Imagine this scenario. You’ve been married (or living with someone) for several years. You share kitchen utensils, holiday plans, children, and perhaps even bank accounts. You feel as though you know your partner on a deep level…
Until one day, you discover that he or she has been secretly racking up debt or siphoning money into a secret bank account.
Financial infidelity is real. A recent study from CreditCards.com reveals that 29 million Americans (1 in 5 who are married or living with a partner) are currently hiding a bank account or a credit card from their partner. A survey conducted by Harris Poll on behalf of the National Endowment for Financial Education found that 2 in 5 American adults who combine their finances with a spouse or a partner admit to having committed financial deception.
To make matters worse, staging a financial deception today is easier than ever. Someone can sign up for a new bank account or credit card online, opt out of physical statements, and not trigger any paper trail whatsoever!
How can you improve your odds of avoiding that fate?
Get clear on what’s yours, mine, or shared
Every family has its own preferred way to set up family and personal finances. Some make the decision to share everything. Others set up a few shared accounts for household expenses and keep the rest of money in their individual accounts. And then there are families that have no shared accounts at all.
Regardless of the way you choose, it’s important to talk through it with your significant other. All too often, couples move forward by default and assume that they agree on money matters without having discussed it first. That can lead to hurt feelings even without an outright deception!
Set rules about big purchases and financial decisions
The second part of the bank account and credit card conversation is what your family unit will consider as “big financial decisions”. You might be surprised to discover significant differences on this front!
For example, if you grew up in tight financial circumstances where every dollar counted, you might think that a purchase of $100 or more should be discussed together. However, if you partner grew up in a home where money wasn’t a pain point, the internal trigger for conversation might be much higher, perhaps over $1,000. Unless you shine a light at this difference and pick a dollar cutoff that’s comfortable and fair for both of you, you will run into misunderstandings.
Get a credit report — and get involved
Everyone should order a free credit report every year — and then review it carefully. In families that have an established practice of looking at credit reports together, it would be more difficult for one spouse to open a secret credit card and keep it a secret. This annual review is also a great opportunity to identify any mistakes on the reports. Just be sure to follow through on resolving anything that looks unfamiliar!
On the same note, get involved in family finances. It’s common for couple to designate one person who’s in charge of money. However, staying blissfully uninformed can compromise your financial future. Don’t simply assume that your lifestyle is comfortable and therefore everything is fine. And if your significant other is reluctant to bring you into money conversations (or is dismissive of your wish to be involved), treat it as a red flag.
Get help if you find yourself on the wrong side of financial infidelity
Finally, speak up if you discover that your significant other has been hiding a significant credit card balance, a gambling habit, a penchant for making undisclosed risky investments, or has been lying about income to watch you pay all the household bills on your own.
As far as your relationship goes, financial infidelity is just like any other form of cheating. You may feel angry or hurt. You may spin into denial or find it difficult to trust your partner again. Getting past this will take counseling, a commitment to transparency, action to fix the consequences of the bad decision, and time to heal the wounds.
From a legal standpoint, you may be on the hook for whatever debt your spouse has racked up during the marriage, even if you had no prior knowledge of the situation. Working through the fallout may take years. It will probably affect many areas of your financial life, from saving for retirement to lifestyle choices.
Many couples in this situation would benefit from working with a financial planner. An independent professional can keep the conversation productive, mediate points of disagreement, and help you plan for overcoming financial infidelity and moving forward together. The sooner you can have an open and honest conversation about all aspects of money, the better your odds of recovery.