Money can be both a loaded and uncomfortable topic. We are so conditioned to be private with our paychecks and piggy banks that we may not even disclose all of the details to our spouse or partner. In fact, 2 out of 5 people reported lying to their partner about money or committing what is called financial infidelity.[i] Of course, not all financial infidelity is the same, and buying something and hiding the receipt is much different than having a secret credit card, or a secret bank account. Regardless, before we go any further, it’s important to remember that whether the secret is little or big, there is still a choice being made to actively withhold financial information.
Fact: 15 million Americans admit to having a secret credit card or bank account.[ii]
Being completely open can be scary and leave you vulnerable to judgment or reprimand but being deceptive to avoid discomfort may destroy your relationship. Financial infidelity often starts small and grows. The dishonesty may be rooted in shame, or pride, or even power. Whatever it is, finding the source of why financial infidelity happened, or why a person lied, will be vitally important if a relationship wants to survive.
Fact: 21% of divorcées cite money as the cause for the dissolution of the marriage. The percentage of divorces goes up based on household income as those making over $100,000 bumped up to 33%.[iii]
The Worst Financial Infidelities
No matter if the transgression is minor or major, there is still a conscious effort to withhold or straight up lie about money to a partner. In a relationship, couples pool their resources and share the expense of running their household, saving for retirement, etc. So, if one member is making deliberate financial choices in secret, it isn’t fair to the other person. That being said, there are some more dangerous and egregious types of financial infidelity. For example, an aspect of domestic abuse is often financial abuse. A person who has restricted access to money has undisclosed debt in their name, or has their spending habits strictly monitored by another person is a victim of financial abuse. Partners may take out credit cards or buy vehicles in their partner’s name, without them knowing about it, leaving the unaware party responsible for repaying the balance in the event of divorce or death. In other scenarios, money may be siphoned out and put into private bank accounts to hide it. Undisclosed gambling, drug or alcohol addictions can also devastate a relationship as one partner drains away assets without the other’s knowledge. Another scenario, which is less malicious but equally damaging, has one spouse managing all aspects of the finances and only later when something happens like a divorce, death, or a repossession, is it revealed that they had over-extended, mismanaged, or over-leveraged their finances.
How This Happens
Outside of the more extreme examples, which may involve power, abuse, or addiction, a lot of money infidelity just sort of happens. There isn’t so much malicious intent as there is pride, shame, or a desire to appear more successful or for their partner to not worry. The start of it is often small, little charges on a credit card, a pricey gift, etc. But with time, that behavior can start to snowball into separate accounts, credit cards, and debts. As the snowball grows, the harder it is to fess up, and the more elaborate the secret is to keep. Like most things in life, this is an example of how vital communication is. Regardless of good intentions, any sort of deception can poison the relationship. Deception hurts people.
Financial Infidelity Can Cause Real Harm
Not only is learning of a partner’s betrayal heart-wrenching, but the damage done to your finances can also take years, if not your whole lifetime, to repair. If a partner racks up an enormous amount of debt in their spouse’s name, for example, the kept in the dark spouse is responsible for that debt, whether they knew about it or not. In fact, most states do not currently have laws to protect people, often women, who get into this type of situation. There is a real ripple effect from even a small financial deception or bad investment. A partner making high-risk investments with your savings or retirement funds could greatly impact your later years. Losing a home or vehicle, or having a large amount of debt, could impact your credit and take years and money to get back on track. In the meantime, you are left suffering the consequences of lost savings and the burden of bad credit.
How Can You Prevent Financial Infidelity?
Like most things in life, there aren’t any guarantees. But a couple that has open communication, especially about hard topics (like money) will be less likely to encounter this type of situation. Money values vary wildly in couples, so the more you know about each other, how you save, how you want to live, and what your long-term goals are, the better off you will be.
Fact: 73% of couples have money management styles that differ from their partner.[iv]
Another piece of advice is to share the financial responsibility of both day-to-day household expenses and long-term investment and savings. This may not necessarily mean merging finances, especially if one partner has poor credit that needs to be rebuilt. Often, the danger comes when one person is in charge of the money in a house and they may be making poor choices (intentional or not) that can hurt everyone. The more transparent the expenses, taxes, credit card balances and bank statements are, the less opportunity to abuse or make risky decisions without alerting the other person. A red flag is a partner who refuses to disclose or limits information, especially with regard to things that require your signature or personal information.
Getting Started
If talking about money is especially difficult, start small. Schedule a time, ideally without anything pertinent going on, where you can sit and talk openly about short-term goals, long-term goals, all the debts and loans, investments, etc. Give each other space to share and try not to get heated or emotional. The goal is to get everything out in the open and to find solutions and compromises so that everyone can move forward on the same page. If this is too difficult, it may be worth making an appointment with a financial advisor who can help guide you toward your goals. The ideal relationship can allow for differences in money styles and philosophies, while staying secure and on-track for unexpected expenses and a healthy retirement plan. Ideally you want to develop a strong, financially transparent relationship built on trust.
[i] https://www.moneycrashers.com/lying-spouse-financial-infidelity-marriage/
[ii] https://money.cnn.com/2018/01/22/pf/hiding-money/index.html
[iii] https://www.magnifymoney.com/blog/featured/money-causes-21-percent-divorces925885150/
[iv] https://www.forbes.com/sites/nealegodfrey/2017/02/12/for-love-or-money-how-to-avoid-financial-infidelity/#612346565c58
