One of the number one relationship issues is money. Or in other words, people are not on the same page about money and argue about it a lot. I believe a big reason for this is a lack of financial compatibility.
There’s a tendency to fall for someone and their great qualities. Caring personality, adventurous spirit, good looks, etc. It’s usually not until much later in the relationship that money is even thought about, much less addressed and spoken about. There are many signs that you have financial compatibility though, this post will address eight important ones.
What is Financial Compatibility?
Financial compatibility is not perfection. Nobody is perfect, and that creates unreasonable expectations. Rather, financial compatibility is having similar values and being on the same page as your partner. There will be differences of opinion but you are close enough to make it work well.
Why is Financial Compatibility Important?
Two people on the same page about money are likely going to avoid money arguments and the stress that comes with it. Two people who are on totally different pages when it comes to personal finances are likely to have a lot of disagreements, hard feelings, and other problems related to money.
For example, if Bill is a spender who likes to spend his paycheck on new gadgets and expensive trips while Teresa is a saver who wants to invest 30 percent of the family’s income, there is a disconnect. Bill is a spender and Teresa is an investor/saver. They have very different money goals and expectations.
Bill spending the family’s money on the newest gadgets and expensive trips isn’t likely to sit well with Teresa if they are not investing 30 percent or more of their income. Likewise, if Teresa asks Bill to curb his spending so the family can invest more, that conversation is not likely to go well.
Signs You’ve Got It
There are many signs that you have financial compatibility, here are eight of them along with a brief explanation of each one.
Number 1: Money Conversations Are Easy
When you have financial compatibility, money conversations are usually easy. Before going any further, it is important to address the need to have money conversations. It doesn’t have to be a daily meeting, but from time-to-time money conversations are necessary. It’s simple communication–and communication in any relationship is important.
When those conversations are held, they are normally easy. Both people respectfully listen and come to a resolution together. Rather than the conversation turning into an argument, it’s solution focused with a quick resolution. Things get accomplished and both people feel good about the way it went, even if there are some imperfections.
Number 2: Open and Honest With Purchases
Being open and honest with purchases can look different ways. Depending on the systems put in place, that could mean telling your partner about every single purchase or just purchases over a certain amount. Or it might just be a brief discussion.
The way my wife and I do it is kind of a hybrid. For small purchases, we just do it. No conversation needed for the small stuff. For larger items, we give each other a “courtesy tell” where we just mention to each other that we bought this item. This avoids any confusion when one of us is looking at the credit card bill or checking account so we don’t wonder what X purchase is.
For the really big purchases, we always talk about it to assess if that’s something we want to spend on. For example, we’re going to do a soft remodel of a bathroom where we are getting a new sink and vanity. It’s not a massive purchase, but enough where we want to talk about it first and figure out if we really need/want it and how much we want to spend.
Number 3: Similar Goals
The fourth sign of financial compatibility is having similar goals. Goals cover a whole slew of areas, even areas not traditionally thought of as relating to money. For example:
- Health and fitness goals
- General life goals
- Career goals
- Family goals
Here’s what I mean by not traditionally thought of as relating to money. If you and your partner both have similar fitness goals, you are likely to support each other in spending money on health and fitness. That means spending more to buy healthier food, buying exercise equipment, subscribing to a fitness app, etc.
Related:
This is part of value-based spending, a concept I write about often. Health and fitness is valued, so money is spent on that area of life. Same concept goes for career goals. More money is spent on personal development, books, seminars, etc. that will help advance a career. Both partners are on the same page and are willing to spend to help both people reach their goals.
Related: Value-Based Spending: How to Create a Budget Around What You Value
Number 4: Understand Each Other’s Needs
To have financial compatibility, it’s critical to understand each other’s needs. For example, if your partner really values self-care, you will understand that more money will go towards self-care than other areas of life. That doesn’t mean thousands of dollars every month going towards the spa, but it might be a couple hundred.
Allocate money towards that expense with the understanding that both people in a relationship have different needs and wants. Different doesn’t equal incompatible as long as both people appreciate and respect those differences.
Of course this is all within reason. A couple making $50,000 per year would not be spending thousands per month in travel simply because they like to travel. But they might save a few hundred every month towards travel for a big trip or a series of small trips.
Number 5: Built in Trust
Next on this list is built in trust. Trust is such an important word in our language as it’s the backbone of all relationships. Without trust there’s uneasiness and a feeling of uncertainty. With trust, there’s security and an understanding that you have the right partner.
Financial compatibility is no different. With trust, there’s an understanding that your partner is on the same money page, isn’t making purchases behind your back, or hiding anything financial from you. Financial infidelity is a real thing, and a lack of trust is a big sign that something isn’t right.
Number 6: Systems Are in Place
Some financial compatibility comes naturally and organically. The good news is that it’s possible to also manufacture it through systems. Because good financial systems can increase compatibility.
Here are some examples of good financial systems that can be put in place:
- Automation
- Purchase thresholds that should be discussed
- Monthly investment percentages
- A vacation savings amount
All of these systems take the guess work out of things. The work is done upfront and then the expectation is set for both people. Each month is not a wild adventure of where the money is going.
Sure, it’s boring and not very sexy, but being intentional and having systems in place is one of the easiest ways not only to maintain financial compatibility, but also ensure long-term financial success.
Number 7: Good Faith
If you and your partner consistently act always acting in good faith towards each other, you probably have financial compatibility. Good faith is trying to do what’s best for your overall goals, your partner’s needs, and your overall situation.
Some examples of good faith:
- If questioning whether to tell your partner about a certain purchase, tell them
- Acknowledging when your partner is working hard at work or on a project
- Forgiving and letting go when your partner makes a money mistake (which we all make)
Good faith goes a long way in relationships. It’s giving the other the benefit of the doubt and not hanging on to the negative. And it’s always seeing the best in another person with an understanding they are trying their hardest.
Number 8: Similar Risk Tolerance
A big part of financial compatibility is similar risk tolerance. Risk tolerance covers a wide array of topics in personal finance. A few examples:
- How much of an emergency fund you want to keep–how much extra cushion would help you sleep better at night?
- Investment Risk–What kind of investments are you comfortable with? Are you willing to risk money to earn more money? Is slow and steady the game for you?
- Cars–how long are you willing to keep older cars that have a higher likelihood of breaking down? Do you spend more money upfront for a more reliable car?
These are just a few examples, but there are probably hundreds to pick from. To expand on the point, if one partner has a high risk tolerance and wants to invest half of the family’s income on high risk growth stocks, but the other person wants a safer allocation of index funds and bonds–there’s a compatibility challenge. They are pretty far apart and will need to figure out how to bridge that gap.
Conclusion
The stakes are high in personal finance, and developing financial compatibility with your partner is a big piece of the money puzzle. Financial compatibility is likely to mean less overall stress, less arguing about money, and a more stable relationship.
Simply ignoring money and hoping everything is going to work out in the end rarely works. While talking about it, getting on the same page, and gaining an understanding of the other person is as close to a guarantee as you can get.
Do you have financial compatibility with your partner?
