A red flag says, “Something is wrong, proceed with caution. In a relationship, financial red flags can herald troubled times. It’s important to deal with this quickly, ideally before your future becomes too intertwined with that of your partner.
Raising a financial red flag may seem scary, but it can be a positive experience if both parties are willing to work on it.
Take a look at these five financial warning signs; Do any of them sound familiar to you? If so, now is the time to act.
1. Refuse to talk about money
“Money is consistently cited as the biggest stressor in people’s lives,” said Maggie Baker, Ph.D., author, money psychologist and senior researcher at the Canadian Financial Resilience Institute, in an email. “Because there are so many cultural and social taboos about being transparent about the reality of one’s finances, it remains in the shadow of many people’s consciousness.”
While it might be inappropriate to ask for bank statements on a first date, it’s not unreasonable to discuss money matters with someone you really like. Planning a future together means communicating openly and being on the same page financially and otherwise.
Refusing to talk about money can be a sign of a serious problem, such as a hidden debt or not being ready for a serious relationship.
2. Frequent expenses
It’s natural to want to impress a potential partner, and gifts or trips are a common way to do that. But being too visible or demonstrative with money without the bank account behind it can lead to major challenges later.
If your partner is living beyond their means and you find this troubling, it could be a sign that their values or goals related to money are different from yours.
3. Use of money for purposes of manipulation or shame
Beware if your partner judges you or makes you feel embarrassed about financial differences (whether you feel bad about having too little or too much money compared to them).
It’s not right to be ashamed or feel guilty about paying for things because you have more money, or to feel inadequate because you have or earn less money. Either way, your partner isn’t supportive or understanding of your financial situation, and that’s a red flag.
4. Excessive consumer debt
A mortgage or student loans are one thing; excessive credit card debt is another. Borrowing money to make ends meet is also a red flag. These are signs that your partner isn’t financially responsible, and it can get you both in hot water later on.
Marriage means you take responsibility for their debts (and they yours) – past, present and future. Try to determine if your debt situation is an isolated incident or the result of an ingrained behavior before it becomes serious.
5. Keeping secrets or telling lies about money
Feeling financially out of control often causes people to hide aspects of their financial lives, Baker says. “When your partner has better control, you are more likely to expect criticism than empathy, and this perception will motivate you to hide the truth from yourself and your partner.”
Yet secrets and lies set a dangerous precedent for dishonesty in the relationship, which can drive a wedge between the two of you.
What if there are financial red flags in a relationship?
Open and honest communication is the antidote to most of the financial warning signs above. It’s also easier said than done, especially if you or your partner have trouble talking openly about very personal or complicated things.
Baker says more new couples should ask themselves, “Can you be honest and open about your overall financial situation?” Assessing your partner’s willingness to be transparent can help you have easier conversations about money later.
If you put up a financial warning sign with your partner and they hear you with an open heart and a desire to work through it together, great. But if they deny it or reject it or become argumentative, what will you do? Is this red flag big enough to be a deciding factor?
Couples who are at an impasse with a financial problem but both want to work on it should see a therapist who can mediate the conversation. Financial therapists, in particular, are well equipped to help couples navigate these troubled waters.
Once the lines of communication are open, it’s time to figure out how to move forward together. Every relationship is different; Not all couples need to fully combine their finances or agree on every detail of the budget. In fact, some financial autonomy in a relationship can be good, as long as it’s not kept secret.
It is important that you and your partner set clear terms for managing your finances. This means having practical conversations about day-to-day money management, as well as developing financial goals together and creating a plan to get there.
Money questions to ask your partner
Are you ready to talk about financial red flags? First, set up a recurring “money date” where you can spend at least an hour together without interruption. During this time, answer the following questions together:
- What is our current financial situation? The more specific you are about your individual and combined income, assets and liabilities, the better.
- What are our goals ? For example, buying a house, having children, taking annual leave and going back to school. For each goal, set a time frame in which you want to complete the goal and how much money you will need to do so.
- How are we going to achieve these goals? Break down each goal and create a financial plan to achieve it.
- What has changed since our last financial check? Seeing yourself achieve your financial goals can be motivating. Be sure to celebrate milestones along the way. Likewise, discovering that you’ve gone in the wrong direction can be a signal to re-evaluate and adjust your goals. Or it could be a sign of other financial red flags that you can ideally address before they spiral out of control.
About the authors
Nora Dunn is a former financial planner and digital nomad since 2006. On her website, TheProfessionalHobo.com, she decodes financially viable long-term travel. She’s on FB and IG @theprofessionalhobo.
Beth Buczynski is a writer on NerdWallet’s international expansion team. Beth works with editors and publishers to bring financial clarity to readers in Canada’s 10 provinces and three territories. Previously, Beth covered mortgages and homeownership for NerdWallet for four years, first as a writer and then as an editor. As an author, Beth’s work has been featured by The Associated Press, The Washington Post, and Money Magazine, among others. Beth holds a master’s degree in public communications from Colorado State University.
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