This article originally appeared in ameriprisefinancial newsletter
“Financial infidelity” is the No. 1 cause of divorce. So what is it, and how do you know if it’s a problem in your marriage or relationship?
To find out, Ameriprise Financial interviewed us, along with Holly Buchanan, author of Selling Financial Services to Women — What Men Need to Know and Even Women Will Be Surprised to Learn.
An increasing number of studies show that financial infidelity is the leading cause of marital strain and divorce. How would each of you define this phenomenon?
Scott: We define it as you’re committing financial infidelity if you’re lying, cheating or hoarding money inside of your relationship.
Bethany: For example, we had one couple that was going to get married and she had $30,000 in credit card debt and didn’t tell him. He found out about it one week before they were going to get married and it blew up the whole relationship. Financial infidelity can happen in large amounts like that or in smaller everyday expenditures.
Holly: Scott and Bethany’s definition is spot-on. I would add that there are so many issues of shame when it comes to money, and that this is often a driver of financial infidelity. Either shame or fear of judgment.
What are the primary reasons for financial infidelity?
Holly: It goes back to the fear that I will be judged if I share my total situation, if it’s not good. There is also an issue of control. Or sometimes the other spouse just isn’t interested or truly doesn’t want to know. We have a high number of clients who are what we call “married solo” — the advisor only has a relationship with one half of the couple.
Bethany: Whenever a couple says “we’ve just grown apart,” we’ve found that 75% of the time it has to do with the pocketbooks not talking to each other. We advised a couple where the wife had saved $10,000 in cash by storing extra change from expenditures in a drawer. Her husband was excited about a business opportunity that happened to require about that amount of money, and she liked that idea so she literally went into her drawer and pulled out $10,000. He wasn’t happy at all, because in reality, she had committed financial infidelity.
Scott: We’ve broken financial infidelity down into five major reasons:
1. Financial separation is when “one or both don’t know what’s happening with the other person. They’re probably paying bills separately and they don’t want the other person to know.”
2. Overspending and debt causes one half of the couple “to set up little pockets of money that the other spouse can’t know about, which is a form of financial infidelity.”
3. Lack of planning is when couples “do not have a jointly agreed on plan for retirement, insurance and other financial needs.”
4. Control of the couple’s money by only one spouse “almost always forces one or both spouses into financial infidelity.”
5. Money secrets can start with good intentions — such as the wife who saved $10,000 — but have terrible consequences, such as not paying child support. “Money secrets are common in second marriages, with the financial pressures of caring for children, shame about debt from the first marriage or the need to pay alimony.”
Regarding the pledge in The Five Money Personalities that consists of a couple writing down their specific goals and committing to work together. Why is it important to have this agreement in writing?
Bethany: It’s kind of like when you get married and take vows. You nail down exactly what you mean and exactly what your commitment is to each other. You formalize it. It really has to be a commitment to each other that your financial future is important.
Holly: Advisors tell me that when they work with both members of the couple, their clients have better results. As an example, we had an advisor working with a couple who was going to purchase a longterm care policy. Then one spouse came back and
said the other had different plans for the money. The couple lost out on really important coverage.
Scott: One of the most important conversations couples can have is to set appropriate expectations for each other. Then we can begin to compromise.
After reading the five reasons for financial infidelity, have you identified any lurking in your relationship? What conversations can you have today to solidify your financial commitment to each other? Leave a comment or ask a question below.