Money is difficult to talk about, especially with your spouse. However, lying about money in a marriage can have dire consequences. Partners often conceal finances out of a desire to impress or fear of disappointment. To illustrate this, I’ll define “financial infidelity,” why it happens, and how to recover from it.
What Is Financial Infidelity?
Financial infidelity is a term used for when someone lies to their partner about their shared money.
Here are a few examples of financial infidelity:
- Keeping a secret bank account
- Lying about how much you make
- Not disclosing side hustles
- Hiding significant debt
- Making expensive purchases without your partner’s knowledge
- Lying about how much you’ve amount spent on purchases
- Lending money without your partner’s consent
- Buying stocks or making investments without your partner knowing
In fact, married couples owe a fiduciary duty to one another pursuant to Family Code section 721, and when they conceal debts and excessive spending, the offender is breaching their fiduciary duty to their spouse. A breach of fiduciary duty during marriage can have dire consequences during the divorce process, which carries penalties, reimbursement, and mandated awards of attorney’s fees.
Despite its seriousness, financial infidelity is a common behavior. In the U.S. alone, one in three couples has experienced financial infidelity. Plus, more young adults and millennials have committed financial infidelity compared to previous generations, hinting that the practice is becoming more common.
But to address and heal from financial infidelity, let’s understand why it happens first.
Why People Lie About Money
Lying often spurs from how each partner grew up with money, how they spent money before the relationship, and what role money plays in their lives. It’s never just a white lie — dishonest transactions come from years of developing a unique relationship with money.
Generally, many parents don’t talk to their kids about finances, and it’s a subject that’s woefully lacking in school curriculums. As such, many struggle with managing their money spurred by deep issues related to trust, intimacy, power, or a lack of communication.
Psychologist Daniel Kahneman determined that people make financial decisions based much more often on emotion than rationality. This is apparent when you dig into the main motivation that causes people to lie about their finances: fear.
Fear
Fears relating to money boil down to two things: the fear of not getting what you want and the fear of losing what you have.
Not Getting What You Want
Say you have your eye on a personal purchase or want to help out an old friend going through financial woes. However, you fear that your partner wouldn’t approve of it. Many find it easier and safer to keep it a secret to avoid being vulnerable here. As a result, people lie to get what they want to avoid the discomfort of confrontation.
Losing What You Have
Many times, in relationships, opposites come together: one partner is a saver while the other is a spender. As a result, both fear losing control of how they manage finances.
On the one hand, the saver might secretly siphon money into investments or real estate. The saver fears poverty but is equally afraid of running financial ideas by their partner.
On the other hand, the spender is buying things incognito. They feel it’s deserved but are fearful that the saver might not feel the same way.
In both cases, shame plays an important role. Many tend to spend money impulsively, making them feel fearful of talking to their partner once they’ve come to realize what they’ve done.
Recover from Financial Infidelity
You can absolutely work through financial infidelity, but it can be incredibly difficult to resolve feelings of mistrust and betrayal.
If your spouse lied to you, take the time to process and determine if this is a dealbreaker. Money troubles caused by poor communication can lead to divorce, but every relationship is different. Sometimes, financial infidelity can also help pry open lines of meaningful communication. Once you have these deep talks, you can use a postnuptial agreement to lay the ground rules for spending money within your marriage, and to resolve any possible breach of fiduciary duty issues that may have occurred.
In almost any case, you can take these four steps to recover from financial infidelity:
1. Come Clean and Say Sorry
Tell the truth immediately and apologize for your actions. Describe the details of what you did and how much you spent. If your partner asks for some time, respect their space and allow them to gather their thoughts and feelings.
2. Talk About Your Money Story
Once the smoke clears, sit down and have an open and honest conversation. Talk about how your family viewed money when you were growing up. Here are a few questions to discuss together (both partners should answer):
- Were your parents frugal or lavish?
- Did they have large debts?
- How did you view money in your formative years (teens and 20s)?
- Did you work at a young age? How much did you get paid?
- Did your family help you through college?
- Are you accustomed to living with debt or having a sizable savings account?
- Have you made investments? Do you plan to?
- Do you have plans for a big purchase?
- How much money do you want to retire with?
These are just a few of the questions to help you get started. Use this comprehensive guide to talking about money with your spouse. It’s typically used for pre-marriage couples, but many have found it equally helpful to talk through the questions in the guide when already married.
3. Plan and Execute
Set clear expectations about the steps you both need to take to remedy the situation, such as paying off debt, drafting a postnuptial agreement, or seeking counseling. Set new financial goals together and check in often on your accounts.
Depending on your situation, separating finances, expenses and debts may also be a good idea until the behavior has stopped. You can try setting a new household budget where you both contribute a portion of your income to basic household needs while the rest of the money is kept as separate property. You can ask for proof that they’re paying off their debt, improving spending habits, getting reimbursed for money spent without your knowledge or consent, or making certain debts your partner’s sole liability.
4. Get Expert Help
You can use the services of a family law attorney to discuss the terms of a postnuptial agreement to lay out your and your partner’s agreement on separating finances, responsibility for debts incurred, and how money will be handled moving forward.
A postnuptial agreement can be a great solution for couples wanting to continue their marriage but with a new understanding of how their joint and separate finances will be structured moving forward, as well as settling issues in connection with a breach of fiduciary duty.
You can also consider seeking counseling to help you discuss solutions, mediate between you and your partner, and provide a neutral opinion on the best path forward. If your relationship improves to the point where the offense can be considered forgiven, don’t hold it over your partner’s head. Once you’ve moved past the issue, it’s good to stop holding on to your hurt feelings.
Transparency Is King
Coming clean about money isn’t easy, but neither is marriage — both you and your spouse need to put in the effort to make it work. Lying about money happens, but that doesn’t mean it’s healthy. So whether you’re willing to improve the health of your marriage or considering a break-up, you need to have honest conversations with your spouse.
If you find the situation irreconcilable or if you believe a postnuptial agreement will be right for you and your partner, feel free to reach out to me — I’d be happy to help talk you through solutions and the next steps.