Money, relationships and stress

Whether we like it or not we live in a world that runs on money, especially in OECD nations.

Everything has a cost and our capacity to pay market rates is constrained – and balanced – by our ability to earn and save.

What we want and what we can afford is limited by this. Fluctuating financial stress is somewhat inevitable in this continual ebb and flow.

One of the benefits of relationships – whether romantic or other kinds of partnerships – is that the costs for many things can be shared.

That can make life noticeably cheaper for people committed to shared objectives.

People in relationships can and do share the costs of everything from meals to furniture, from vehicles to houses, parenting costs and even business running costs.

Shared finances are traditional in romantic relationships, for good reasons.

“Working together as a financial ‘team’ and pooling resources makes more financial sense as a couple than having separate accounts – for one there are fewer bank fees and the opportunity to accumulate savings is doubled,” says Clinical Neuropsychologist, author and speaker Nicola Gates.

“Joint accounts also help maintain a sense of equality.”

The resulting financial enmeshment however creates difficult complex complications when relationships ad partnerships seek to disentangle.

A significant number of romantic relationships fall apart purely over money issues – as many as one in eight, according to comparison website Finder.

Why can money become a big issue in relationships?

Financial security is a basic human need, and an essential aspect of health according to the World Health Organisation but how we each interpret that varies significantly.

“Finances can become a big issue in relationships because we all have our own emotions around money, wealth, savings and have different financial behaviour,’ says Ms Gates.

“When couples have different emotional relationships with money and have different financial behaviour conflict can easily arise.”

This is exacerbated by a trend towards each adult in the relationship to manage their own finances and the couple dividing expenses.

Whilst this can work there is a huge risk that it leads to inequality and potentially disadvantages one partner.

Most of us would agree relationships work best when both partners feel respected and equal.

“Resentfulness can arise if there is significant inequity, and separate accounts also divide spending power, halves cumulative saving potential, and potentially disadvantage one member of the relationship,” says Ms Gates.

The biggest money issues in relationships

Money issues become divisive in relationships when there is a loss of transparency and honesty.

Some of this comes down to misguided priorities.

Ideas about personal freedom are so compelling that people can mistakenly seek to exercise personal freedom beyond where it is helpful.

For instance, they make what they see as personal financial decisions without consulting or even considering their partner.

Unwittingly this person could be corroding the sense of teamwork that relationships thrive on.

“I know someone where the joint financial goal was to save for a long holiday together but the one partner could not restrain from acts of immediate gratification and could not save for the long-term goal,” Ms Gates says.

“As a result, there was only money to purchase one airline ticket and the holiday did not occur.”

Separate accounts can also lead to perceived or actual financial infidelity when one partner hides money, or debt, from the other.

Financial infidelity ranges from lying to your partner or spouse about money to hiding things such as cash, bills or a purchase.

“Any lack of trust and transparency regarding finances is an issue, from secret spending or hidden savings, or debt is dishonestly hidden, as they all break a commitment to honesty,” says Ms Gates.

Sadly, it is not rare behaviour.

According to a poll of 2000 Americans by the National Endowment for Financial Education, a massive 43 per cent of adults with combined finances in a relationship said they’ve committed an act of ‘financial deception’.

Financial deception will undoubtedly erode trust in a relationship.

More than a fifth of respondents admitted directly lying about money, while 39 said they hid a purchase bank account, statement or cash.

It’s worth fully considering the seriousness of financial infidelity; in many scenarios, such acts amount to financial abuse, which is today recognised as a type of domestic violence.

A definition of financial abuse occurs when a perpetrator uses or misuses money which limits and controls their partner’s current and future actions and their freedom of choice.

It can include using credit cards without permission, putting contractual obligations in their partner’s name, and gambling with family assets.

The link between personal financial freedom and financial infidelity does not automatically mean any financial independence is unhealthy for people in relationships.

So long as absolute honesty and openness – in all things – are foundation stones of a relationship, then some independence is not a risk.

