Talking about finances with your significant other isn’t always fun, and most people certainly wouldn’t categorize it as romantic, but it is a fundamental part of most relationships. That’s because money is a big deal! How big? Well, big enough that financial factors can be a main determinant in a person’s decisions to start or advance a relationship with someone. For example, according to a January 2018 WalletHub study conducted to learn how consumers are approaching Valentine’s Day, 36% of people say they wouldn’t date someone with bad credit, while 52% say that wouldn’t marry someone with bad credit. But bad credit is just one potential deal-breaker when it comes to relationships. Here are some others you’ll want to avoid.
In a January 2018 CreditCards.com survey of 1,372 U.S. adults who are in relationships, 31 percent said keeping a credit card, checking or savings account hidden from a spouse or partner is worse than physical cheating. Sadly, one in five people in a live-in relationship admit to “financial infidelity,” which was defined in this study as keeping a private bank account or credit card without telling a partner. The survey found 31% of millennials, 24% of people ages 38 to 53, and 17% of baby boomers have at some point had an account they keep secret from a partner. The WalletHub study found that financial secrets are the worst type of problem in a relationship (36% of respondents) compared to irresponsible spending (28%), high debt level (15%), not saving for the future (11%), and ruining your credit score (7%).
Meanwhile, the American Psychological Association’s (APA) 2017 Annual Stress in America survey revealed money to be a significant source of stress for 63% of Americans, second only to the state of the U.S., American adults’ number one stressor. The bottom line? Money is stressful enough without adding lies into the equation.
It’s common for one person in a relationship to want to make a purchase or financial decision the other disagrees with. One philosophy on this kind of “money talk” is that if you don’t discuss it, you can’t argue about it. There may be truth somewhere in that notion, but safe to say it’s probably not the healthiest or smartest approach. The truth of the matter is, in an era where it is common to receive financial statements and other information through snail mail, e-mail, text messages and mobile push notifications, any secret is bound to be discovered at some point.
In a recent article on the topic of financial infidelity, Sonya Britt-Lutter, associate professor of personal financial planning at Kansas State University, noted “the long-term consequences are going to be reduced relationship satisfaction and increased likelihood of divorce or breaking up.” She suggests couples with marriage in their future seek premarital financial counseling and share credit reports and bank account information with one another prior to the wedding, while partners with no plans to get married should consider discussing finances before moving in together.
Neglecting Your Credit
When you are single, you are the only person your credit affects. Once you enter into a situation where you are applying for any sort of joint financing with another person, the story changes. While one person’s credit will not directly damage or improve another’s, both credit scores are taken into consideration, which will impact the outcome.
Remember, though, your credit score is not permanent! Just like a relationship, improving it is an investment. Some of the steps you can take include:
- Checking your credit report for mistakes. The Fair Credit Reporting Act requires each of the nationwide credit reporting companies — Equifax,Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.
- Making payments on time. Automatic bill payments are a great tool for this!
- Lowering your debt-to-credit ratio (DTI). Eliminating or reducing debt will help to lower your DTI (the total amount of monthly debt payment divided into monthly income), putting you in a better position when it comes time to apply for a loan.
- Paying down debt faster. Easier said than done, yes, but reasonable modifications, like making more than the minimum payment, when possible, can make a significant difference over time.
Four out of ten people say irresponsible spending is a bigger turnoff than bad breath, according to WalletHub. The same number of people claim they would end things with their significant other if he or she spent money irresponsibly. For the other 60%, there are ways to try to amend this bad habit. The sooner you can address an issue like this, the better. A good starting point is to get to the root of the problem and try to figure out why it’s happening. It’s possible a person was not taught how to properly handle finances, or maybe the irresponsible spending is a byproduct of a different issue altogether. If you’re not able to address this internally, consider seeking counsel from a trusted financial advisor.
So, what’s the best way for couples to avoid money problems? According to 40% of WalletHub survey respondents, the answer is separate accounts! The good news is that there are a plethora of account options that cater to different needs and desires, from standard checking and savings accounts to money market accounts, CDs, IRAs and more. Find what works for you!
To learn more about NVE’s products and services, visit our website. You can also speak with one of our Branch Associates by visiting your convenient neighborhood branch, or call us at 1-866-NVE BANK (683-2265).