People whose marriages seem solid are often blindsided with the revelation that their spouses have been unfaithful-financially.
It happens often. In 1 out of every 3 couples, one spouse admits to lying to his or her partner about money, according to a 2014 survey by the National Endowment for Financial Education. In addition, 76 percent of those surveyed said financial deception has adversely affected their relationships.
Those of us who provide holistic financial advice-that is, helping couples manage all aspects of their financial situation, not just their investments-are in a great position to help prevent financial infidelity or, when it does occur, to serve as dispassionate counselors and mediators.
And we deal with this often; my colleagues and I often feel equal parts marriage counselor and financial planner. When a case of financial infidelity comes to our attention, we use the same approach that we use to prevent it: encourage open, honest dialogue.
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But we can't force disclosure; we can only encourage couples to see that it's in their best interest to disclose financial secrets that could be hurting them. We're careful not to put ourselves in the middle of a personal issue or to disclose client confidentiality.
Sometimes, though, when it's obvious to both partners that something's amiss-usually because numbers don't add up-we speak factually and bluntly. In one recent case, a couple came to us for help in eliminating $50,000 in credit card debt. A detailed review of their situation revealed that $300,000 in net income earned over the past five years was unaccounted for-and neither spouse could explain where the money might have gone.
So I offered my own observation. "In my experience," I told them, "there are only four reasons that money seems to vanish with no explanation."
I waited for a reaction. It didn't take long-maybe 10 seconds-for the wife to exclaim, "Well, what are they?" I calmly replied. "A marital affair, drug or alcohol addiction, a gambling problem or compulsive shopping." She burst out laughing, saying none of that is possible in their case.
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Her husband looked away and said nothing-causing her to stop laughing and stare at him. The conversation during their drive home was either the beginning of the end or the end of the beginning. Usually it's the latter, but once or twice I've seen it become the former.
One of my colleagues came up with a simple tactic we use to dissuade our clients from hiding spending from their spouses: He simply gets his married clients to agree that each can spend a preset amount each month, however he or she wishes. They aren't required to ask permission of the other or tell their partner about it. That allows both to spend some cash without guilt and without damaging either their relationship or their financial plan.
Whenever we encounter a couple worried about or involved in financial infidelity, we offer suggestions such as these:
- Never hide income or debt from your spouse. Instead, show all your financial documents-including your credit report, pay statements, bank records, insurance policies, debts and investments-to each other, especially if you have never done it before.
- Don't discuss money when you are angry or arguing. If you suspect something's amiss, be delicate. Instead of blindsiding your spouse, mention that you'd like to talk about money and then set a date in the near future to do so. Be sure to select a place when you will be free of interruption and stress.
- Keep the conversation casual, even though the subject is serious. Respect the fact that each of you has valued opinions and concerns. Allow your spouse to express his or her views without interrupting.
- Don't cast blame. That serves no useful purpose, because everyone already knows all this. Focus instead on how you can both move forward. Otherwise, the conversation might end abruptly and negatively.
- Be honest about your financial situation. If you have accumulated substantial debt through unwise spending, make your spouse aware of it. Don't omit embarrassing aspects of your situation or try to dismiss them as unimportant.
- Be willing to adjust your spending habits and lifestyle as necessary-even if you feel the problems are your spouse's fault.
- Discuss yours and your spouse's long-held financial attitudes. Most of the feelings we have about money were developed in childhood.
- If one of you is a saver and the other a spender, understand that there are benefits to both mind-sets. Agree to learn from each other.
This kind of dialogue should be ongoing. That way, should a sensitive issue arise, a quick discussion likely will resolve it. Other issues might involve more effort and lengthier chats-and that's when you might want to bring us in as a disinterested third party and mediator. Among other things, we advisors can help you:
- Deal with "surprises" uncovered from earlier, private discussions.
- Decide which of you will pay the monthly expenses and keep the records.
- Set aside some discretionary spending money each month.
- Set short- and long-term financial goals.
- Agree on a policy regarding lending money to family and friends.
- Decide how to care for aging parents.
Studies show that financial infidelity occurs evenly across all income levels and both sexes. It's harmful-both financially and emotionally. Should it occur in your family, remember that an objective, experienced financial advisor can help you.