9 Ways To Avoid Financial Infidelity

The US divorce rate among young people under 30 has been dropping to below 50% since the early 1990s. However, that may be deceiving. Millennial couples are marrying later and arming themselves with prenuptial agreements.

According to a sociology professor Philip Cohen’s study, total divorce rates may be higher, closer to 53%. Older couples are quitting their marriages more than previously.

According to 35% of people surveyed in the SunTrust Bank study, money is the number one trouble spot among couples. Most conflicts about finances are the driving force in most divorces. Couples talking to each other in wise financial decisions may reduce some of the strain these topics cause.

In its Love and Money survey, TD Bank found that 90% of respondents who say they are in happy relationships discuss money at least once a month. Bad financial habits may be costly by not confronting the piling up of higher-cost debt or overspending. It is always better to address these problems head-on rather than procrastinate over financial decisions.

Related Post: 11 Ways To Avoid Costly Procrastination

Financial Attitudes May Be Visible Early On

When couples start dating, they may gain some visibility into each other’s attitudes about saving and spending habits. Once couples become more seriously involved, they should have more in-depth conversations about money to gauge each others’ financial goals. They should communicate their perspectives on financial planning with honesty and respect.

Talking with your partner about money is awkward if you have yet to. If you are moving to the serious couple stage, you need a way to get started. Ramit Sethi, a legendary personal finance expert (in all areas), developed “The Definitive Script…” He provides helpful word-for-word phrases for you to use. Frankly, it works for us after 30+ years of marriage!

First Money Fight May Illuminate Your Differences

Learning how to talk to each other is essential as you contemplate tying the knot. A couple may have different opinions about what kind of wedding you want. Should you marry at City Hall (about 3-4% of couples do) or have a lavish wedding? You may get an early view of your financial differences once you decide to get married.

The Wedding: City Hall or Grand Affair

If you choose the latter, you are on the same page. Make sure you do your research and are ready for the high costs. The average amount spent on a traditional American wedding is $35,439. However, geographic locations differ. Expensive weddings could go higher; they cost $75,000 or more in New York and San Francisco.

How the engaged couple handles this monumental event may tell volumes about how close their relationship with money may be. That is a significant first step if they agree on the venue together. Think twice about having an expensive wedding that may put a big dent in savings for couples. 

Their weak money management skills challenge highly educated professionals like doctors and lawyers. My husband, Craig, an attorney, has often had difficulty with finances. He frequently laughs, saying he went to law school instead of working with numbers. 

My Experience

Finances have been a complex topic for our household. Once my husband began his legal practice several years ago, I needed a better handle on what he earned regularly. It was understandable in the early years as his practice went through typical growing pains, and his income was minimal. Also, clients don’t pay as regularly as they should.

We missed some bills as Craig was the billpayer. The problem was that Craig needed to make me fully aware of how tough things were. Truthfully, I was wantonly oblivious and focused on my career, which demanded long hours of 6-7 days and heavy traveling.

Fortunately, I was doing quite well on Wall Street. Ultimately, we were able to pay bills. However, as time passed, my husband still needed to share his income or be more specific. He is not alone in hiding information from me. Eventually, I did find out about the financial damage. It caused enormous stress in our lives.

A Financial Planner Helped Us

Among the biggest mistakes I have made is not being persistent about knowing what he earned. Like others, he has a less predictable income, so he had some valid reasons. Working with a financial planner benefited us, and Craig was far more open.

Circumstances change, and you and your significant other must update each other. As those who have children know, our financial lives get more complicated when our family expands. So, folks, be open and honest with each other.

Financial Infidelity Seems To Be Growing

Many people who succeed in their careers have had trouble handling their finances and may cover up some of their actions. They may hide large purchases they have made, have credit cards, or a loan they didn’t share with their partner. They lie to each other about financial transactions. This symptom is known as financial infidelity, when couples are secretive about hiding money or having excessive debt accounts. It leads to stress, anger, broken relationships, potential bankruptcies, or divorce.

