Financial Infidelity - The Leading Cause of Divorce?

Apr 28, 2008

Financial Infidelity - The Leading Cause of Divorce?

I was doing my regular web money reading and came across an interesting article on MSN Money Central about marriage infidelity. No, not that kind of infidelity, I'm talking about financial infidelity.

What is financial infidelity?

This is where one spouse in the relationship overspends without the other spouse knowing. I can see this being a major problem if it happens often, especially if money is already tight. According to divorce lawyers interviewed by MSN, they see more divorce cases lead by financial rather than sexual infidelity.

Some marriages never recover from that breach of trust, says Brandt, the lawyer. That's when they come to see her. "I get people at the end of the marriage when it's too late," says Brandt. "You have to start talking about these things before you even get into a marriage."

What's the solution?

I believe that the key to avoid money related issues is through open communication about money. Even with our most trusted partners, some of us still treat money as a taboo subject.

Here is what the MSN article suggests:

Brandt and others advise that the best way for couples to avoid this problem is for both partners to get actively involved in the finances. You don't both have to pay bills, but both partners must be aware of how much money they have and where it's going.

Couples should also have an agreement about how much they can spend using joint funds before they need to clear it with the spouse. Online banking makes it simple to periodically check for unusual withdrawals or changes in financial position. Don't leave financial management all up to one person, especially if that person has had spending problems in the past.

Money may seem like a secretly understood topic, but everyone has their own opinions/views. In addition to the above, David Bach from Smart Couples Finish Rich teaches that the key to financial success between couples is to determine a common ground with regards to money. He suggests to base family financial goals around values instead of monetary goals.

How do we handle purchases in our family? I have to admit that I'm the family chief financial officer but all bigger purchases need to be agreed upon. To give ourselves a little freedom, we each get some discretionary cash at the beginning of each month to spend on whatever we please without question.

If you're in a relationship, how do you deal with purchases? Are you guilty of hiding purchases from your partner?

Photo Credit: hypertypos

21 Comments, Comment or Ping

1. Trent Hamm

No secrets. The second you start hiding financial statements from your spouse is the second you’ll start having marital troubles. If you want to hide a specific gift purchase, tell your spouse and redact just that line, but other than that, it should be 100% open.

Apr 28th, 2008 @ 7:41 am
2. The Financial Blogger

No secrets here either. Everything is joint. This is definitely not optimal tax wise, but working as a team is more important for me than saving a few bucks in taxes.

Hiding expenses to your spouse is lying. So I don’t think you should base a relationship on lying (unless you are living with a sugar mommy/daddy! ;-))

Apr 28th, 2008 @ 8:26 am
3. Mr.Archanfel

Nothing is joined here. No problem whatsoever.

Apr 28th, 2008 @ 9:40 am
4. David

My way of looking at it is a little different. We have a joint account for household expenses and we each keep seperate accounts for personal stuff. I may not understand the need for expensive shoes, and she may not understand the need for carbon wheels for my bicycle, but as long as our house expenses get paid, we can spend as we like with our personal money.

This only works if there is money left over after paying expenses for both parties.

Apr 28th, 2008 @ 10:49 am
5. guinness416

We keep separate chequing accounts, and have a similar attitude to David above - we don’t hide purchases (!), but neither do we necessarily talk about personal expenses unless they’re really large or need advice or we’re excited about whatever we bought. We’re both gainfully employed adults, so we certainly do not need to justify purchases to each other. I have a colleague who discusses buying six dollar moisturiser with his girlfriend before doing it, which is completely insane to me.

Apr 28th, 2008 @ 11:32 am
6. fathersez

My wife and I tell each other about the purchases or expenses. She has some plans which I do not completely agree with, and I have some plans she does not completely agree with.

But the money only leaves the accounts after we have had our discussions, disagreements and finally agreed.

Apr 28th, 2008 @ 11:32 am
7. squawkfox

My “better half” and I are on the SAME page financially. When we first met eons ago I watched how he pondered his pennies. During our dating phase I asked him his thoughts on money, investing, spending, and saving. So many of my friends were appalled, but I’ve ended relationships early when I knew the guy was a poor financial fit for me. Too many couples leave the “money” talk for when it’s too late citing it’s “not romantic” or “not polite”. Jeepers!

These days my “better half” and I meet weekly to review our Quicken data. I’m kinda the CEO of our financial matters since I am most sensitive to keeping things up-to-date, but we’re both equally mindful. Money is just such a big part of a relationship, as “unromantic” as that sounds. Because money is openly discussed, it’s never argued about.

