The power of two is real. Single life can be bliss, but from a financial perspective, couples tend to enjoy higher household incomes, accumulate more wealth, and, by the time retirement rolls around, are up to six times less likely to live in poverty than singles.
The catch is that singles can control all the financial reins. For couples, money has the potential to drive a wedge in relationships, especially when a twosome isn’t working as a team.
Long-standing research by Relationships Australia confirms that financial stress is a leading cause of relationship breakdown, accounting for close to one in four break-ups. The other main culprits are communication difficulties, different expectations, and lack of trust.
Why does money rank so highly on the list of issues that can drive a relationship onto the rocks? It’s a no-brainer that if you’ve lost your job and have kids to support and a mortgage to pay, the ingredients are all present for serious financial stress. But Relationships Australia found high-income couples are just as likely to go to war over money matters as battlers. So, it’s not always a lack of money that causes friction.
The reality is that in today’s complex world, money can be toxic in a relationship no matter what our personal circumstances look like, and financial issues can undermine a relationship in a number of ways. As the graph on page 34 shows, for almost one in two couples money is a tension-builder. But financial problems can also lead to the blame game and outright fighting, and ultimately see people simply walk away from a relationship.
Add in the stress of a pandemic and there’s a perfect mixing pot of issues for couples to find themselves at loggerheads. Research commissioned by dating site eharmony during Covid-19 shows almost six out of 10 (58%) Australian couples now say finances are a major source of conflict in their relationship.
Financial expert Victoria Devine, from She’s on the Money podcast, says the uncertainty caused by the pandemic has created enormous fiscal stress for singles and couples alike.
Early signs of trouble
Pandemic or not, studies show arguments over money can be a reasonable predictor of relationship breakdown. So, it pays to address money matters at an early stage, preferably while we’re still basking in the warm glow of the beginnings of a relationship. The trouble is, this doesn’t always happen.
According to Relationships Australia, only about one in three of us discusses our financial situation before committing to a partner. That’s largely because 70% of people say their partner’s finances weren’t an important consideration when they entered the relationship. And let’s face it, questions along the lines of “What are your thoughts on budgeting?” don’t make for great pillow talk.
Nonetheless, it’s an oversight that can come back to haunt us. “It’s so important to have those uncomfortable money conversations early in your relationship,” says Devine. “My advice is to be upfront, because the more you hide, the more it can impact you in the future.
“I’ve worked with clients who have been in six figures of debt and haven’t told their partner. It’s a shock to the relationship to say the least and it can be really difficult to work through.”
Kate McCallum, financial adviser and director of Multiforte Financial Services and joint author of The Joy of Money, says conflict often arises because people have different values and priorities and so want to spend on the things they value, which may not be a priority for their partner.
The trick, she says, is for couples to normalize conversations about money. “I believe the best way is to not make money the topic of the conversation. Instead, talk about values and priorities.”
She recommends asking a partner questions like “What do you value?” and “What do you have dreams about that you’d like to do?” These conversations can naturally lead to money.
“For instance, if your partner says they have dreams of travel, you can talk about exactly what type of travel and how often. Then you can ask what this looks like in terms of putting money aside to make this dream happen. It’s all about goals, priorities, and dreams.”
Keep it non-judgmental
One of the benefits of raising money matters early on is that it allows relaxed, non-confrontational discussions. There’s little to be gained from kickstarting money conversations by waving the latest credit card statement and yelling, “Look how much you’ve spent this month!”
Equally, if your partner does open up about their dreams and goals, it pays to avoid insensitive shotgun comments like “The way you spend, you’ve got no hope of achieving that!”
“These money conversations need to be nonjudgmental,” says McCallum. “Talk to your partner with a mindset of pure curiosity. Ask what’s important to them and why they value certain things.”
If you are at the beginning of a relationship, the bonus is that you may find you each have very different values – and that can be a red flag to get out early.
“Some people may receive extravagant gifts when they first start dating,” says McCallum. “It can be lovely at first until they talk to their new date and realise they are expected to reciprocate. So even simple questions like “How do you mark special occasions?” can draw out significant differences in values.”
Importantly, McCallum says these sorts of conversations about money aren’t restricted to couples starting out. They can potentially be held at any stage of a relationship. “It’s all about introducing money and financial wellbeing as a part of your shared lives in the same way you may discuss your fitness goals, or parenting, or even what you’re cooking for dinner that night to ensure you’re sharing a healthy meal,” says McCallum. “Once these money conversations are part of our lives, it can be a real enabler to financial security.”
Another layer of stress
One reason we can find it hard to have open and honest conversations is that we feel our own approach to personal finance isn’t too flash. The latest Family Finances survey from St.George bank found around one in five Australians feels embarrassed about their financial situation, a figure that rises to over one in four single women. This has seen the Westpac Group (owner of St.George) establish the Ruby Connection, an online resource designed to help women build a financially sustainable future.
Embarrassment aside, two other issues loom large: trust and debt.
Lack of trust can be the equivalent of wood rot in a relationship. It creeps up over time and can erode even the strongest foundations. Yet St.George found almost a quarter (24%) of Australian couples don’t trust their partner when it comes to managing money.
Lack of trust filters through to other areas. St.George found almost 1 in 10 people in an otherwise committed relationship is not open and honest with their partner about debt and their financial situation.
“It’s never been more important for couples and families to have honest conversations about their financial situation, even if they might be uncomfortable,” says Ross Miller, general manager at St.George Bank.
“Trust and openness are so important in committed relationships, particularly when it comes to money. From this study, we found that across the board, couples aren’t talking about money nearly enough.”
In the face of the pandemic, he encourages everyone to discuss their finances as a family. The St.George survey found over a third of couples say managing personal debt adds an extra level of stress to their relationship at some stage.
It’s not about compromise
The old line about “I earn the money. She spends it” no longer has relevance in modern relationships. Thank goodness.
Today’s lifestyles, housing commitments, and career aspirations mean that in many households both adults work, making a valuable contribution to overall income. According to Kate McCallum, this explains why the answer to managing money as a couple isn’t about compromise.
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