4 mindset shifts to make debt talks easier

Death, sex.... and debt? For today's adults, debt is commonly a thing that almost everybody has, but is often hard to admit. Whether it's career-establishing student loans, credit card balances, car loans, or mortgages, debt has become a common feature in many people’s lives.

Despite that, debt continues to be one of the hardest conversations for people to bring up in a relationship. And it often leads folks down a path where they share stories like:

I’m 27, and my partner and I have lived together since December 2020 and had been together for about a year before that. Our relationship is going well overall, and we’ve talked a little bit about getting married. The problem is that I haven’t told him the specifics about my debt. He knows that I have student loans, but since they’ve been on hold since the beginning of the pandemic, I’ve been conveniently ignoring them.  (I owe about $60,000 total between undergrad and my master’s degree in teaching, and yes, I know it’s bad that I’m in denial.) I also have about $15,000 in credit card debt, mostly from my early 20s. I pay the minimums every month. (Again, I know this is bad.) 

I make $66,000 from my job in education, and work has been incredibly stressful over the past two years, so the prospect of facing my financial issues has been overwhelming. I’m also incredibly ashamed of putting myself in this position, so it’s not exactly something I’m eager to discuss.

In today's blog post, I'll write about ways to understand and reframe your debt both to yourself and your partner, in hopes that it makes it easier to talk about. We'll go through:

• Why not all debt is created equal

• Where luck and debt intersect

• A way to start ‘the talk’

• How couples can decide if it’s “ours” or “mine” to manage
  
  
  

Why not all debt is created equal

Bot all debt is "bad". 

It’s easy to lump all debt together and try to avoid it at all costs (or feel negatively about any debt, even if it’s helping you build wealth). Debt is usually considered "bad" when the interest rates are so high they’re often viewed as predatory. Having "bad" debt serves as a beacon to prioritize paying it down first, helping you determine where to focus your efforts.

If you're trying to figure out what’s "good" or "bad" debt, focus on two key factors: the interest rate and the purpose of the debt.

How quickly it grows

'Good' debts have low interest rates that make the eventual payback possible and affordable. A rough rule of thumb to sanity check this is:

• 'Good' - Low-interest debt: < 5% (like mortgages)

• 'Okay' - Medium interest debt: 5 - 15% (like car and student loans)

• 'Bad' - High interest debt: 15%+ (like credit cards)

• 
  

If you were lucky and bought a house a few years back, you'd potentially have a 30-year mortgage with a mortgage rate that may be as low as 3%. That's great debt, especially in today's market with accounts like Plenty's cash+ goals offer 4.7% (meaning you'd be financially better off saving extra money instead of paying down your debt). But if you had a credit card with 30% interst rate, a $10k loan would grow to $13k after just a year making it that much harder to pay off down the road.

What is it for?

Debt can be a powerful tool—it makes it possible to buy something before you've saved up all the money for it. In many ways, it’s critical for leveling the playing field, offering opportunities to more people, not just those who already have enough funds.

If you had to save until you had 100% of the value of a house, you might wait decades before you could afford one. If college students needed to save 100% of their tuition upfront, far fewer people would be able to attend college. If you had to save the full amount to buy a car, many would be stuck with much older, less reliable vehicles.

When debt is used as an investment—such as for a home (assuming it appreciates in value)—it can be foundational for building wealth. When used to make a college degree (and a future career) possible, it can uplift the next generation.

The gray area arises when debt is used for lifestyle or consumption. It’s often necessary to take on additional debt while in school—to cover rent, food, and other essentials. Some purchases, like a flight home to see family after a challenging term, can be essential for well-being. However, the constant allure of consumer products, combined with one-click buying, can make impulse purchases easy, and high-interest debt can accumulate faster than we realize.

Where luck and debt intersect

Two partners almost never come from identical upbringings or family backgrounds, and debt often highlights these differences. When two partners have different amounts of debt—or one partner has debt and the other doesn’t—it can lead to statements like:

"It's hard to talk about my student loans. I feel ashamed, but my family couldn't afford to pay for college and I had no other options."

So what if one partner was financially luckier and happened to be born into a family that could cover college expenses, while the other wasn’t? Is it possible to reframe your views on debt together to recognize the role of luck and circumstance?

"I didn't have debt for a long time, but then I was fired and it's taken me longer to find a job than I thought... and it all just came out of the blue. And it's hard to admit this to my partner because I don't want them to think less of me."

And what if life events or bad luck led to limited alternatives, such as not having family support, which contributed to creating the debt?

A willingness to look at these circumstances and perhaps reframe how the debt was created is an important step toward bringing empathy into the relationship and working together as a team. Whether you decide to tackle it together or independently, this first step can provide emotional support in paying down debt.

How couples can decide if it’s “ours” or “mine” to manage

For many things in a relationship, there's no one-size-fits-all. Each relationship will need to decide what feels right and all the same 'how best to communicate' rules still apply.