Apr 28th, 2008 @ 12:06 pm
8. Cannon_fodder

We have a joint account and our own accounts. The joint account funds our mortgage payments primarily. My wife appreciates the fact that I have brought discipline to spending and saving into the relationship and I appreciate the fact that she has brought a degree of reward spending. If it weren’t for her we would have more money saved away but we wouldn’t enjoy life today nearly as much.

The one thing that I wish were different is her involvement with our investments and retirement plans. I have heard too many horror stories of women left in the dark about the family finances and then the husband dies. That is not the time to go into a crash course of where the money is coming/going.

That is why I’ve tried to engage my wife in these discussions because I want her to be able to step in (with professional help if required) and ensure that her standard of living does not suffer if something should happen to me. While she states that she is very comfortable with how I’m handling things I would feel better if I knew she could carry on with an understanding that would prevent anyone from taking advantage.

So, very recently, we have engaged a dear friend in the financial planning profession to handle the bulk of our retirement savings. His temperament suits us well and I know his counsel will be sound and in my wife’s best interests.

Apr 28th, 2008 @ 12:56 pm
9. Telly

Like others, I am the CFO in our family but I always discuss the budget thoroughly with my husband. We have joint accounts across the board but transfer a small amount of “spending money” to our individual accounts to do with what we please. Things like gym memberships, hockey, etc. do not come out of our spending accounts but dinners out, golf, etc. do so no one feels like the other is keeping tabs.

Apr 28th, 2008 @ 1:18 pm
10. JR

Squarkfox & Telly hinted on something that has a different side to the male respondants to this thread so far.

Being in my 60’s I can relate back to the good old days (50 odd years ago) when mum stayed at home and dad worked. In my family growing up I seem to remember the bank accounts & financial decisions belonged to Father.

As the 60′ came into being it would appear that more women took on careers, (working outside of the home) for them came independance with their financial fortitude, females began to take on the role and responsibility of being financially independant as well as being the financial decision makers.

From personal observation, it can swing both ways in the male/female co-habit relationship, in that, one or the other will handle most of the finances and that person generally makes the decisions for major expenditure. Thre are no secrets or lies in a good relationship.

What I have observed is each have identity independance, both having seperate bank accounts, both working and the most important thing to the relationship (money and everything that goes with it) is the communication.

“According to divorce lawyers interviewed by MSN, they see more divorce cases lead by financial rather than sexual infidelity”

FT, your header talks about “financial infidelity” , funny is that (mostly male respondants, I think) but the real crux of this surely is about ‘communication’, or the lack thereof. Zero communication or very little in a relationship, then it will breakdown real quick… this IMHO is the major cause of divorce, not the financial or sexual infidelity kind

Apr 28th, 2008 @ 3:25 pm
11. Dividend Growth Investor

Yeah, you need to have both partners involved in the finances.. That might be tough though if one of them is a genius, and the other one is not ( I am not the genius )

Apr 28th, 2008 @ 4:32 pm
12. The Reverend

I’d be interested to hear people’s reasons for keeping separate accounts, even small separate savings accounts.

My wife and I have everything joint (other than RRSPs and investment accounts, for which we are each other’s beneficiaries) and it works fine and I see no reason why I would want an account of my own.

Apr 28th, 2008 @ 7:23 pm
13. The Reverend

(edit) we have our own credit cards. This serves the dual purpose of allowing us to surprise one another and both of us maintaining long credit histories.

Apr 28th, 2008 @ 7:28 pm
14. nancy (aka money coach)

I work with so many women (and sometimes vice-versa) who are disappointed and angry at their partner’s money management - or more accurately, lack thereof. And in the mix, serious questions about continuing the marriage/relationship comes up.

Some women still had anticipated (yes, even in this day and age) that their partner would both be a strong provider and also manage the money well. Others are strong income earners themselves, but are angry that their spouses are not on board with saving/getting rid of debt.

I also meet with groups as part of various marriage-prep courses, and anecdotally would say typically only half have had coffee-and-conversation about how they intend to function as an economic unit.

It’s nuts. We’ll see each other naked but won’t talk about money before we commit our lives to one another.

As noted in various comments above, dealbreaker questions include: can the couple at this point, agree on common values? And, can they learn to set common goals thinking as an economic unit? And, can they let go of some judgement and see things from the others point of view?

Apr 29th, 2008 @ 12:58 am
15. Al

Before my wife and I got married, we had an unfortunate event that had positive sides. One week after proposing to my wife, her car was rear-ended while waiting at a red light. She wasn’t hurt luckily (though shaken up), and the car was a write-off.

The positive side was that it got us talking about finances. She had a plan of taking out a loan to buy another vehicle in a certain price range. Since I had a decent cash reserve, I suggested we buy a car together without a loan. After that we learned all the details of how we managed money which was valuable when we bought a house.

