By FPA Members Elaine King, CFP®, CDFATM and Philip Herzberg, CFP®, AEP®, MSF
Is financial infidelity really “the new normal1?” With 31 percent of couples who share finances indicating that they have been deceptive about money matters2, you should be cognizant that financial infidelity can have significant repercussions, including separation and divorce.
In some instances, you can have disagreements with your spouse over hiding income or making unethical moves because of honest mistakes. Recognize that you may not be detail-oriented and can forget to account for specifics when dealing with combined personal finances.
Alternatively, if you have any reason to believe your spouse is purposely concealing the value of assets or switching funds into stealth accounts, you may choose to consult with a financial or tax professional specializing in forensics to comb through your marital records and to create an accurate picture of your spouse’s financial position. With 92 percent of divorce attorneys seeing an increase in the number of cases using evidence taken from smartphones in the past three years3, you can also readily uncover pertinent financial information via electronic discovery and social networking site browsing (i.e. Facebook and LinkedIn).
Before you secretly search for clues online or immediately turn to an outside professional to check for financial indiscretions, you should have a careful and honest conversation with your spouse about money and define a strategy or outline a resolution that suits your situation.
Utilize and apply the following pointers to facilitate financial transparency and compatibility with your spouse:
- As hidden debt can signal distrust and a lack of communication in your marriage, you should be completely open with your spouse about any amount you may owe, the interest rates, and payments. Realize that debt can have serious ramifications on your credit score and your ability to apply and secure a joint home loan.
- Foster a healthy dialogue to understand your partner’s current financial situation, values, and history with money. As part of a joint financial planning process prior to marrying or merging assets, you should fully reveal and review all credit card accounts, bank statements, and credit reports. With the help of a CERTIFIED FINANCIAL PLANNERTM professional, you can receive guidance on shared priorities and reconciling differences in managing debt. Also, refer to Matrimonial Bliss? Pros and Cons of Merging Your Finances for insights on handling monetary responsibilities before marriage.
- Arrange a regular time to meet with your spouse and discuss family finances without distractions. Permit ample time to answer any questions your spouse may have regarding unexpected expenses and insufficient savings after the conversation has ended.
- Ascertain that there is a mutual awareness of separate and merged assets and liabilities. Note that statutes and provisions about combining finances and creating joint accounts for couples depend on the state where you are domiciled. Delineate the types of investments or unforeseen expenditures that may warrant tapping into your savings, such as college education or retirement funds.
- Ensure you delegate the tasks of managing accounts and paying bills. Create checks and balances on family finances, where you take the lead in tracking income while your partner has the role of defraying expenses. To assist you in building this platform to succeed, find a qualified financial planner from the Financial Planning Association.
Be prepared to conquer financial infidelity! Remember that effective communication with your spouse is pivotal to mitigating challenging money conversations and alleviating tensions.
FPA member Elaine King, CFP®, CDFATM, is Chairman of FPA of Miami-Dade and Author of Family & Money Matters, La Familia y El Dinero Hecho Facil. FPA member Philip Herzberg, CFP®, AEP®, MSF, is President-Elect of FPA of Miami-Dade and Director of Media Relations & Public Awareness for FPA of Florida/Miami-Dade.
1Thomson Reuters, “Three in 10 Americans Commit Financial Infidelity,” January 13, 2011.
2Dickler, Jessica, CNNMoney, “Financial Infidelity: Catching a Cheating Spouse,” July, 1, 2011.
3Dagher, Veronica, The Wall Street Journal, “Why Hiding Money From Your Spouse Has Gotten a Lot Harder,” April 30, 2012.