It matters not whether you are young, at mid-life or even older; we all seek compatibility when we choose our friends. That becomes even more magnified when it involves more than just a friendship. When you’re dating someone and wondering if they could be “the one”, how do you really know? You may be compatible in many areas, but what about financial compatibility? How do you know when (and how) to talk about money with the person you are thinking about spending the rest of your life with? Why does that really matter?
Falling in Love Isn’t Logical
Since I have been in love and also had financial issues in my own life, I feel like this is a subject I can talk about with some authority.
The act of falling in love is an emotional state, not one based on logic. When we are falling in love, we focus on the passion in our relationships and most of us never ever give a split second thought about such a mundane thing as money. But there does come a time when money thoughts do occur to each of us as individuals and the two of us as a couple when we think about taking more serious steps. The exact moment when that might happen has no timetable, but it can happen at some point. When it does, it can be a real eye-opener.
Financial Compatibility Isn’t About Past Financial Mistakes
I am willing to bet you that when you and your romantic partner first discover “the money part” of a relationship (also known as getting “financially naked”), it is an awkward time. That’s mainly because we place such an important part of our persona on money, income, and our assets that we are sometimes embarrassed by our financial situation. This can lead to bending the truth about our finances when we do talk about them. We are more likely to enhance our financial prowess rather than to admit to any problems or failures we have experienced.
But here’s the thing. Most of us have some experiences we aren’t proud of in our financial past. We make some bad decisions from time to time or even worse, we have bad habits that we haven’t broken or dealt with right now and we just don’t want to talk about them, with our partner or anyone else.
Since we all have made mistakes, if we are going to have a relationship, money has to be a topic we discuss. We are likely to find that if we don’t deal with money in an honest way, it will damage our relationship or even worse, eventually destroy it.
Money is the leading cause of stress in relationships and the leading cause of divorce in America. That’s a result of the fact that we search only for romantic sparks and then test out our financial compatibility after the fact, and we do a pretty poor job of evaluating it when we do.
When you are first getting to know someone you begin to find out about their lives, habits, successes, and failures. You can’t help that part of any real relationship if you are listening and talking even a little bit with each other.
Finding out your financial compatibility doesn’t seem to come up right in the beginning when you first meet someone that sparks romantic interest. If it did, it would seem a little weird, I think. But at some point, you will have to deal with this subject and perhaps in great detail if you are seriously contemplating turning your friendship into a real romantic relationship.
How someone treats money and deals with financial issues has lasting effects. It’s important to realize that there are certain points in a relationship when the time is right to have financial conversations.
Financial compatibility isn’t about avoiding partners who’ve made money mistakes or incurred debt. Compatibility isn’t about dating someone with a big income. Financial compatibility is a lot more important than your net worth or salary. You can have a low income and still be a great money manager.
How to Decide Who Is Financially Right for You
Whether we admit it or not, most of us search for specific attributes or characteristics in a partner. Some of us seek a humorous or adventurous partner, while others may look for a kind or generous companion. Whatever it is that you are seeking, it will be different for everyone.
The bottom line is that a couple is compatible when they share common values and beliefs. So then it follows that a couple is financially compatible when they share common beliefs and values about money.
Financial compatibility is not about setting your sights on someone with a lot of money or requiring your future partner to earn a high salary.
The amount of money you earn for working each week doesn’t include details on how someone manages their money. You can make a ridiculous amount of money and burn through it the minute it hits your bank account or you can make modest wages and save every penny you make. It matters in knowing what you are most compatible with in a partner. But the amount of money you earn isn’t what makes you compatible. It’s how you view and use money that matters.
What Are Your Financial Values?
You shouldn’t rule out people who aren’t well versed in financial matters as potential partners in life. You can learn all about those things. Don’t rule out every person who is in debt or hasn’t saved for retirement either. But there are certain questions you need to ask when you are serious about choosing a life partner.
1. What are their goals and priorities?
As James W. Frick famously said, “Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” While your goals don’t have to be identical, if one of you prioritizes travel and experiences and the other one prefers high fashion and fast cars, you may be in for a bumpy road.
2. Are they a spender or a saver?
Savers and spenders have different approaches to money and budgets, so it’s important to have a real conversation about it.
3. How do they track money? Do they use a budget?
It may seem like a given, but there must be some way to budget and track your money to help avoid problems. If there isn’t, that may be a red flag and a problem just waiting to happen.
4. Do they have debt and a plan to pay it off?
Some people don’t have issues with having debt, while others may believe in living debt-free. If you both have strong views, this could be a dating deal-breaker.
5. How do they handle credit and credit cards?
While credit and credit scores may be an issue, the more important thing is the attitude someone has about past problems and their current thoughts about how to handle it now. This topic offers the opportunity to consider each other’s tolerance for debt and how the two views might mesh or conflict.
6. How much money do they make?
When there are big differences in personal income levels and the relationship is moving forward, talking about how you both feel about combining money can avoid disputes later on and a “yours vs. mine” mentality. When you get serious is the time to have this discussion.
7. How do they feel about combining finances (or not)?
Each couple needs to decide if they will be combining their finances, keeping them separate, or something in between (like a three-account system with yours, mine, and ours). If there’s some degree of separateness, then you will need to talk about how joint expenses will be shared.
What Are Your Financial Behaviors?
When it comes to financial compatibility, it’s also worth talking about financial behaviors and habits. These should include:
- Open communication
- Awareness of financial situation
What Are the Big Financial Red Flags?
Before committing to a shared financial life, think about some serious red flags you may discover and if you think they can be overcome. They can include: very low credit score, constant overspending, out of control gambling, secrecy about finances and unwillingness to talk about it, and having no idea where money goes.
The funny thing about this subject is that we often learn lessons after we develop relationships and not before. I think that the effects of mismatched financial compatibility are almost always deadly to a relationship but unfortunately, well matched financial partners don’t ensure success. The good news is that if compatible, you can at least rule that reason off your list of potential reasons for relationship failure.
The key to your success is to have conversations to make sure you’re both on the same page. If you’re both willing to work together to achieve greater financial compatibility, the results will be a stronger relationship and healthier finances. Luckily, I have found a romantic partner who is financially compatible with me!
Have you been in a situation where financial compatibilities have caused stress? How did you handle it? Did you resolve the issues or did it ruin your relationship? What did you learn from the experience?