Watch Out: Financial Incompatibility Is the Newest Relationship Red Flag

financial incompatibility red flags"
financial incompatibility red flags
Graphics by: Aryana Johnson
Graphics by: Aryana Johnson

Imagine you’ve met someone special. They’re charming, funny, and kind, and you’re on the same page about the important stuff, like getting married and having children. You start seeing each other more often and learning everything there is to know about them, and everything is going great! But then, out of nowhere, you see something you weren’t expecting: a red flag. You learn about the debt, you discover they haven’t made a plan to start saving for retirement, and you realize that their version of a monthly budget is whatever is left under their mattress that month. You take your finances a lot more seriously than they do, and just like that, your rose-colored glasses are a bit more hazy than they were before these details came to light.

While money isn’t a sexy topic of conversation on a first date (or third, for that matter), financial compatibility is crucial for the long-term success of a relationship. This is why financial incompatibility is considered one of the biggest relationship red flags in 2024, as more and more people are getting serious about their financial futures. But what does it really mean to be financially compatible, and how can you test it with someone you’re dating? We’re explaining everything you need to know.

What is Financial Compatibility?

You might know what it feels like to be compatible with a partner emotionally or physically, but what about financially? According to Northwestern Mutual’s 2023 Planning & Progress Study, 49 percent of Gen Zers view financial compatibility as more important than physical and spiritual compatibility. Mindy Yu, CIMA/Director Of Investing at Betterment, explains that being financially compatible with someone means that you have similar beliefs, values, and practices when it comes to managing money. This can be reflected in how you both save, spend, invest, manage debt, and plan for long-term goals like retirement. So, as you might share similar family values with a partner, like valuing a good education, being financially compatible means that you share similar values around money, like prioritizing paying down your debt so you can invest in a house.

While we can’t expect to be on the same page with our partners about every little thing in life, financial compatibility really is critical for a healthy relationship. Yu explains that “it ensures you are working together towards common financial objectives and can avoid any potential conflicts that may arise over money,” Yu explains. After all, over 30 percent of Gen Z and millennial couples are breaking up over money, according to Credit Karma.

How to Determine If You’re Financially Compatible

Money can be a huge point of contention in a relationship, which is why it’s so crucial to determine if you’re on the same page with your partner financially. According to the same Northwestern Mutual study, 40 percent of millennials believe that conversations about money should happen before their relationship gets serious. So hopefully, if you’re in a relationship with someone, you’ve had the money conversation already, but if not, Yu recommends discussing the following questions to gain a deeper understanding of where they stand financially:

  • How do you envision your financial situation in the future/what age do you anticipate retiring?
  • What are your priorities when it comes to spending and saving?
  • How do you feel about debt, and how should it be managed?
  • How important is it for you to have savings for emergencies and retirement?
  • Do you prefer to keep finances separate, combine them, or have a hybrid approach in a relationship?

Throughout this conversation, listen closely and ask yourself the following questions:

  • Do you have similar financial values, meaning your attitudes towards saving, spending, and investing align?
  • Would you be comfortable collaborating as it pertains to goal-setting—whether they be short-term financial goals like planning for a vacation or long-term financial goals like saving for retirement?
  • Can you (or do you already) make shared financial decisions, no matter the size?

While this isn’t an exhaustive list to determining financial incompatibility or compatibility, the answers to questions like these will be an easy yes if you are financially compatible. But if you determine that your partner doesn’t align with your financial values and goals (like they don’t prioritize investing for retirement and you do or they regularly live beyond their means and that concerns you), you’re likely not financially compatible. Yu shares that this is “an obvious reason to pump the brakes.”

What to Do If You’re Financially Incompatible

If you’ve assessed the financial flags in your relationship and they’re all coming up red, don’t worry; not all hope is lost. Financial incompatibility doesn’t necessarily mean you need to end a relationship—it just means you need to do some honest work to get on the same page so you can build a sound future together.

Keep in mind that all relationships take work. Depending on your current compatibility level with your partner, some relationships will take more effort than others. It’s up to you to decide if it’s worth the work to get on the same page and continue your financial journey together. If it is, Yu recommends the following steps you can take now to solve financial incompatibility.

Have honest discussions

“A financially compatible relationship, like any healthy partnership, relies heavily on communication,” Yu highlights, so start having open and honest discussions about your current financial status, future goals, and how you envision working together to achieve them. While it might feel uncomfortable at first, practice makes perfect. The more you talk about finances, the easier it will get. By facilitating these conversations with your partner, you lay the groundwork for productive financial conversations that can help you build a life together.

Establish shared goals

When you’re just getting started, establishing shared goals might look like saving for a nice dinner or a weekend getaway. Then, depending on how that goes, you can gradually progress toward bigger goals, like saving for a deposit on an apartment together. Working together to achieve a shared financial goal will not only help to get you both on the same page but can teach you a lot about how you navigate your finances together. Plus, whether your goals are small or large, working toward a shared vision for your financial future can strengthen your relationship and your confidence in your partnership.

Learn about money management together

Learning how to manage money together doesn’t exactly sound romantic, but it will help you improve your financial literacy and alignment, making it easier to have discussions around money and make plans. Remember that you’re in it together, so make it a joint effort—even if one of you is more financially savvy than the other. There are plenty of free resources available (think: books, podcasts, and online courses). Check them out together to use as a learning opportunity. If you need specialized assistance, consider consulting a financial advisor for personalized advice and strategies.

Create a joint budget

If you live together or share resources (like a Netflix account or a phone plan), work together to create a joint budget. Plan your financial journey together and consider both partners’ incomes, debts, and spending habits. Make it fun by having a money date together and enjoying your favorite meal while planning your financial future together. The more you look at your finances together, the better off you’ll be moving forward in reconciling your financial incompatibility.