Financial Infidelity: This Valentine’s Day, invest in open communication

For couples unfamiliar with the term, financial infidelity is the act of lying to a partner about money habits or behaviours. According to a 2021 National Endowment for Financial Education poll, 43% of US adults admitted to committing at least one form of financial deception.

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It’s an insidious betrayal because it can start with a seemingly small act, such as downplaying the cost of a recent purchase to avoid a fight. But when a partner becomes comfortable with fibbing about the little things, it can lead to lies about other behaviours — think hiding assets or racking up debt unbeknownst to your partner or even creating debt in their name without their consent.

Financial infidelity is dramatic enough to play out on reality TV. A recent season of Bravo’s Real Housewives of New York kept teasing that housewife Erin Lichy was having marital issues. Vague references to her feeling betrayed by her husband were peppered throughout the promotional videos, and viewers assumed it was an extramarital affair. It was indeed an act of infidelity, but it was a financial one.

Her husband had sold off some of the couple’s Bitcoin to pay off some debts — debts Lichy didn’t know existed — without consulting her. Lichy found out the investment had been sold when she logged in to check its current value, expecting to see a decent return. It was a breach of trust that led to a conversation similar to those seen in cheating scandals on other franchises of the show.

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It’s bad enough when financial infidelity happens, but there is another element that makes things worse: Sometimes, one partner can attempt to justify the behaviour by claiming it was to spare the other’s anxiety or stress levels. Withholding the knowledge of debts or mismanaged money until the problem is solved is rebranded as a loving act by the perpetrator. But in in reality, it often leaves the other person reeling about what else could be being withheld.

There’s no perfect way for a couple to structure their finances to completely mitigate the risk of financial infidelity. It’s possible that fully combined finances can reduce the likelihood of it being hidden, but that’s only true if both people take an active role in checking bank and investment accounts. That doesn’t always happen, at least not regularly.

Many couples defer the role of chief financial officer to one person in their relationship. A 2021 UBS survey of men and women found that 48% of wives in high-net-worth partnerships rely on their husbands to take the lead on long-term financial decisions. The same report found that only 20% of couples say they make economic decisions together.

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Others prefer to have completely siloed finances or a hybrid “yours, mine and ours” approach. It’s a trend that we see a lot in millennial and Gen Z couples because they are more likely to cohabitate before marriage, which doesn’t always lead to completely merged finances (nor should it, because a breakup doesn’t provide the same protections as a divorce when it comes to dividing assets). 

While keeping things more separate makes it easier to take out loans, run up credit card debt, or make investment decisions without a discussion, it certainly doesn’t mean it’s the wrong way for a couple to structure their household finances.

The focus on reducing the risk of financial infidelity is less about how a couple handles their money and more about how they communicate.

Every relationship should first set a baseline for when each partner has full autonomy and when a discussion should happen before a purchase. For example, for those who fully combine their money, can either party spend a certain limit without checking in? For those siloed, do you ever need to discuss a large purchase with your partner if it’s with “your money” and you’ve satisfied your obligations to the household bills, savings and investing goals?

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Once a baseline is set, then couples should acknowledge what each person considers to be violations. That’s also the time to bring up potential consequences. 

It could be a change in how the current spending system operates — such as going from separate to joint accounts. Or perhaps it’s a transgression that requires the wrongdoer to share regular credit reports to prove no new lines of credit have been opened. In some cases, the breach of trust is so severe that it’s grounds to end a relationship.

No one wants to throw around words like “consequences” and “divorce” on Valentine’s Day, but healthy communication — particularly the ability to talk about difficult topics — is the hallmark of a healthy relationship. This is arguably more meaningful than an actual Hallmark card with a few sentences about how much you appreciate your partner. So why not engage in both — open discussions and heartfelt gestures — as demonstrations of love and affection? ©Bloomberg