Financial Red Flags: Is It Time for a Tune-Up, or a Breakup?
A romantic relationship is hard enough to keep healthy, but its odds take a hit if one or both of you has a poor relationship with money.
It’s no secret that finances are the most common source of disagreement and stress in relationships and a leading cause of divorce, according to Chad Cummings, an attorney and certified public accountant (CPA) at Cummings & Cummings Law.
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“In my tax and financial planning practice, I routinely have clients discover financial problems during mortgage underwriting, tax preparation, estate planning or divorce that could have been avoided earlier with even an hour-long annual financial review,” he said.
Here’s a look at what some financial and legal experts want you to know about looking for financial red flags in your relationship and deciding whether it’s time for a tune-up or a possible breakup.
Time for a Tune-Up
“The first red flag I look for is using credit to cover ordinary living expenses,” said Phillip Zagotti, a CPA and attorney at North Star Law Firm. “If groceries and gas are going on a credit card that doesn't get paid off in full, the household is spending more than it earns every month. Making only the minimum payment is the next step down.”
Per Saadia Ahmed, a certified financial planner (CFP) and cofounder and principal advisor at Kaizen Financial Strategies, money is one of the biggest sources of conflict between couples and can sometimes contribute to breakups. She said that even in strong marriages, it’s rare for both spouses to have the same attitude toward saving and spending. Often, one spouse takes the lead in financial decisions while the other simply follows.
“What matters is understanding these differences and learning to work around them,” said Ahmed. “Sometimes, when working with couples who have very different attitudes toward money, I ask them a series of questions to identify whether they are savers, spenders or somewhere in between.”
Ahmed said seeing how differently they answer the same questions can help them understand each other better and open up meaningful conversations. This can be a solid first step toward a tune-up that can avoid a breakup.
“The overall question is whether both people in the relationship are willing to be honest about what is happening and work on it,” said Ashley F. Morgan, bankruptcy and debt attorney at Ashley F. Morgan, Law PC. “A budget can be changed, debt can often be addressed and financial habits can improve. But repeated deception, refusing to discuss money and regularly creating new financial crises reflect a pattern that is not easily changed.”
Time for a Breakup
According to Morgan, debt isn’t necessarily the biggest financial red flag in a relationship. Rather, it may be when someone isn’t willing to communicate honestly about the debt or address the underlying financial issues.
“You don’t need to exchange credit reports on the first date, but as a relationship becomes serious and people start talking about marriage, living together, buying property or combining finances, money becomes part of the relationship,” she said. “If you don’t know where your partner stands financially, it becomes nearly impossible to plan for the future together.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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