“If you choose to have separate finances make sure you talk about contingencies when one of you is in financial stress.”

These situations might include losing employment, being ill, supporting parents, raising children, or returning to study.

“Consider how to support a feeling of independence for the non-earner such as giving them an agreed amount so they don’t have to ask,” Ms Gates says.

What can we actually do if our partner has big money problems?

So, what happens when one partner cannot manage their finances, cannot save or has hidden transactions and money?

Sooner or later this behaviour will place enormous stress on that individual, then their partner and then eventually the relationship.

Can a relationship survive in those circumstances?

Yes, it can, but again, the answer lies in each partner’s willingness and ability to open up and work together for mutual benefit.

“Honesty, communication and total transparency are essential,” Ms Gates says.

How individuals, partnerships and couples manage financial stress when one partner is in acute stress will be determined by the quality of their relationship and how they communicate and support each other.

“How a couple manages the tough times is the best indicator of how close they are and how well they can communicate and problem solve as a team,” Ms Gates says.

If there has been dishonesty, trust issues will need to be resolved and to do that, moving to shared finances or 100 per cent transparency will likely be needed.

In a society that needs money to survive, it makes sense that people sharing a life – or a business – must have shared solutions to the challenges posed by the need to continually make and spend money.

The cost of divorce – immense impact on couples and their children

We know that divorce – the unsettling reality for one in three marriages – usually has an immense but largely immeasurable emotional impact on couples and their children.

But the financial costs can be quantified. A detailed report by the National Centre for Social and Economic Modelling for AMP (called Divorce: For Richer, For Poorer) shows a $14 billion cost to “the nation [in] government assistance payments and court costs”.

Closer to home, divorce means financial stress increases for divorced families in almost every area.

“Divorce has a significant impact on families’ financial wellbeing, whether they have children or not, both in the short and medium term,” the report found. “While most families start to recover economically five years post-divorce, there remains a significant gap [20 per cent] in the financial well-being of divorced and married couples even five years later.”

The report found the median age of divorce for men was 45.3 years and women 42.7 years. It claimed divorce typically occurs during “couples’ prime wealth accumulation and child-rearing years”.

The division of assets caused the greatest financial damage, the report concluded, with retirement looking “bleak” for divorced couples because “super balances for divorced women are 70 per cent less than married women, and 28 per cent lower for divorced men compared with married men.”

“A divorced parent aged less than 45 years has 35 per cent fewer assets than a married respondent of the same age, while a divorced parent aged 45–64 years has assets valued at only 25 per cent of those of a married parent from a similar socio-economic background.”

In the short to medium term, there were big differences in day to day expenses that could conceivably set up problems for years.

Household expenditure changed significantly before and after divorce, with the biggest differences experienced 1 to 4 years out from divorce. For divorced men and women with dependent children, spending on items such as groceries, utilities, meals eaten out and alcohol and cigarettes increased, while money spent on clothing and footwear, repairs, maintenance and insurance dropped. The changes remained five years and more after divorce, although the disparities had eased.

The proportion of a divorced mother’s total income spent on groceries climbed 27 per cent between 1 and 4 years after a divorce, while the share of their incomes spent on utilities rose nearly 47 per cent. Their spending on health and medicines fell, while five years after divorce they were spending 45 per cent more on alcohol and tobacco.

Divorced fathers with dependent children increased their spending on education by 39 per cent inside the first 4 years of divorce. “This may reflect fathers having been the main income earner in the family and that paying for their children’s education is their main source of child support,” the report found. But divorced dads’ spending on also alcohol and tobacco by 53 per cent inside the first four years. Their grocery spending rose by nine per cent.

The report found: “Divorced mothers are more likely to experience financial stress than divorced fathers or couple families … One in five newly divorced mothers report they can’t afford to spend on the kids such as school clothing, leisure activities, or school trips for their children. This compares with only one in 50 newly divorced fathers.”

