Foundations for Strong Families 201. Marriage

01/09/2009

Getting married and starting a family are life events that many individuals strive for. Research has shown the positive financial benefits in terms of wages and accumulation of wealth for couples who are married and stay married.12 If something serious happens such as unemployment or health problems, having a spouse can help one to get through the hard times. However, being married also can increase the risks of negative life events and it is vital for couples to be financially prepared.

Obtaining financial goals can demand an increase in expenses and requires strategic and informed planning. For instance, couples must think ahead about how to keep their finances afloat if one will leave the workforce to raise children. Questions that experts recommend couples ask themselves include, “Can your family survive only on one income?”; “Can you downshift the fixed expenses?”; and “What is your emergency backup plan?”13

Other negative life events—such as involuntary job loss, illness or disability of oneself or a family member, and divorce—may have negative financial consequences and can increase the immediate need for cash flow, which can threaten healthy finances if credit is not used wisely. Studies have shown that the risk of these events has increased dramatically in the past 30 years.14 The table below provides a few examples of negative life events and the possible consequences.

Life Event Threats to Healthy Finances and Credit
Involuntary job loss Lack of sufficient savings to pay bills and credit payments
Wage earner misses work due to either his or her or a family member’s illness or disability Lack of insurance and/or paid leave to defray the costs of missing work
Divorce Abuse of credit by partners, child support payments

If a disastrous life event strikes, financial ruin may start slowly, but it can quickly pick up speed. Not many families have enough money saved to cope with a devastating life event and they can run out of money within a short amount of time. Job loss, divorce, and medical emergencies all result in the loss of funds that are needed to keep up with minimum credit payments. Once this happens, credit scores can begin to fall.

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