3 Financial Red Flags for Relationships

It feels like every day there’s a new documentary or expose about innocent people falling victim to predators that make off with thousands and sometimes millions of dollars.

As these stories often highlight, it’s easier than it may seem to become a victim of financial fraud. Many frauds are perpetrated by someone close to the victim, like a romantic partner.

Transferring money to someone you trust, blindly signing documents — these are all ways that average people end up in extraordinary situations and are probably things that everyone has done.

Talking about money makes many people uncomfortable, but turning a blind eye to financial discussions can have significant consequences that range from overspending and not saving enough money to more sinister situations with legal involvement.

As a financial advisor, I’ve witnessed this behavior on several occasions, and it never gets easier. Fortunately, though, there are patterns to look for. A simple way to start the process of identifying red flags is to determine how financially compatible you are with your partner in the first place.

Often, these red flags start small and are easy to miss. With the right conversations, however, anyone can be better equipped to spot warning signs early and take the proper course of action to stop nefarious behavior.

Three such red flags are listed below.

1. Living Beyond Their Means

This subject might seem simple, but there’s a reason that “too good to be true” is a common phrase. It frequently has the benefit of being true.

Money must come from somewhere, and, yes, family money exists but shouldn’t be assumed. Flashy cars, expensive clothes and watches, and nice dinners all need to be paid for, and if the person’s job doesn’t seem like it can afford a lavish lifestyle, something is probably wrong.

Getting to the bottom of this can be easy with the right questions. Start with a conversation about college. From here, it’s easy to start to discuss student loans: Did your parents help you with your degree or graduate degree? Alternatively, where did the person grow up? Expensive neighborhoods will be a good tip if someone comes from money.

2. Cash Flow Concerns

Schemers need cash to keep the scheme going. In my experience, seemingly wealthy people who never seem to have cash is a major red flag. Excuses can range from money being tied up in long-term or illiquid investments to problems with trusts or bank transfers.

Stay diligent. Repeat cash flow problems mean that something is up, especially if the person starts asking you to cover more expenses or loan money. Even more indicative of this behavior is declined credit cards. Watch out for dates and partners that seem to repeatedly need you to cover the bill because a credit card is declined.

For people in long-term relationships or already living with their significant other, keep an eye on random charges or excessive bank withdrawals. These are signs that your partner is hiding something, and having an open and honest conversation about it can help you better determine the severity of the situation. These things can often be explained, but evading questions is a sign of a problem.

3. Evasive Conversations About Work or Money

Many people learn from a young age that discussing money is tacky or rude, but both halves of a relationship need to be on the same page when it comes to finances.

I encourage my clients to take the “ABCD test” to ensure financial compatibility:

• Adulting: Conversations about who will be responsible for paying bills, and who will handle insurance matters, investments and other financial decisions are a great way to have easier conversations about money.
• Babies: Apart from whether both partners in a relationship want to have children, there are financial considerations as well. Will both partners work, or will one spouse stay at home?
• Cash flow: As mentioned, cash flow is an easy red flag. Is your partner insisting on keeping everything separate or otherwise elusive about discussing this? This could signal something is off.
• Debt: Once married, both parties become responsible for all debt. Is your partner always swiping a credit card for pricey purchases? Is he or she paying these bills down in a timely manner? Is one partner coming into the marriage with large amounts of debt, such as student loans or mortgages? Knowing what you’re entering into financially is important.

These are tough conversations, but all couples should have them — not just those who believe that their partner may be up to no good. While it might be challenging in the short term, the long-term implications of not being on the same page about finances can be much more devastating than an awkward conversation at the beginning of a relationship.

Red flag answers will be evasive, encouraging you not to worry about it or even gaslighting — convincing you that your “evidence” doesn’t exist, or you misunderstood the situation.

Manipulation is a top talent for schemers, and diligence is key. Keep receipts and take notes when answers seem shady or elusive. This type of proof is mandatory when dealing with a manipulator.

For most, any one of these situations will be a one-off awkward situation. Credit cards get declined all the time, sometimes cash is short, used cars can look just as good as new ones with proper maintenance, but repeat red flags should not be ignored.

Open and honest conversations about money are critical in every relationship, and you have a right to know about your partner’s finances and spending habits.

Erin Wood is senior vice president of Financial Planning & Advanced Solutions at Carson Group.

 Credit: Chris Nicholls/ALM; Adobe Stock