The biggest way to tell financial compatibility is separating savers versus spenders. This is the biggest financial difference between any two people. It’s what determines how each person allocates money that maximizes their happiness.
Red flags are important but none is more important than financial compatibility. Whether we like it or not, money is the leading cause of divorce. Not being on the same financial page is detrimental to the relationship. We have a hard time being single without a good financial foundation.
It’s infinitely harder for a relationship to thrive without a good financial foundation. I’ve personally seen many friends’ parents get divorced over money. It’s especially detrimental to the child actually seeing their parents go through the money hardships.
One of my prior girlfriends was a huge spender. Worse still, she expected me to pay for everything. Every night out costed $100 for me. Good thing it only lasted a couple of months. I knew that wouldn’t be a long term relationship because the financial compatibility wasn’t there.
Financial compatibility is the most important factor in a relationship because it determines the financial security in a relationship. Whether we like it or not, stability and security is at the top of our needs that has to be fulfilled for long lasting happiness.
We can’t get enamored by the good looks of our partner if we can’t see money the same way.
Financial Compatibility: 9 Ways to Tell
Financial compatibility is so important that we can’t afford to get it wrong. Bad relationships may be one of the answers to the question “why am I not rich?”.
1) Savers vs Spenders
Savers naturally do not understand spenders and vice versa. I naturally do not vibe well with spenders. I personally save and protect my money as much as I can today. So that I can spend as much as I can tomorrow. Saving money is the building block of financial independence.
The biggest differences in the personal finance world is spending vs saving. Everything else is a nuanced discussion. Spenders love instant gratification and savers love delayed gratification. There’s no right or wrong answers but the spenders will drive the savers crazy.
There can be a good middle ground to achieve. For example, maybe instead of a 50% savings rate, the couple compromises on a 33% savings rate. If the couples’ income increases as a result of combining the two, then it makes sense to lower the savings rate.
Especially if both are saving more money in absolute terms. There is always a middle ground and compromise to achieve.
2) Financial Compatibility: Debt
Debt is one of the biggest destroyers of wealth. Real estate investing mortgage debt is one thing. But it’s another for consumer debt. I took on $50k of consumer debt in 2022 before. It was low interest rate at 0 – 5% but it still felt awful every day.
It felt like every paycheck wasn’t mine. I eventually paid off everything in just one year on January 2023. However, it still felt awful holding the debt on my balance sheet. Financial compatibility means being on the same page about debt. Personally, the best debt is having no debt.
Some business loans are tolerable but in no situations should there ever be credit card debt. Credit card debt is the worst debt because the interest rate is so high. There shouldn’t be any financial surprises between couples, especially if they are looking to get married.
This doesn’t mean that the partner can’t have debt. But if they have a good plan to pay it off, then everything can work out as well.
3) Investing
I LOVE investing. It’s one of the fastest way to build wealth. I personally invest a majority of my paycheck in the stock market and/or high yield savings accounts. Some people prefer to keep it in their savings accounts for safety. Which is OK. However, investments should be a non-negotiable between partners.
There’s no one who got on solid financial footing who haven’t invested their money. There’s not a single millionaire or billionaire on Earth who haven’t invested their money. Financial compatibility requires solid investment plans between two people.
The best investments are low cost index funds that average a return of 8 – 10% per year. Real estate is a good asset class as well. It doesn’t matter how much the couple decides to invest. However, investing money is a necessity in a relationship. It should never be $0.
Investing not only protects the couples’ future but it protects any children’s futures as well. Investing is what allowed me to have $500k net worth by just 28.
4) Income
Financial compatibility means increasing income whenever possible. Income is the bedrock of any great financial decision. When I was making $100k, I thought I was doing good. Until I started making $200k. That’s when all the doors opened for me. (Is $200,000 a year good?).
No matter how much we wish we could save our way to wealth, income is the real path forward. The best way to move forward. The best part about being in a relationship is that the income is combined. Even better is that even though the income increases, expenses don’t increase proportionally.
The couple merges expenses and then splits them, like rent. It’s much easier to pay a $1.5k/mo rent with two people’s incomes than it is to pay a $1k/mo rent by themselves. One could decide to be a stay at home parent, which is completely OK as well.
However, in childless years, then there’s nothing wrong with maximizing income for the couple to build wealth with.
5) Starting a Business
There are some who are risk loving and want to start a business on their own. There are some who are risk avoidant and don’t want their partners to start a business at all. Even more so, building a business is more grueling than working a 9-5 job.
Financial compatibility revolves around starting a business, as well. Business is risky and while it can be very lucrative, many people fail more than succeed. Couples should know what they’re getting themselves into with the other person.
I personally want to start a business after I reach financial stability and security. However, in no way would I want to burden my family with the risk that comes with building a business. Therefore, I will start a business first when I’m single and then look into starting a business.
There’s no reason to be selfish in the relationship. It’s about what’s best for the team that matters, not what each person in the relationship wants.
6) Financial Compatibility: Kids
Kids are expensive and they’re getting more expensive by the day. It now costs $300k+ to raise a kid. And the expenses are rising! Financial compatibility can’t exist without the topic of children. I personally want two kids to raise. Any more and that would be too much for me to handle.