Today we have shared chequing and saving accounts, and separate investment accounts. I know more about investing so I make suggestions on what we could do for either of us and we discuss the upsides and downsides together. She has the veto. When considering risk we look at all accounts together. It works well for us.

Apr 29th, 2008 @ 9:59 am
16. Enginerd

I live with my girlfriend, and we split rent, utilities, groceries, general expenses according to our incomes. I make twice as much as she does, so I shoulder 2/3’s of the total burden. We don’t pool accounts, but I keep complete records of all expenditures, and we settle up at the end of each month. This means she writes me a check, because I am the one that actually sends in the rent/utilities/etc. She checks with me about most purchases, although I’ve said that I trust her on small (< $50) items. We discuss and agree on major purchases, which so far have just been apartment and furniture.

I like the idea of a joint checking account, which each part contributes a certain part of their income, and each party could see all activity of the other online. But we haven’t set that up, because we don’t really need it.

Apr 29th, 2008 @ 12:16 pm
17. Adventures In Money Making

Wifey and I have joint accounts. Our approach is quite simple. She vetos everything I suggest, and I approve everything she wants.

This system is working quite well for us!

Apr 29th, 2008 @ 5:39 pm
18. JR

FT said:

“You might be thinking that I’m crazy for buying such small lots, but since I have a bunch of free trades to use up, why not?”

I dont think so FT.

It reminds me of the $50 rule which is quite simple.

Take the avearge Jane or John Doe who may spend (waste) $50 per week on either a 2/4 or booze, lunches, entertainment, possibly even junk food groceries or toys they really dont need.

Simply stick a $50 in an account every week (a good forced savings habit), then at the end of each month have your broker take the $200 by direct withdrawal and put it into your trading account to buy dividend stocks. If your have an RRSP all the better, then you can compound the tax return also.

It does not take very long to accumulate wealth this way &with the many rollover options reinvesting on dividends, you end up accumulating dividends larger than the $200 per month that goes into the trading account.

Small steps get you to the top much easier than running

Consider the possible multiples of $50 for those of you that have more spare change or if you frugal it a bit more

Apr 29th, 2008 @ 8:50 pm
19. Topher

Dr. Joyce Brothers suggested a plan for married couples that went something like this: both parties put all their current income in a single pool. Out of that is paid everything that the two agree on — essentials, probably a budget for mutual fun, and savings for the future. The remainder is split evenly between the two, for each to use without being answerable to the other.

Seems pretty good to me.

Apr 30th, 2008 @ 1:19 am
20. Mr. Cents

I agree whole-heartedly in that both spouses must have complete transparency in their finances. Problems start with the little white-lies, half-truths, and the hidden purchases.

My wife, Mrs. Cents, and I utilize financial software and online banking to ensure all expenses, incomes, and transfers are known to each other. We each have our own allowances every month that we can use for whatever we choose, but these purchases are shown when downloaded from our credit cards or bank accounts. The specific item/purchase/service might not be conveyed, but we must tell the other that it was for allowance (and sometimes face a question or two like “Honey, what’s ‘The Silver Slipper Saloon’ and why did you go there twice last week?”)

It’s this transparency that keeps us honest with each other and ourselves and keeps us off the road to financial ruin.

May 5th, 2008 @ 7:11 pm
21. Investor X

My take on bank accounts is this:

1. 2 Separate bank accounts ( a third joint account is going to attract more bank charges). I did the joint bank account thing and when the overdraft reached critical point there was nobody to point the finger at because nobody took responsibility for the spending or overspending. 4 years of separate accounts and I’m still in the black.

2.Separate bank accounts allows for 2 different people with different levels of urgency. If I overspend, I will suffer and that makes me responsible for my own finances. I don’t appreciate suffering from someone else’s spending habits. That doesn’t mean that you can’t offer advise to your partner but I would rather give friendly advice than yell when things have gone too far.

3. The major bread winner pays all of the bills and recoups a flat amount each pay from the partner for a reasonable share of the non-mortgage, non-taxes expenses (or however you want to split expenses). At the end of the year or when there is a significant
change in wage for a partner, there should be a reasonable adjustment in the flat amount paid. It should always be fair.

My wife-to-be appreciates that I take the bull by the horn when it comes to finances. I appreciate that she understands me and thinks the same way. Life is great when you are on the same wave-length. Its really nice not to argue about money. Its easier to negotiate splitting the bills once per year than arguing about mounting debt when there is nothing left.

Separate accounts might not be politically correct but I’d rather be happy and politically incorrect.

May 16th, 2008 @ 12:54 am