Building Financial Trust in Relationships
By Zina Kumok, Financial Health Counselor, Credit Counselor
Reviewed by Lauren Bringle, AFC®
Trust is the foundation of a healthy relationship. If you don’t feel comfortable and safe with your significant other, it’s hard to form an intimate bond that lasts through the years.
But trust isn't just about staying faithful. It's about open and honest communication in all aspects of a relationship, including how to manage money. Without a shared financial understanding, the foundation of your trusting relationship is missing a key piece.
While most successful couples understand this implicitly, many younger couples are still hesitant to talk finances
in their relationship. With regular disagreements about money being a top indicator for relationships splitting, it’s more important now than ever to make sure you’re on the same page when it comes to financial trust in relationships.
How Financial Habits Predict Your Relationship Health
Being responsible with money isn’t just good for your bank account - it’s also good for your marriage. A report
published by the Federal Reserve Board found that couples with similar credit scores were less likely to split up than couples with radically different scores.
The report hypothesized that having a low credit score indicates a lower level of trustworthiness, which is essential to a successful long-term relationship.
Kansas State researchers discovered that money arguments were the biggest predictor for divorce, beating out topics like children, sex and in-laws. The study
, based on a survey of 4,500 couples, controlled for income, debt, and net worth. In other words, these results are relevant for couples in any income bracket or financial situation.
Sonya Britt, director of the Kansas State personal financial planning program that conducted the research, said arguments about money last longer and couples use “harsher language” in those conversations.
Both these reports indicate that figuring out how to jointly manage your finances is one of–if not the most–important conversations you could have as a couple. This is one of the best ways to build financial trust in relationships. When you and your spouse share the same financial goals, you won’t have to deal with money secrets or other financial issues later down the road.
How Financial Abuse Affects Relationships
Financial disagreements can be a sore spot in many relationships, but there’s a darker side to how money can influence a partnership – financial abuse
Financial abuse is the process of using money to control another person. It can start off relatively harmless, like a spouse offering to manage the budget
because they’re better with money, but it can easily warp into controlling and restrictive behavior.
This behavior could be as simple as not giving a partner the new PIN code for a debit card, or as manipulative as sabotaging the other person’s job so they get fired and become financially dependent. Like all abuse, financial abuse exists on a spectrum.
According to the Center for Financial Security at the University of Wisconsin, some form of financial abuse
is present in 99% of domestic violence cases. By limiting their financial power, perpetrators can make it difficult for the victim to leave an abusive relationship, because the abuser has ruined their credit, drained their bank account or prohibited them from accessing cash.
If you suspect that you or someone you know is a victim of financial abuse, call a local shelter or talk to a social worker or licensed counselor. They can tell you what steps to take and how to protect yourself and others from further abuse.
Should You Split Everything 50/50 in Relationships?
Creating a healthy financial equilibrium is a part of almost any successful relationship, and that involves deciding how to share and divide expenses
. Many married couples lump everything into one bank account with no separation of funds, but the lines are less clear for unmarried couples who live together or those who want more autonomy.
Traditionally, couples split expenses down the middle, but you don’t have to abide by convention. If you and your boyfriend live together and make different salaries, try splitting expenses by a percentage. For example, if you make $75,000 a year and he makes $50,000, you would pay 60% of the rent instead of 50% because you make 60% of the total household income.
This system is popular with couples who have disparate salaries. Splitting everything by percentage makes things more equitable, removes any resentment that the lower-earning person might have, and strengthens your overall relationship.
The success of this approach depends on the dynamic of your relationship. Ultimately, open, honest communication is the best way to find a balance that works for you and your partner.
How Can You Build Better Credit – Together?
When it comes to building trust, it's important that you know your spouse's spending habits and financial goals, especially when it comes to their credit score
and history. If you and your partner want to improve your relationship as well as your finances, tackling your credit together is a great start.
First, pull each of your credit reports from AnnualCreditReport.com
, a free site that provides reports from the three credit bureaus. If it’s been a while since you checked your credit, pull your report from all three bureaus. Credit reports are usually identical, but sometimes a lender may only report activity to one bureau. It’s always best to double-check their credit reporting
. And learn how to read your credit report
You can also gain access to your credit score at no cost from Self, or a variety of other banking apps. Try checking with your current service of preference to see if they have an option built in for you to review your credit score and report.
If you and your partner check your scores and you’re sitting comfortably at a 700 or higher, you’re already in a credit-score-match-made-in-heaven.
If your score is below that, look at your credit report and try to dig deeper to find out why your score is low.
Here are a few questions you can ask yourself as you start to take your credit report “inventory”:
- Do you have a bankruptcy on your record?
- Do you have a high utilization percentage on your credit cards?
- Did you miss a couple payments on your student loans?
- Do you have a healthy mix of credit lines, including unsecured and installment loans?
While the key to having good credit is simple (in theory), it’s not always easy.
__Just a few things to consider if you’re looking to build better credit: __
Pay your bills on time.
The most important thing is to pay all your bills on time, since this determines 35% of your credit score. Create bill due date reminders and set up autopay if you can. If only one of you has been managing the money so far, make this a dual process. Learn more about how payment history affects your credit
Take a look at your utilization ratio.
Your credit utilization ratio
just means how much available credit you’re using. For example, if you have a credit card with a $10,000 credit limit and a $5,000 balance, you’re using 50% of your credit limit. The maximum utilization percentage should be 30%. Anything more than that could negatively affect your credit score.
Avoid opening new lines of credit
, as they will drag down the average age of your credit history. Recent credit inquiries
will also ding your score.
Make sure you have a healthy mix of credit.
Otherwise known as “credit diversity,” being able to manage different types of credit lines
(such as installment loans and unsecured credit) can prove to lenders that you’re more trustworthy. This diversity could positively impact your credit score.
Can’t get approved for the installment loan you really want?
Like a house loan or car loan? If you need to diversify your credit to build it, but can’t get approved for a traditional installment loan, you might want to consider a credit builder loan
. You can access these loans via an online platform or mobile app, such as Self, or via your local credit union.
Once you’ve figured out why your credit score is low, create an action plan to build and improve your credit
. Even better if you create this action plan with your partner, so you can encourage each other and hold each other accountable through the process. And, as the Federal Reserve Study shows, better credit could mean a better relationship.
Building credit can seem like a challenge, but it’s easier if you’ve got someone else’s hand to hold along the way.
About the author
Zina Kumok is a Financial Health Counselor and Credit Counselor certified by the National Association of Certified Credit Counselors who writes extensively about personal finance. See Zina on Twitter
About the reviewer
Lauren Bringle is an Accredited Financial Counselor®
with Self Financial– a financial technology company with a mission to help people build credit and savings. See Lauren on Linkedin