How Couples Can Overcome Financial Incompatibility

How Couples Can Overcome Financial Incompatibility article image.

Sharing your life with someone often means commingling your finances. This might be an easy transition for couples with similar spending personalities, but what happens if you and your partner clash when it comes to your financial habits? It's a worthwhile question considering that 1 in 3 married couples fight about money at least once per month, according to a 2018 TD Bank survey.

If this sounds familiar, now is as good a time as any to address financial incompatibility. Maybe you're a frugal saver, while your partner is more financially impulsive (or vice versa). Read on for some tips that can help you and your partner get on the same page so you can better reach your financial goals as a team.

How Financial Incompatibility Can Cause Problems

Partnering up with someone who isn't exactly like you can be a great thing. They may balance out your personality and help you to grow and evolve as a person. When it comes to your financial life, however, differences can create real friction in a relationship.

A super frugal partner might insist on extreme saving habits that the other person finds unlivable. On the other hand, if one partner is a wild spender, it could cause you to fall behind on your household bills and result in consequences that affect both of you.

Marriage doesn't combine your credit reports or directly affect your credit scores, but your credit should be a consideration when making financial decisions as a couple. Whether you're buying a house or opening a new auto loan or joint credit card, your individual credit histories will come into play, and your credit can be affected by how you manage accounts you choose to open together.

Even if just one partner has a high debt load or history of late payments or delinquent accounts, it may cause you both to get stuck with a higher interest rate on joint accounts—or be declined altogether. Couples who open new credit accounts together will find that payment history and credit usage will reflect on both partners' credit reports (for better or worse). Having different spending personalities can also make it that much harder to reach your individual and shared savings goals.

How to Get on the Same Financial Page

Overcoming financial incompatibility begins with identifying mindsets and spending habits that are causing relationship stress. Just remember that it isn't about pointing fingers. Make it known that you want to move forward together and strengthen your relationship. The following action steps can help you do just that.

1. Create a Realistic Budget

Having a realistic and comprehensive household budget can prevent overspending and help you reach your financial goals faster. The first step is for you and your partner to go over your combined income, expenses, debts, savings and investments. Now is also the time to talk about any past credit events that could impact the two of you going forward, like foreclosures, bankruptcies and past-due accounts.

From there, steer the conversation toward short- and long-term financial goals. This can include everything from paying down debt or building an emergency fund to buying a home or saving for retirement. You can break these goals down into monthly savings targets, which can be line items on your new budget. At this point, a method like the 50/30/20 rule can help you stick with it.

And remember that a budget will only do your household finances good if you stick to it. Set attainable goals and hold each other accountable for staying true to what you set out to accomplish. A budget should be something you closely monitor and occasionally reassess. If you find that your budget isn't working, or that you set unattainable goals, there's no harm in reworking it.

2. Visualize Your Financial Goals Together

It's one thing to talk about your financial goals; it's another to feel them. Creating positive emotions around your savings goals can help stoke your motivation and align your spending habits. This is where visualization comes in. If buying a home is an important goal to you, but one partner has a history of overspending, consider making a vision board of the home you want. Seeing it on a daily basis can help you both stick to your budget.

Alternatively, some banks allow you to nickname your accounts. You may find that both of you are less willing to make an impulse withdrawal from an account that's labeled "Vacation" or "Home Down Payment."

3. Set Ground Rules

You and your partner can also consider setting some ground rules to protect your budget. Maybe switching to an all-cash system is a good idea for discretionary spending. Another idea is devoting one bank account to bills and another to spending, making it easier to track your balances. Setting a maximum spending limit could be worth exploring as well. For example, if one partner wants to spend more than a predetermined dollar amount on a certain item, they have to consult the other person before doing so.

4. Keep the Lines of Communication Open

Creating a budget, visualizing your goals, and establishing financial boundaries won't work if there's no accountability. Regular and open communication can set the stage for success. Pick one day a week when you and your partner get together to talk about money. Instead of it being a stressful, heavy conversation, think of it as a quick weekly check-in.

Are you on track in terms of saving? Did you stay within your spending limit for the week? It's a great opportunity to be transparent with one another and talk about your challenges. If one of you went off course, you can troubleshoot together and make a plan to prevent similar situations from happening again in the future. You might experience a financial close call, for instance, and decide that building an emergency fund should be a higher priority.

You can also get into the habit of celebrating the wins. If you're staying on track and meeting your goals each month, reinforce that positive behavior with a small treat that doesn't break your budget. Sticking to a budget doesn't have to mean a joyless life, which is why it's important to set aside a certain amount of money for discretionary spending you can use on whatever you want.

Managing a Financially Healthy Relationship

At the end of the day, it's about managing your financial health as a team. This goes hand in hand with staying on top of your credit. Opting for free credit monitoring with Experian can help the two of you spot red flags that could threaten your credit scores. Consider it an extra resource to keep in your financial toolbox.