Aside from the money costs, there’s also the reward factor of raising children as well. That can’t be ignored. It’s one of the most rewarding things that a parent can ever do because we’re leaving behind our legacy. Even more so, we’re helping someone else become a great human being.
While having children is a deeply personal decision that goes beyond money, the money can’t be ignored. Some couples even want to fix their relationship by having a child. Which is the worst decision a couple can ever make, ever.
It’s better to have no children if the couple can’t afford them than it is to have a child in the first place. It’s not the right thing for the child.
7) Fun Budgets
No matter what, we need to have a fun budget to keep us mentally sane. Some need a bigger fun budget than others. Fun budgets determine financial compatibility in how much we want to spend on fun. I personally went away with fun in 2022 and 2023.
My finances were taking a beating too much in that I didn’t really spend any money on fun. It contributed to the girlfriends who left me for that reason. In any other case, fun includes any extra spending such as a vacation, trinkets and toys, and the like.
I personally don’t need to spend a lot of money to keep myself entertained and happy. Therefore, I will personally have to find someone who doesn’t need the same things either to keep themselves happy. I’ve packed up for a move in May 2023 and I realized just how much I need to throw away.
That’s money down the drain that I wish I never spent at all in the first place. Fun is expensive.
8) Career Goals
Some are so career oriented that they’re willing to sacrifice any and everything for an employer. Including moving to a completely new state, city, or country. Moving to another city for a job is worth it. I personally don’t want to move anywhere for my employer now.
In my younger days, yes, but I no longer want to do anything of the kind.
Financial compatibility includes career aspirations because a career oriented man or woman might be willing to sacrifice their relationship for their career. I personally don’t think it’s worth it because we can always make more money but we can’t always find the love of our lives.
I also work for an employer who I want to work for for the rest of my life and I do not want to switch and move around companies. It’s too much work. Career goals are a necessary component to relationships because we spend at least a third of our lives working.
Whether we like it or not, work is an integral part of our lives and it always will be. Compatibility in this area is crucial.
9) Big Ticket Purchases
Things like houses, cars, and kids make a difference in putting the relationship into a strain or not. I personally don’t want to spend more than $350k for a house. I want to drive my 6 year old beater car for at least the next decade because “stuff” doesn’t excite me as much as it used to.
Financial compatibility can’t happen without agreement on the big ticket purchases. In 1949, the typical single family home was just 909 square feet. By 2021, it was 2,480 square feet. Big ticket purchases make or break the relationship because they likely need debt to finance.
Debt is one of the worst destroyers of relationships. I’ve been in debt before and it feels awful. Like someone else controlled me and something else was weighing down on my life. It was as if the banks had a secret say in everything I do until the debt was paid off.
That’s why being on the same page about the big ticket items make all the difference in the world. I personally do not want a big mortgage weighing me down.
Financial Compatibility Impacted My Relationships
As the man in the relationships, all of my relationships expected me to pay. And so pay I did. Some relationships were so bad in that she expected me to pay $50 for all-you-can eat buffet in which she didn’t even eat anything! The relationship lasted 2 months.
Financial compatibility is so important because money impacts our relationships more than we know. I personally do not want to marry anyone if I’m not at least a millionaire. I can’t imagine financially burdening my future family like that.
Money impacted all of my relationships and I fully expect it to impact my future relationships as well. Money puts limits around everything. When we have unlimited amounts of money and options, we don’t feel constrained and/or limited to what we want to do.
That’s why financial compatibility is so impactful because it dictates what kinds of limits we want to live with and share with another person. We absolutely do not like limits imposed on our life. However, we absolutely have to live with limits.
I personally believe the best way to get over a limit is to want less instead of making more money. I’m personally happy whether I spend $25k per year or $50k per year. After all my basics are taken care of, there isn’t a whole lot of things I need.
Finding the right person with that level of mindset will be difficult but rewarding. Financial compatibility is at the top of my wants and needs in a partner.
Financial Compatibility is the MOST Important Question
It’s not romantic nor idealistic. Financial compatibility is a realistic question that many couples think they can just “figure out” as time passes. That’s a hope strategy and not an everlasting one. No matter how much we want our relationships to be idealistic, that’s not how real life works.
We need money to put food on the table and keep a roof over our heads with. Some couples cannot be happy without spending $100k per year. That’s completely OK as long as they are making $200k and above. The most important relationship question is not religion. It’s money.
Money is one of the number one leading causes of divorce. Which makes the problem even worse because divorce is so expensive to begin with! Imagine the impact it has on the children as they go through their lives. Their biologically optimistic nature will dwindle to pessimism.
I personally cannot date or marry a spender. I’m a natural saver at heart and we will clash way too many times. I also can’t marry anyone with a high debt to income ratio. That would give me nightmares every day on how we will meet the debt payments.
Whatever the case may be, financial compatibility matters too much for us to ignore. It doesn’t feel good when we’re poor. I know because I’ve been there. I would even argue that I’m currently poor because my limits are too much at the moment. Even with my high income and net worth.
I can’t imagine if someone else shared the burden with me. We would clash too often for a good relationship to blossom.
Financial Compatibility: 9 Ways to Tell Shortlist
- Savers vs spenders
- Financial compatibility: debt
- Investing
- Income
- Starting a business
- Financial compatibility: kids
- Fun budgets
- Career goals
- Big ticket purchases
