Warning signs to avoid financial distress from a partner

When considering a life together, one in four couples see money and finances as the biggest challenge to their relationships. Emily Irwin, Managing Director and Senior Director of Advice at Wells Fargo, joins Yahoo Finance to discuss the red flags to avoid in a partner – especially before choosing a joint bank account – including their spending habits, ignoring outstanding debts and even financial secrecy.

“Behaviors like gambling – we just came out of Super Bowl weekend – can be a real indicator of…risk tolerance,” Irwin lists. “Throwing a little money at whether Taylor Swift is there or not isn’t a bad idea when spending your coffee money. If you spend your rent money, that’s a problem.”

For more expert insights and the latest market activity, click here to watch this full episode of Yahoo Finance Live.

Editor’s Note: This article was written by Luke Carberry Mogan.

Video transcript

According to a recent study by Fidelity Investments, more than one in four couples cite money as their biggest relationship challenge. However, as you overcome financial indifference, there are some warning signs worth revisiting. Up for discussion is Emily Irwin, CEO of Wells Fargo and Senior Director of Advice. Emily, thank you so much for joining us.

They told us about some red flags to look out for when thinking about your finances. Can you tick some of the top phrases that come to mind?

EMILY IRWIN: Absolutely, thank you for the invitation and Happy Valentine’s Day everyone. Some of the big red flags we see in relationships include things like financial secrecy. So this is really a red flag that someone is just not being transparent with their finances. It could be because of their spending. It could be that they are hiding a liability on their balance sheet.

They may not even be willing to talk to their partner about their career goals. Another would take on debt and simply pretend it didn’t exist. And not all debt is bad debt. It could be that you’ve invested in yourself, you’ve taken out a student loan, you’re saving for a big purchase and you’ve taken out a mortgage or maybe you’ve got a car to drive to your job.

However, if you don’t plan on paying the money off or just pretend it’s not there, behaviors like gambling are a big red flag. We just finished Super Bowl weekend, which can be a real indicator of risk tolerance. Dropping some money on whether Taylor Swift is there or not isn’t a bad idea when spending your coffee money. If you’re spending your rent money, that’s a problem. And finally, it’s about prioritizing wants over needs.

Everyone should value a little luxury to maintain their financial goals and good behavior. But if you do that consistently and can’t pay off your monthly bills, that’s going to be a problem.

So, Emily, which caught my attention, is a possible red flag for gambling or betting because a lot of people, Emily, like sports betting and a lot of people, I mean, buy me. When exactly is this Emily, a red flag, a warning, is it the amount you’re spending? Is that it?

EMILY IRWIN: Actually, it’s not the amount. You want to think about what you spend in accordance with your goals. And for someone it might have 1, 2, 3 zeros, that might not be problematic. If they can support this within their lifestyle and budget, it’s a problem if it impacts, for example, paying your bills on time. If this affects your credit score for any reason.

If for some reason it gets to the point where you no longer even share these behaviors with your loved one and your partner, that’s a red flag. Because that means you start hiding things that can impact not only your financial picture, but potentially your partners too

Yes. Emily, the thing that struck me was financial secrecy or keeping things from your partner when it comes to your finances. What advice would you give to someone who may not feel comfortable discussing their credit score with their partner, for example?

EMILY IRWIN: Yes. I think it depends on where you are in the relationship. For example, to start, you can observe behaviors and think about how that person handles their finances. You can ask about their money history. You can ask and tell them everything you want to do in a relationship, for example. Tell me about yourself, tell me about your money story and your story. So it invites them to do the same.

If you’re a little further along in the relationship, definitely before making joint purchases or mixing assets. You want to have a really transparent conversation about the big things: saving, spending, debt. How will we connect with each other? A wonderful way to do this is on Valentine’s Day. Do it on a date night somewhere that isn’t emotionally charged.

You both know going into this conversation, you know what the topic is, and therefore you will be able to be in an environment where you can have a more transparent, less emotional conversation.

All right, these are good financial and other tips. Emily, thank you so much for joining the show, I appreciate it.

EMILY IRWIN: Thank you very much.

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