No matter your nationality, gender or income, you likely find it difficult to talk about money. It's considered one of the most uncomfortable and invasive topics to discuss—even more so than death. Money is personal, but losing money is very personal. How we earn and spend our money is ensnared with pride, ego, and often shame, and perhaps because of this, some turn to hiding their transactions from the people they're closest to.
Hiding financial transactions from a partner, known as "financial infidelity," can exacerbate tensions in an already stressed relationship, potentially leading to its demise. Precisely why someone feels compelled to hide their spending, particularly once it's reached a point they can no longer afford to keep hidden, may not always be clear.
What drives the urge to overspend, let alone hide it? It’s tempting to blame the rise of social media for setting unrealistic lifestyle expectations. According to a recent study by survey group Nonfiction Research, 28% of 18-24-year-olds admit to posting Instagram photos that make themselves appear wealthier than they really are. While some people rely on cleverly staged photos to keep up with the Joneses, others may actually spend themselves into debt or bankruptcy purely to maintain an aesthetic, and to buoy their pride.
This type of spending, considered "compulsive spending," tends to manifest during spenders' early midlife - their early 40s. And while not all are compulsive spenders, most Americans are in debt, even if it’s not yet affecting their quality of life. Total debt balances have grown in recent years for every American age set, according to data from the Federal Reserve Bank of New York.
When you combine the pressure to spend with the fear of honest conversation around money, it's easy to see where rising debt takes root. Naturally, as the problem worsens, the fear and shame of exposure only double down.
What We Talk About When We Talk About Money
Establishing and maintaining financial honesty in a relationship can be tricky, but it's necessary. "The sooner, the better," says Douglas Boneparth, CFP®, president of Bone Fide Wealth in New York City. While he doesn't recommend bringing up your credit score on a first date, Boneparth does suggest having the conversation once in a "long-term, committed relationship."
Not all couples heed his advice. According to a recent study published in the Journal of Financial Therapy:
35% of participants believed that some of their finances should remain private or off limits to their spouse.
Perhaps that explains why financial infidelity is relatively common among American couples. In the aforementioned study, 27% of respondents indicated that they had kept a financial secret from their partner.
Financial infidelity takes plenty of forms. Some people may commit more egregious breaches of trust - gambling away money without telling their spouse, buying pornographic material or keeping a checking account secret on the side. But for the majority, financial infidelity takes shape in smaller transgressions: saving money to be spent on a guilty pleasure or squirreling away paychecks.
In fact, while only about a quarter of respondents admitted to committing financial infidelity, half indicated that they had performed actions that fit the clinical description of the term.
But when one party in a relationship feels that their trust has been violated, the consequences can be severe.
Of those couples who experienced financial infidelity, 76% reported that it harmed their relationship and 10% said that it resulted in divorce.
For context, the correlation between sexual infidelity and divorce is higher, with studies estimating that anywhere from 15% to 50% of instances in which a partner discovered that his or her significant other was “unfaithful” led to divorce.
Interestingly, while men are more likely than women to be sexually unfaithful, both genders were equally likely to have hidden their financial decisions from their partners. Despite this, a review of Investopedia's own data shows that women are more likely to be interested in marital finances.
"Increased interest in this topic for women could be driven by several factors," says Dr. Joetta Gobell, Ph.D., vice president of research and insights at Dotdash, Investopedia’s parent company. "Not only are women more likely to be researching the dynamics of finances in marriage, but they may be facing life events that motivate increased interest, whether that be concerns about ongoing potential financial infidelity, seeking to ensure they learn from previous experiences, or preparing themselves for the potential financial consequences of the end of a marital relationship."
Who Holds the Pursestrings?
Oftentimes, the kindling for conflict builds slowly. “It’s the snowball effect,” says Joseph Conroy, CFP®, a financial consultant with Synergy Group and author of Decades & Decisions: Financial Planning At Any Age. Seemingly inconsequential choices are easy to write off but build and fester over time. He says:
“People don’t try to get help when they’re having trouble financially until they can’t make their mortgage payment and they’re going to lose their house.”
A substantial amount of conflict can be avoided by making sure that both parties in a relationship have a realistic expectation of what is - and isn't - affordable.
It's worth remembering that not all financial infidelity is selfishly motivated. If one spouse is solely responsible for the household's finances, they can feel like they're the ones holding the rest of the family back from important experiences. "You don't want to say 'no' to your family," says Conroy. If the family "wants to go on a Disney vacation, or one of the kids has an [out of state] little league tournament," it can be difficult for the partner managing the household's finances to admit that it just isn't in the budget.
Default to Transparency
There's no magic bullet for overcoming the fear, guilt, and anxiety of being completely transparent about your spending. One key to developing the habit is enforcing a default reaction in yourself: open and frequent communication, without exception, especially if only one member of the partnership retains control over the household's finances. "Operate in complete transparency and communicate as frequently as possible," says Boneparth. Being in a relationship is like being on a team: "That means sharing information."
While most couples will likely require at least one formal discussion around shared goals and financial priorities early on, framing the conversation around money as a positive is important to ensure it doesn't feel like a burden (or confession). Conroy suggests that couples check-in informally, but regularly, so that money issues are addressed early and don't have a chance to snowball out of control. "Couples need to talk," he says, "even if it's just over a cup of coffee in the morning."
Agree to a Plan
Research suggests that the best way to stave off surprises is to set a defined plan and stick to it. "Couples who pay their bills in a less structured manner are more likely than those who had a more established budget and plan to keep a financial secret from their partner," write the authors of the aforementioned survey in the Journal of Financial Therapy. Understandably, the looser the plan, the more easily transactions can slip through the cracks.
It's important to not only set a household budget that accounts for regular expenses like mortgage or rent and utilities, but also for long-term goals and emergencies.
"People tend to get into trouble because they don't think about emergency spending in their plan," says Conroy. Financial experts generally advise that couples keep at least three to six months of living expenses in cash or other safe investments to account for unforeseen events, like a sudden loss of income, hospitalization, or needing to care for an injured or ill family member.
Keep it Separate, as Long as You Keep it Honest
Some financial experts suggest maintaining just one shared account, but others recommend each spouse maintains a separate account for the little things they just want for themselves.
If that's more your style than all-access, all-shared accounts, Conroy advises that couples route all income through a shared account first, then transfer discretionary spending to individual accounts. This approach, he says, "gives people a sense of independence," but ensures that both parties are still working together on the same goals.