Welcome to another deep dive into the world of personal finance and what it means for your relationship. Today, we’re exploring a topic that’s as crucial as it is fascinating: money compatibility. You may have found your perfect match – the yin to your yang, the peanut butter to your jelly – but when it comes to managing finances, are you sailing smoothly or headed for stormy waters? A 2024 Love & Money study released by Fidelity Investments found that 45% of couples argue about money, with 1 in 4 citing money as the greatest challenge in their relationship. So, where do you stand? Let’s delve in to find out!
What are the different types of money habits?
Money habits are like fingerprints – unique to each individual. They’re shaped by your upbringing, experiences, and personal values. Some of us are natural savers, diligently squirreling away every penny. Others are spontaneous spenders, living for the moment, taking a more carpe diem approach to life. And then there are those who fall somewhere in between – the budget-conscious adventurers. They love to enjoy life, but they do so while taking care of their finances today and well into the future too. To understand whether you and your partner are a financial match requires you to first understand your own financial habits and relationship to money. So let’s give a nod to the old-school days of Facebook and figure out what your relationship status is.
How to figure out your personal “financial relationship status”
The first thing to understand is your relationship with money. It’s easy for us to point the finger at our partners and judge their habits, but remember, there are always three fingers pointing back at us when we do that. So before you begin to ponder whether your partner’s money habits are the issue and if you’re financially compatible or not, let’s first get clarity on what your own relationship with money looks like.
Get your journal and jot down your answers to the following questions, which will help determine your current financial relationship.
- Money as a person: If money were a person, how would you describe your relationship? Deeply intimate? Awkwardly distant? Casually dating? It’s complicated? Love, hate? There’s no right or wrong answer here, so what is it for you?
- Financial literacy: On a scale of 1 to 10, how would you rate your own level of financial literacy? With 1 being that you struggle with budgeting, have little to no knowledge of saving or investing, and may not be able to differentiate between different types of financial products, and 10 being that you’re proficient in budgeting, saving, investing, and planning for the future, understand complex financial products, such as stocks, bonds, mutual funds, and retirement accounts, and are able to make informed decisions about your financial well-being.
- Money management: How effectively do you manage your money? For example, in the last month, do you know exactly how much you earned, spent, saved, and invested? Do you know how much is currently in your current/checking account? Do you know how much of last month’s expenses were spent on essentials like rent, utilities, and groceries, and how much was spent on non-essentials like dining, take-out, and entertainment?
- Spending breakdown: Based on your current habits, do you know: How much you will have saved by the end of this year? And how much will you have invested by the end of this year?
- Debt-awareness: If you have debt, do you know what are the current balances, interest rates, and your debt-free date
- Hypothetical $100k: If you won $100,000 tomorrow, what percentage would you save, invest, use toward debt, spend, give away, and keep in an account?
Now that you have a clearer understanding of your financial relationship status and where you sit on the financial education scale, it’s time to sit down with your partner and see whether you’re on the same page or in a completely different finance book! Invite them to answer the above questions for themselves and get ready to compare notes.
Your money mindset compatibility test
Now, let’s put your money habits to the test! Here are a few questions to ponder together during your next money date:
- How do you handle budgeting? Are you meticulous about tracking every expense, or do you prefer a more relaxed approach?
- What are your saving goals? Are you saving for a rainy day, a dream vacation, or long-term investments?
- How do you approach debt? Are you debt-averse or comfortable with leveraging credit for big purchases?
- Are you a spender or a saver? Do you enjoy treating yourself to luxuries or find fulfillment in frugality?
- How do you communicate about money? Are you comfortable with scheduling monthly money dates and being transparent with your finances? Why or why not?
- How will you manage finances? Do you think it’s better to maintain separate bank accounts, have a joint account, or have a hybrid option i.e., a joint account for joint expenses while also maintaining individual accounts
- What are your views on financial responsibilities? If your partner were to lose their job or source of income, how would you respond? Would you support them financially in the interim or expect them to continue to pay their share of the financial obligations?
- How will you manage unequal earning capacity? If one partner earns more than the other, what approach would you take to paying for bills and other expenses?
- What are your views on having a prenup in place before marriage? Why or why not is this important for you?
- If you have or are planning to have a family together. How do you expect to manage your finances? What are your views on going back to work versus staying at home to take on childcare duties? How will you manage the income earned if one partner is a full-time stay-at-home caregiver?
With a better understanding of your own financial relationship status and how that overflows into your views of financial responsibilities and obligations in your relationship, where do you both stand now? Are you sailing in the same direction? Or are there treacherous rocks that your love boat is at risk of hitting?
Remember, regardless of where you currently are, the key question to ask yourselves next is, what can we do to move forward? What does this mean for you, and where do you want to get to? Even if there are some significant divergences in how you currently manage or view finances individually and within your relationship, ideally, you and your partner will be ready to make adjustments to bring you closer together.
How to become better financially matched
The first step in becoming a financial match made in heaven is to schedule that all-empowering Money Date! You can read in-depth about money dates and how to make them a success for you here, which I highly recommend checking out once you’re finished.
Once you’ve worked through your first successful money date and you’re closer to being on the same page, the three Cs below will help sustain that progress for you both in the long term.
1. Communication is Key
Open and honest communication is the cornerstone of any healthy relationship, especially when it comes to money. Schedule regular check-ins to discuss your financial goals, concerns, and priorities. Remember, it’s not just about the numbers – it’s about understanding each other’s perspectives and finding common ground.
2. Embrace Compromise
In any relationship, compromise is crucial. You may not see eye to eye on every financial decision, and that’s okay. The key is to find a middle ground and make decisions that reflect both your values and priorities. Maybe it means splurging on that fancy dinner one month and cutting back on expenses the next.
3. Assess Compatibility
While opposites may attract, financial compatibility can significantly impact the long-term success of your relationship. Take the time to assess your compatibility – not just in terms of spending habits but also attitudes towards money, financial goals, and risk tolerance. Remember, it’s not about finding someone who’s exactly like you but finding someone whose financial values align with yours.
Frequently Asked Questions (FAQs) about financial compatibility
Let’s dive into some more questions you may have on this topic.
Q: What if we have different money habits?
A: Differences in money habits are common in relationships. The key is to communicate openly, find compromises, and focus on shared goals.
Q: How can we create a joint budget?
A: Start by outlining your shared financial goals, then track your income and expenses together. Consider using budgeting apps or spreadsheets to simplify the process.
Q: What if one partner is more financially responsible than the other?
A: It’s important to approach financial responsibilities as a team. Consider dividing financial tasks based on each partner’s strengths and interests, and set clear expectations for accountability.
What does this all mean?
In the game of love and money, compatibility is key. By understanding and respecting each other’s money habits, communicating openly, and embracing compromise, you can build a strong foundation for financial harmony in your relationship. Remember, it’s not about who’s right or wrong – it’s about finding a balance that works for both of you. So, here’s to love, laughter, and financial bliss! Here’s to the strengthening of your financial love story!
Laura Tynan is the founder of The Witch of Wall Street, a personal finance and investing community, where women are shown how to manage, multiply and manifest money, using simple strategies. Laura holds a BSc Hons in Finance, is a Chartered Accountant, and is certified in EFT Tapping, Breathwork, and RRT. She has been recognized by the Financial Times as a Top 20 Future Female Leader and by Yahoo! Finance as a Global Champion of Women in Business. She is a multi-award-winning speaker who has spoken at, and been featured in, Forbes. Laura hosts The Witch of Wall Street podcast and is the author of the personal finance and investing book for women, by the same name, which is available now on Amazon.
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