3 Financial Red Flags for Relationships

What You Need to Know

Financial fraud is often perpetrated by someone the victim knows, like a romantic partner.
Watch for recurring signs of cash flow problems, like declined credit cards or asking to borrow money.
Ecourage clients to use the “ABCD test” to ensure financial compatibility in a long-term relationship.

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.