This may be related to the one area fathers benefited from after divorce: income. “The income of a divorced father is 26 per cent higher than the income of a … married father. This may reflect increased job mobility in terms of location and type of work as well as an increased ability to accept higher paying work.”

The employment rate is also higher for divorced fathers than married dads five years after the divorce.

The report also claimed education outcomes for children from divorced families are slightly worse than for those families whose parents remained married. “Family breakdown increases a child’s chance of being an early school leaver (i.e. doesn’t complete year 12) by 6 per cent [and] decreases their likelihood of getting a tertiary education also by 6 per cent compared with children whose parents were married when they were 14 years of age.”

Financial stress a perennial reason couples split

It’s February already and in a lot of relationships that means money worries will be to the fore.

It’s well known amongst lawyers that returning to work after the holidays brings up dissatisfaction amongst couples.

The pressure of being forced together more often, especially with the added burden of home-schooling during the pandemic, has only increased tension for many couples.

The first working Monday of the year is even known as “Divorce Day” by some lawyers because of the increase in enquiries about separation after the stress of Christmas and the New Year.

Dig a little deeper and you’ll see a correlation between that stress and the bills coming in following holiday spending. A lot of it is financial stress.

Money stress has long been a source of relationship pressure.

“Arguments about money is by far the top predictor of divorce,’ said Kansas City associate professor Sonya Britt, from the university’s family studies and human services program, in 2013.

“It’s not children, sex, in-laws or anything else. It’s money – for both men and women,”

Britt, who specialises in “financial conflict within relationships” ran a study of 4500 couples as part of America’s National Survey of Families and Households. It was published in Family Relations, a journal of applied family studies. The study accounted for income, net worth and debt and found “it didn’t matter how much you made or how much you were worth.

“Arguments about money are the top predictor for divorce because it happens at all levels.”

Britt also found arguments about money took longer to resolve and recover from than other disagreements and used harsher language.

Her research seems to be backed up by people who sought information on relationship therapy in Australia.

An online survey of 2050 people who visited Relationships Australia’s website in late 2015 found nearly 85 per cent thought “financial problems were likely to push couples apart”. More than three quarters of the respondents were women.

This was a big increase on the last time the counselling provider surveyed web visitors on money issues, in 2011. Back then 71 per cent thought money dramas could split couples.

The survey drilled further into why money worries might lead to separation – and the answers were varied. But several of the main causes related to stress; 25 per cent thought financial problems caused “too much stress”, while another 15 per cent answered: “a lot of people can’t cope with the stress”. Nineteen per cent said money troubles “caused fights” and 12 per cent said such issues “caused blame”.

But the biggest single reason cited in the survey was the more diplomatic “people have different priorities/expectations”, which is another way of saying people disagree about money – presumably how much is enough, as well as how to spend and /or save it.

One finding in particular from the survey showed how mixed up couples are about money: around three quarters of female respondents reported that their male partner managed finances, exactly the reverse of how male respondents answered the question.

In other words, while everybody seems to think they are in charge of the money, nobody seems to be communicating well about finances.

This was backed up by a different set of questions Relationships Australia asked respondents in 2019 – the degree to which couples discussed finances.

Prior to making a commitment to their current of most recent partner, 56% of survey respondents reported they had not discussed how they would manage their couple finances if one of them no longer had an income.

A significant majority of women (74%) and men (69%) reported they had not discussed how they would divide their finances if their relationship ended.

“A mindful approach to money is without doubt a more successful one and a key to living mindfully is being able to accept reality for what it is – good, bad or neutral,” said Andrew Fleming, CEO/Founder of Financial Mindfulness.

It’s not a great leap to see that this can stretch to couples keeping secrets from each other about their finances.

“When we can accept reality, we can admit where we are at with money, not be so intimidated by it and we can discuss financial problems within relationships too.”

“That takes a lot of stress out of relationships, and everyone benefits from that.”