Does the secret of true love come down to your attitude to money? This Valentine’s Day we’re looking at the role of financial compatibility… and whether your IFA could be Cupid in disguise. Article by Nick Green.
Amazingly, arguments about money are as big a trigger of relationship break-ups as infidelity. Several different studies have found conflict over money to be in the top two causes of marital splits, including a 2018 study by law firm Slater and Gordon that identified it as the single biggest reason for divorce.
But if that’s true, then maybe the reverse also applies. Perhaps the key to finding ‘The One’ is to look for someone you don’t just fancy, but who’s financially fanciable too.
Wait – does that mean you should be a gold-digger? (Well, it’s a strategy…) No, what we’re talking about is financial compatibility. In other words, having a similar attitude to all things money-related. In a long-term relationship, this can save you a huge amount of ‘trouble and strife’.
How financial personalities can clash
Being in a loving relationship for any length of time will almost invariably mean merging your finances to a large extent. Yes, we’ve all heard of exceptions to this rule, where one person controls most of the assets, and tells their partner what they can and can’t buy, and reads their texts, and stalks them online, and vets all their friendships… yeah, you get the idea. Healthy relationships are built on mutual trust and respect, if they’re to last longer than a fling.
You don’t need a shared bank account to have merged finances. It might simply be that both your names are on a mortgage, or you both pay rent on your flat, or just share household expenses. Living with another person usually means a stark choice: share your finances, or eventually grow further apart. The problem is, sharing your finances can be where the cracks start to appear.
Two people who can’t keep their eyes off each other may still not see eye to eye on money. Here are a some typical examples of the ‘money mismatches’ that can occur.
Splurge versus sacrifice
He denies himself treats so they can save a bit more, while she splashes out on what he sees as luxuries. He perceives that his self-denial is funding her self-indulgence, so feels like an unequal partner.
One spouse is the main or sole earner, while the other keeps house. The earning partner starts to believe they have more right to choose how the money is spent, while the other one argues that raising kids is just as hard and every bit as vital. Arguments follow.
The high roller and the hedger
The high roller will risk a big loss for a greater gain, such as buying a home right on the edge of affordability and trusting that they will manage somehow. The hedger prefers to play safe and not overstretch themselves. Each can be frustrating for the other one.
The credit crush
He sees nothing wrong with living with debt, providing he feels in control of it. She, by contrast, hates to borrow anything. As a result, he feels rich, while she feels broke.
Short-term, long term
Her idea of wealth is having money to spend now. His idea of wealth is having plenty of savings. One of them will always feel restless.
Charity begins at home
One spouse enjoys giving lots to charities, while the other feels the pinch on their household finances – but if they complain, they risk appearing mean.
Do men and women relate differently to money?
Though it’s dangerous to generalise, there do appear to be broad differences in the ways that men and women relate to money. And really, this shouldn’t be surprising. Woman who expect to have children know they may have to take one or more career breaks, affecting their earnings, and there is also a well-document gender pay gap. Based on this alone, one would expect women to take a more cautious approach to money.
This was indeed a key finding of the Value of Advice research by Unbiased, though the full picture is more nuanced than that. Overall, we found that:
Women are often:
- Less confident in their own financial knowledge
- More conscious of the true cost of living
- More realistic about their needs in retirement, but
- Less aware of the value of pensions
The final point is particularly interesting: women getting divorced were far less likely than men to prioritise pensions in their financial settlement, often virtually forgetting about them. This is potentially a real concern, given that women typically have lower pension savings.
Meanwhile, men tend to be:
- More financially confident – but more likely to make decisions they regret
- More likely to set clear financial goals and fixate on them
- Over-confident of how well-prepared they are for retirement
So much for the generalisations. There are also, of course, differences in individual attitudes – too many to count. So what can you do if you’re crazy about your new squeeze, but their approach to money drives you mad?
How financial advice can help your relationship
According to research by the charity Relate, 61 per cent of couples with children say anxieties about money put a strain on their relationship (47 per cent of couples without children say the same). These stats show the extent to which money is a factor in romance, and also reflect the additional burden that raising a family brings.
When money issues arise, couples will try to deal with them – and each partner may have different ideas about how to do this. This is where disagreements can start, which can lead to arguments and eventually conflict. Each partner may be convinced that they are right, and that the other is being naïve or obstinate. How do you resolve that kind of situation?
The simplest way to resolve a disagreement is to have a mediator who is an expert in the subject, who is working in your best interests, and who is unbiased. An independent financial adviser (IFA) fits this description perfectly. So if the two of you can agree at least to consult an IFA, you can defer to an expert’s professional judgement, resolve any personal disagreements over money and – most importantly – know that you are making the best decisions for your circumstances.
So are IFAs also relationship counsellors? The answer is, they certainly can be – and if your shared finances as a couple are kept healthy, the chances are improved that your relationship will stay healthy too.