When you first start seeing someone, it’s completely understandable that your focus is on whether you’re romantically compatible. But as the relationship becomes a long-term one and perhaps even a forever one, research shows it’s important to get an understanding of your financial compatibility.
According to the Australian Bureau of Statistics (ABS), in 2019 there were 2162 divorces in Australia, with financial issues cited as one of the major reasons for these marriage breakdowns.
How can you set your relationship up now to protect it from the effects of financial tension in the future? These five questions are a good place to start.
1. Am I bringing any money surprises into this relationship?
When Chris a restauranteur, and Noel a marketing manager, decided to buy a home together, they were so compatible that they agreed on location, style and even budget without the need for any serious discussion.
Imagine their surprise when their joint application for a mortgage was declined.
Turns out, that several years ago Chris had taken a business loan to buy his restaurant. The business had undergone some teething problems and as a result, Chris’s credit score had been impacted.
Noel’s income alone was not sufficient to cover the mortgage, so the couple was unable to buy their dream home, and this caused a great deal of tension for the couple when this dream was dashed. This situation could have been avoided if they’d taken the time to discuss any potential money surprises before starting the search for their home.
2. What’s your money personality?
Investopedia describes five money personalities here:
- Big spenders – love having the latest and great stuff, whether it be the newest iPhone or the biggest, most beautiful home.
- Savers – are the opposite of big spenders. They’re very frugal and find it hard to justify spending money on anything beyond the essentials.
- Shoppers – derive emotional satisfaction from spending money.
- Debtors – don’t keep tabs on their spending and thus often find themselves spending more than they earn simply through lack of attention rather than a desire to spend.
- Investors – are highly conscious of the money they have and want that money to work hard for them.
While it might be tempting to classify some of the money personalities above as ‘good’ and ‘bad’ and hold a ‘good’ money personality over the head of a partner who has a ‘bad’ one, this isn’t at all helpful in a relationship. It’s hard to change your personality. It’s easier to be aware of the effects your natural money tendencies can have on your relationship and adjust your behaviour appropriately.
3. Do I hide purchases from my partner?
If you’re a ‘big spender’ or ‘shopper’ as described above, it’s almost certain you’ve hidden a purchase from your partner at some stage. Most likely because you’ve heard the words, ‘Is that new?’ and felt judged for your purchase.
When someone feels like they are being judged every time they buy something new, be it as small as a book, a dress or a new cushion for the couch, pretty soon they’re going to start finding ways to keep those purchases a secret from their partner.
As you can imagine, this is a slippery slope to get on.
Rather than getting caught up in that cycle of judgement and resentment, it’s better to have an open conversation about your individual approaches to discretionary spending. Both parties (the person making the purchases, and the person judging them) have to be aware of the effect their behaviour has on the other.
4. Do we have the same financial values?
The term ‘financial values’ can best be boiled down to the question, ‘What is the purpose of money in your life?’
For some people, money is about security – knowing they have enough to live now and are well set up for the future, especially if something untoward should happen.
For others, money is about freedom – their goal is to achieve the level of financial independence that means they never have to worry about or think about money again.
Other financial values include family, philanthropy, health and travel.
Of course, most people are not one single value, they are a mixture of values. The important thing for your relationship is to understand each other’s values as this speaks to what drives your money decisions. For example. someone who is all about security may not see the value in an expensive yearly overseas holiday. Someone who is about family might not want both partners in the relationship working full-time if there are also kids in the relationship.
5. Can we talk about money without fighting?
As you’ve probably noticed from the above, a key to strong compatibility is the ability to have open and frank conversations about money.
If you and your partner find that every money-related discussion turns into a fight, you might need to consider bringing in a third party to help. As financial advisors, we often find ourselves playing this role for our clients.
Most relationship counsellors are also skilled at helping couples with this.
And the National Debt Hotline is a free service that provides financial counselling services.
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