Studies indicate that frequent fights around money strongly predict divorce. In fact, financial disagreements are among the top five leading causes of divorce in the United States. This is because the combination of ineffective communication and debt often causes stress around financial situations, leading many couples to seek a divorce. However, according to wealth management expert Chad Willardson, discussing finances early and understanding your partner’s spending habits in advance are ways to mitigate financial disagreements.
LA’s The Place: How soon is too soon to talk about money with a new partner?
Chad Willardson: There isn’t a hard and fast rule of thumb for when to discuss finances with a new partner. It’s only necessary to discuss finances when there’s a clear intention to move the relationship into a more serious phase that involves a higher level of commitment. This could be sharing bills, moving in together, or planning to get married. When the time for this conversation does arise, discuss the details. Does your partner have any debt? If so, what type? Honesty about money in a relationship is a precursor to honesty about other things in the relationship.
LATP: What are your top tips for how couples can successfully navigate money issues?
CW: In my 20 years of aiding couples with their wealth planning, I’ve found that disagreements over money often come down to the individual money personalities of the couple. Contradicting money personalities is a common driver of arguments, disagreements, stress, distrust, and anxiety in relationships. The reason for this is that typically one person in the partnership is a saver, and the other is a spender – and it comes down to that basic generalization.
To best navigate financial disputes that may arise, have a discussion with your partner about financial goals and lifestyle goals. Factors like upbringing or religion can influence an individual’s mindset around money. Being transparent about what scares you about money, your concerns about your partner’s habits, or your relationship with money will be crucial. Share with your partner an honest estimate of your monthly income and expenses. It’s important to note that the saver in the partnership will need to see some type of planning to feel secure.
LATP: What signs can singles look for when dating to gauge whether or not their financial habits are compatible with someone else’s?
CW: If you’re trying to detect financial compatibility, look for the extremes, and watch their purchasing habits. It could be a red flag if the person you’re dating is an extreme overspender. On the contrary, this could also be an issue if they’re overly frugal. Look for dependency on parents past a certain age; this can indicate someone isn’t financially responsible.
LATP: According to PolicyGenius, 25% of couples keep their money separated. What would be your recommendation to couples in married relationships? Is separating their money the best course of action?
CW: There are a lot of different reasons couples may choose to combine or separate finances. However, many states are community property states. This means that if you’re married and you earn money, it doesn’t matter if you have money in separate accounts; it’s all technically owned 50/50.
In my experience, I’ve seen more alignment and harmony when couples combine their financial life and have shared goals. This structure nurtures more understanding and communication. I see more couples having relationship issues when their money is completely separate. I would recommend having hard conversations at the beginning of your relationship. This way, you and your partner are aligned to combine finances when the time comes.
LATP: Financial infidelity refers to one partner spending money or having debt without telling their significant other. What is the best way for couples to be honest about their finances without oversharing too quickly?
CW: Be weary of oversharing about your finances, especially too early in a relationship. As I previously mentioned, this only needs to be an elaborate conversation when the relationship is upleveling. Some relational trust needs to be built first before you discuss money.
When couples consider combining finances, I recommend they meet with a financial fiduciary as a third party to discuss things like this. Just like they would for therapy.
LATP: What advice would you give to high-net-worth individuals who are dating? How should they best protect their finances?
CW: Always maintain some privacy and confidentiality around your financial affairs, especially in a new relationship. Oversharing about one’s financial wellness, especially if your partner isn’t as established, has risks – especially if it’s not yet a committed relationship. Financial fraud is widespread, and white-collar crime is extremely dangerous.
When you move your relationship beyond dating, there are protective measures like trust and family estate planning that I would recommend to protect your finances and assets.
