rules, Ms. O'Leary says. Take blame out of the picture and treat each other respectfully.

In some cases, it may be a good idea to share credit reports with each other. This can be very uncomfortable, but if there are any doubts about a partner's spending habits, it's better to know before the marriage, says Sam Bruning, owner of Southern Magnolia Investment Management, an investment adviser in Port St. Lucie, Fla.

To put a partner at ease, he suggests printing out a copy of your credit report and sharing it first. "This helps the person feel that it's not a distrust issue," Mr. Bruning says. "Rather, you're trying to be open with them and you want them to be open with you. It's touchy, but it's all about how you frame the conversation."

STEP 2: Create a game plan

Advisers say honest conversation sets the stage for couples to create a plan to reduce debt and make progress toward shared goals. "Having a plan is really empowering," says Jonathan Derby, a financial adviser with Edward Jones in Coburg, Ore.

He tells of a couple who were clients of his: The woman had $150,000 of debt and the man had $50,000. They intended to marry, but hadn't discussed their respective debt, primarily because the woman was hesitant to do so.

Mr. Derby started by having them discuss their shared goals, which at the time included getting married, buying a house and having children within five years. He explained that if they wanted to achieve those things they first had to be honest about their debt and create a strategy to unwind it. This helped the woman open up, and as a team they worked to refinance her loans so she had fewer of them and at a better rate. They then created a budget that worked for them both, which included paying down their loans and saving for a house. "There's hope in having a plan," Mr. Derby says.

Think of it like trying to get out of an escape room together, says Joseph Conroy, a certified financial planner and owner of Harford Retirement Planners LLC in Bel Air, Md.

Mr. Conroy says he worked with a couple in their 30s—one a sales professional and the other a teacher—who were prepping for marriage and needed to deal with the husband-to-be's $80,000 student-loan tab. The woman, who had the higher paying job, had amassed $100,000 in savings over 10 years with the intention of using it as a down payment on a house, and neither partner wanted to use her nest egg to pay off the debt.

Mr. Conroy helped broker a solution in which the couple agreed to use some cash to pay off the highest-interest loans. Then they agreed, based on their respective earnings, to each contribute a portion of their income to pay off the other student loans on an accelerated schedule. They preserved most of her nest egg for a home, which they eventually bought. In this way, they were both contributing and neither resented the other.

STEP 3: Execute the plan

This can be tricky, too, especially since emotions are at play and one or both partners may have to make sacrifices because of the other's debt.

Ms. Pinto of Wealthspire Advisors helped a marrying couple deal with $400,000 in debt that the groom-to-be had amassed from college and medical-school loans.

Ms. Pinto spoke with the couple about their assets and liabilities. She showed them how long it was going to take to get out of this debt, based on their earnings projections. The man was just starting his residency, and the woman, an attorney who was in her early 30s at the time, was hoping to stop working and have children. But that would mean the couple wouldn't have enough to pay rent, food or other necessities, let alone pay off the debt.

The couple realized they had to delay having children and curb entertainment costs such as dining out. For the wife's protection, the couple also signed a prenuptial agreement, requiring the husband to repay everything she paid toward his debt if they divorced. Flash forward a few years, they have been making headway in chipping away at his loans and decided they are ready to start planning for a child, Ms. Pinto says.

Going through these processes can be uncomfortable for both partners, but doing nothing isn't a viable option. Ignoring debt going into marriage "can ruin your personal life and your financial life," says Mr. Bruning of Southern Magnolia.

Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at reports@wsj.com.

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