Financial infidelity has been on the rise, according to a survey by CreditCards.com. Millennials are nearly twice as likely to hide money or accounts from their partners than previous generations.

Prenuptial agreements, up 62%, have been popular with Millennials, especially women. These agreements are legal documents two people negotiate and sign before they marry. The signed copies cover financial issues and the potential division of assets in divorce.

A Harris Poll done on behalf of the National Endowment For Financial Education (NEFE) reported these findings:

• In 2 out of 5 couples (or 41%), one spouse admitted to financial deception.
• 75% of those surveyed said financial infidelity adversely affected their relationships.
• 36% of surveyed believed some aspects of their finances should be private.
• 25% discussed finances with their spouse and knew their partner would disagree.
• 18% say they lied or hid financial information because they were embarrassed or fearful and didn’t want their spouse to find out.

Other Surveys

• 31% of people in another survey by CreditCards.com kept credit cards and other accounts from their partners. Hiding debt is a dangerous deception. The unsuspecting partner may think their household is financially secure when it is not.
• Almost 30% of couples do not know each other’s salaries by a study by PolicyGenius.

 

8 Ways Couples Should Talk About Money

Few topics are more uncomfortable to talk about than money. Sex conversations are comparatively easy. Yet, avoiding the conversation about finances because it is challenging is foolhardy. If you are entering what is going to be a lifelong relationship, now is the best time to get started.

1. Have Honest Communications

What kind of lifestyle do you want to have? Early on, you should express your general views on various financial topics without specifics on saving, spending, giving, reducing debt, investing, and retirement. Discussing how your family handled finances may be an excellent place to start.

Remember, if you and your significant other are going to have a long-term relationship, there will be plenty of time to get very specific.

Each of you needs a framework to understand your respective money mindsets better. Consider writing each other a letter as to what is essential to you. Please share it and ask questions. It is a meaningful time to discuss your significant priorities and learn about your partner.

Meeting of the Minds

There must be a meeting of the minds regarding values and expectations. It would be best if you talked about where you want to live, whether you would prefer buying your own home rather than rent, saving for retirement through work, setting up additional Roth IRA accounts, and setting up a vacation fund.

Most importantly, don’t lie or hide crucial financial information from your spouse because you are embarrassed or fear a potential fight. Face the music by admitting your mistake and ask your spouse for help in understanding the matter.

2. Set Up A Time To Talk About Money

Finding a standard time to discuss various money issues together is a good habit. You want to ensure you are on the same page regarding short-term financial goals. Those goals may impact your long-term plans if you breach your ability to save to buy a home. Also, couples should set aside money for an emergency fund for unexpected costs.

Initially, meet weekly to establish this as a regular event. You can call it a “money date” and talk over coffee or dinner. It should be informative and not stressful. It would help if you used this time to get comfortable talking about money issues. One person may be a spendthrift, buying only the highest quality, and the other is thrifty, often purchasing low quality.

A discussion is an excellent way to clear up misunderstandings over one spouse’s purchases while the other person wasn’t happy about the amount spent. We have all been there at one time or another when we couldn’t resist a salesperson’s pitch to us.

Have Monthly Meetings

After the first few weeks, consider a regular monthly meeting convenient to your schedule. Gather financial documents, bank statements, and budgets to review together. Both spouses are entitled to know their financial situation clearly and correct any divergence from their goals promptly.

3. Tell Your Spouse What You Earn

Generally, sharing your salaries as a combined baseline income is a good idea. However, one person may have a predictable salary while the other may depend on annual bonuses, commission, or be self-employed, receiving less predictable lump sum payments. You will need to figure out how much you both earn annually.

Whether you are not sharing with your spouse what you earn or hiding debt from your partner, you impair their right to know about these financial issues. Surprisingly, CreditCards.com reported that only 52% of individuals believe their significant other is honest.

