Financial conflicts in relationships

As a couple, you need to make many financial decisions, be it decisions concerning day-to-day standard expenses or decisions involving enormous financial risk and consequences that you will bear for many years to come. Such as a decision on whether to take out a loan to buy a house or an apartment. One person wants to take out a loan, especially a riskier one, for example, in a foreign currency. The other one needs a sense of security and predictability. Differences in that area can frequently be the cause of a lot of tension and grievances.

Anna Daria Nowicka

Arguing about money leads to divorce

According to research on causes of divorce which was carried out between 2004 and 2017 at the University of California in San Diego (testing 5,300 couples in Germany), differences in risk preferences are likely a root cause of marital separation. Marta Serra-Garcia, associate professor of economics and the study’s author[1], explained that, while arguing about money was typically cited as a reason for divorce, differences in risk attitudes were a main potential driver of separation. She added that couples who had the most dissimilar risk attitudes were twice as likely to divorce, compared to couples with the most similar preferences. Also, differences in that area were the strongest predictor of divorce, of all the variables analysed in the survey. Naturally, the study also controlled for education level, region of origin or religion.

Couples who report big differences in risk preferences are also less likely to buy a home or have their home renovated because it is a major life decision that has enormous consequences and it will be difficult for them to come to agreement on that when they differ so much. What is more, a person who is not stressed out when making such decisions can even downplay the partner’s problems – “what’s the big deal with signing a few pieces of paper for the bank...”. However, if you were to talk to each partner individually on what a given financial decision means to them, what emotions it evokes and how strong they are (especially when it comes to stress or anxiety), you would probably find out that they talk about completely different types of decision!

As a financial coach, I frequently have clients come to me and discuss serious conflicts in their relationships because of a completely different approach to financial matters (in a broad sense of the term), particularly when it comes to decisions that involve risk, a credit obligation, or the approach to spending and saving.

[1] Christine Clark, Differences in Financial Risk Preferences Can Make or Break a Marriage, 27.07.2021