Navigating a relationship when money is a maze.
In the intricate dance of a partnership, few things are as consequential as financial compatibility. It’s a conversation that can feel daunting, but it’s essential for building a stable and secure future together. When one partner is financially illiterate, the ripple effects can be far-reaching, from minor disagreements over spending to a complete erosion of your combined wealth. Recognizing the signs is not about judgment; it’s about a clear-eyed assessment of the situation to protect yourself and your shared future.
1. They have no idea what their credit score is.
A person who is financially literate understands the importance of their credit score. They know it’s a vital number that influences their ability to secure loans for a home or a car, and they take proactive steps to improve and maintain it. A partner who is completely unaware of their credit score or shows no interest in it may be financially illiterate.
This lack of awareness is a red flag because it signals a disconnect from a fundamental aspect of financial health. It indicates a failure to understand how past financial behaviors can impact future opportunities, which can be a significant liability in a shared life.
2. They make impulse purchases on a regular basis.
While a spontaneous purchase is a fun treat, a pattern of impulse buying can be a sign of financial illiteracy. This behavior suggests a lack of a clear budget or spending plan and a failure to prioritize long-term financial goals over short-term gratification. These purchases can quickly add up, leaving little room for savings or debt repayment.
An inability to resist impulse purchases often points to a lack of self-control when it comes to money. It’s a habit that can make it difficult to save for important milestones, and it can create a constant strain on a shared budget.
3. They have no emergency fund.
A financially literate individual understands that life is unpredictable and that a safety net is essential. An emergency fund, which is typically three to six months’ worth of living expenses, is a non-negotiable part of a responsible financial plan. A partner who has no savings set aside for a rainy day is putting themselves, and by extension, you, at significant risk.
This lack of preparation shows a failure to plan for the unexpected. It can lead to a cycle of debt, as they might be forced to rely on credit cards or high-interest loans to cover unforeseen expenses, which can be a heavy burden on a partnership.
4. They believe investing is for “rich people.”
One of the biggest misconceptions of the financially illiterate is that investing is an exclusive club for the wealthy. They may dismiss the idea of investing in a 401(k) or a Roth IRA, not understanding that even small, consistent contributions can lead to significant wealth over time.
This mindset can be incredibly detrimental to your shared financial future. It shows a lack of understanding of the power of compound interest and a missed opportunity to grow your money over the long term.
5. They avoid talking about money altogether.
Money is a sensitive subject, but a healthy relationship requires open and honest communication about finances. A partner who becomes defensive, changes the subject, or refuses to have a conversation about money is often hiding something or is simply too overwhelmed to face their financial reality.
This avoidance is a major red flag because it prevents you from making a unified financial plan. Without open communication, you can’t set shared goals, and you’ll always be in the dark about a crucial aspect of your relationship.
6. They don’t know the difference between a need and a want.
A fundamental principle of personal finance is the ability to distinguish between a need and a want. Needs are essential for survival—like housing and food—while wants are discretionary purchases. A partner who treats wants like needs, such as buying the latest gadget or a new car when they can’t afford it, is financially illiterate.
This inability to differentiate between the two can lead to a constant cycle of overspending and living beyond one’s means. It shows a lack of financial discipline that can put a serious strain on a shared budget.
7. They are constantly in debt and only pay the minimum.
Being in debt is a common reality for many, but how a person handles it is a key indicator of their financial literacy. A partner who consistently carries a high credit card balance and only pays the minimum amount each month is showing a failure to understand the debilitating effects of high-interest debt.
This behavior is a clear sign that they are not proactively working to get out of debt. Paying only the minimum can lead to thousands of dollars in interest, trapping a person in a cycle of debt that can be incredibly difficult to escape.
8. They have no financial goals.
A financially literate person has a clear vision for their future. They set goals, whether it’s saving for a down payment, paying off debt, or retiring early. A partner who has no financial goals, or who expresses them vaguely, lacks a sense of direction and purpose when it comes to money.
This lack of foresight can be a major issue in a partnership because it means you’re not working toward a unified future. Without shared goals, you’ll be pulling in opposite directions, making it nearly impossible to build wealth together.
9. They don’t have a budget.
A budget is the foundation of any sound financial plan. It’s a tool that helps a person track their income and expenses, ensuring that they are living within their means. A partner who doesn’t have a budget, or who sees it as an overly restrictive tool, is flying blind when it comes to their finances.
Without a budget, it’s impossible to know where your money is going, making it difficult to save, invest, or pay off debt. This lack of a plan can lead to a constant state of financial stress and instability.
10. They have no idea where their money goes each month.
While not everyone tracks their expenses down to the penny, a financially savvy person has a general idea of their monthly spending. A partner who can’t account for their money and wonders where their paycheck went a week after getting it is a major red flag for financial illiteracy.
This behavior shows a profound lack of awareness and control over their finances. It’s a habit that can lead to constant overspending and a complete inability to make progress toward any financial goals.
11. They believe in get-rich-quick schemes.
A financially literate person understands that building wealth is a marathon, not a sprint. They are skeptical of get-rich-quick schemes, understanding that they are often scams. A partner who is easily swayed by promises of instant wealth is showing a naive and unrealistic approach to money.
This belief in shortcuts is a major red flag because it can lead to bad investment decisions and financial loss. It shows a failure to understand the principles of risk, reward, and the value of hard work when it comes to building wealth.
12. They believe the bank is a place to get free money.
A person who is financially illiterate may have a naive view of how banks operate. They may see a credit card or a line of credit as a source of free money, not understanding that borrowing always comes with interest and fees. This fundamental misunderstanding can lead to a mountain of debt.
This perspective reveals a lack of understanding of a core principle of modern finance. It’s a mindset that can lead to reckless borrowing and a reliance on debt, which can be incredibly difficult to overcome.