For budgeting purposes, you must know your household’s combined income. Creating a monthly household budget to track savings and expenses will be essential. It would help if you were working together towards your financial goals. Iron out any fundamental differences. You should also know your net worth, tracking your assets and liabilities.

4. If/When Finances Merge

Combining finances and dividing up money responsibilities are among the most challenging decisions for any new couple. There are many tasks to take care of, such as managing money day-to-date and dealing with long-term issues.

Own or Joint Bank Accounts

Traditionally, married couples open joint bank savings and checking accounts. Often, one spouse may earn more than the other.

Increasingly, both spouses earn their income. Both spouses should be responsible for saving and spending per their goals. If they were married later in life, they might have accumulated assets and debt, notably student loan and credit card debt. They may want to protect their owners.

Have At Least One Account That Is Yours

For many couples, it makes sense for each person to have their accounts. Each of you may have automatic paycheck deposits and employer-sponsored retirement accounts. You likely have respective bills for entertainment, clothing, and jewelry paid on your credit card.

You can each allocate a pre-determined percentage for savings to the joint account based on your respective incomes. Joint accounts can distribute your income for household savings, investing, routine, or monthly fixed expenses.

Put some savings into the household’s emergency fund for surprise expenses.

5. Divide Financial Responsibilities

You should decide how to share responsibilities for financial tasks. Among the jobs are paying monthly bills, monitoring credit card accounts, establishing an emergency fund, paying taxes, charitable giving, reviewing credit reports periodically, and your budget. Determine which one of you is financially more capable of various respective tasks.

Your monthly budget and net worth statements are essential tools. Track your income from all sources, less all fixed and variable costs. Review your discretionary spending and consider limits if you are overspending.

Net worth statements will give you a snapshot of your assets divided into cash and other financial assets. You want to track debt amounts from your monthly credit card balances, student loans, mortgage, and car loans. Consider reducing debt to manageable levels, especially high-cost debt, usually from your card balances. Pay these monthly balances in full and zero out that debt.

Related Posts:

10 Reasons Why You Should Know Your Net Worth

How To Pay Down Your Debt For Better Financial Health

How To Control Spending With A Simple Budget

Why You Need An Emergency Fund

6. Spend Less Than Your Combined Income

To spend less than you earn is easier said than done. If you are paying more, you rely on your credit cards or loans.

Put yourself and your spouse on a limit you agree to, which coincides with your targeted budget goals. For example, rein in your spending if your savings target is 10% of your combined income and you find it challenging.

Ultimately you want to maximize your greater financial security for your current household and retirement years.

Related Post: 10 Ways To Better Manage Spending

8. Long-Term Financial Planning

You and your significant other should be on the same page, whether dealing with day-to-day financial management or long-term planning. Any problems in the near term, like reluctantly high debt, need to be worked on to realize your long-term goals.

Consider going to a financial advisor or planner to help you develop your plan more aptly and become more successful financially and in your relationship. You and your partner will need to make many complex decisions as long as you are together. A planner can take some of the angst away.

Related Post: How To Choose A Financial Advisor

9. Strengthen Your Financial Skills

Most of us did not have a course in financial literacy in high school. Having financial skills is essential for everyone for day-to-day transactions and long-term planning. Take a workshop, read personal finance blogs, and listen to podcasts, YouTube videos, and TED Talks.

10. Be Happy With Your Partner Or Go For Help

No one enjoys confrontation, particularly about money. The truth is that our lives revolve around money. We are making, spending, saving, borrowing, and investing money. We do it together and often apart. However, when we have financial issues, we often have battles.

Let’s make a pact to discuss money more freely and discuss financial goals together. You will be happier with your partner if you can plan together. Sometimes you need to go for help financially. If you can’t communicate honestly, consider a marriage counselor.

Thank you for reading this article! Please visit us at The Cents of Money for more articles of interest.

 How do you talk about money with your spouse or partner? It is difficult for all of us. We can all gain from each other’s insights. Please share your experiences as to what works for you. We would love to hear from you!