To help jumpstart the conversation, here are two perspectives to consider:

Did the debt make it possible to earn income? 

It's not easy to figure out what's "fair," especially when it comes to debt. One approach is to start by considering how you view the income each of you earns.

Do you see it as money that contributes to your shared goals? Is it "our" income? If that's not how you currently talk about it, do you think that might change in the coming years?

If your answer is "yes" to any of these questions, then perhaps it’s helpful to reframe debt—like student loan debt or debt from college or grad school—as part of the cost of earning that income. And if you want to share in the benefits of that degree, it might be fairer to also share in the "cost," even if it was incurred before you started managing money together.

Is there bad debt? Will you save money, by working as a team?

Let's talk some stats... In this day and age, over 67% of millennials have, or have had, credit card debt at some point. It’s a slippery slope that can, unfortunately, happen as easily as slipping on those New Year’s resolutions to exercise more.

Take a moment to pause and think about your future together: Do you envision a future where you'll increasingly share your finances? If so, working as a team to pay off high-interest debt can help you avoid interest penalties down the road and build confidence in being on a path free from bad debt.

Navigating that conversation isn’t easy, but an important starting point is to create your own plan, assuming it’s yours to manage. Bringing this plan into a conversation with your partner can help them feel that you’re both taking responsibility, rather than setting an expectation.

A way to start ‘the talk’ 

We know it's not easy, so here are some scripts to help you get started.

1. Acknowledge you're taking it seriously:
   "This isn't easy to share, but I think it's important because we're building a future together. I have [$XXX] of debt from [life circumstance]. I am taking responsibility for it." Specificity here is helpful, so they understand the scale.

   
   

2. Acknowledge how they might feel: "I understand this might be a lot to take in, and I'm sorry I didn't share this sooner. "

   
   

3. Share why it's been hard to talk about it: "I have felt [shame / embarrassment / guilt / fear / regret] and that has made it hard to tell you sooner, even though I've meant to."

   
   

4. Share what your current plan is, assuming you tackle it on your own: "I have a plan for the next year - I'm planning to pay down [$XXX] per month which will bring it down to [$XXX] on my own."

   
   

5. Understand that it may take some time for a partner process and offer space: "I know this is a lot to take in, so I can answer any questions now or give you some time to process this.

In conclusion,

It may sound like a cliché, but we've all been there: staring at that bandaid we know we need to rip off, potentially realizing that it'd even heal faster once it's off. As hard as it is to bring up the conversation, the reward can be waiting: you don't have to be alone in carrying the burden of this secret, and it can bring you closer to the relationship you want. 

Sources

Federal Trade Commission. “Managing Debt.” Consumer.gov. Accessed October 29, 2024. https://consumer.gov/credit-loans-debt/managing-debt.

Federal Trade Commission. “How To Get Out of Debt.” Consumer.ftc.gov. Accessed October 29, 2024. https://consumer.ftc.gov/articles/how-get-out-debt.

Wells Fargo. “Tips for Managing Debt.” Accessed October 29, 2024. https://www.wellsfargo.com/goals-credit/smarter-credit/manage-your-debt/tips-for-managing-debt/.

Blanco, Amanda Arnold. “How Do I Tell My Partner About All My Debt?” The Cut, January 10, 2022. https://www.thecut.com/2022/01/how-do-i-tell-my-partner-about-all-my-debt.html.

KeyBank. “How To Manage Debt as a Couple When Only Your Partner Has Debt.” Accessed October 29, 2024. https://www.key.com/personal/financial-wellness/articles/how-to-manage-debt-as-a-couple-when-only-your-partner-has-debt.html.

Credit.org. “How To Talk to Your Spouse About Debt.” Accessed October 29, 2024. https://credit.org/blogs/blog-posts/how-to-talk-to-your-spouse-about-debt.

Renteria, Laura Grace Tarpley. “4 Ways to Talk to Your Partner About Debt.” Yahoo Finance, August 15, 2023. https://finance.yahoo.com/news/4-ways-talk-partner-debt-230639761.html.

Freedom Debt Relief. “How Couples Can Get Out of Debt Together.” Accessed October 29, 2024. https://www.freedomdebtrelief.com/learn/debt-solutions/how-couples-get-out-of-debt/.

InTouch Credit Union. “2 in 3 Millennials Have Credit Card Debt.” Accessed October 29, 2024. https://www.itcu.org/financial-awareness/guide/credit-cards/2-in-3-millennials-have-credit-card-debt.

Pressman, Aaron. “Millennials and Gen Z Are Snowballing Debt as Interest Rates and Credit Scores Lag.” Fortune, March 1, 2024. https://fortune.com/2024/03/01/millennials-gen-z-snowballing-debt-interest-rates-credit-scores/.

Adams, Alexandria White. “Average Credit Card Debt by Age.” CNBC Select, June 8, 2023. https://www.cnbc.com/select/average-credit-card-debt-by-age/.

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