A relationship which is built on trust and honesty can withstand any storm. However, any actions that jeopardize the trust that partners have for each other spells doom for the relationship. While most people single out cheating with a different person, outside one’s own relationship (extramarital infidelity) as a major cause of marital wrangles or disagreements and subsequent break ups or divorce, there is a major elephant in the room that most people forget; financial infidelity. Although extramarital infidelity has been widely studied, financial infidelity remains a less known aspect despite the serious consequences it has on marital, or romantic relationships.
Understanding Financial Infidelity
Financial infidelity is defined as the act of “engaging in any financial behavior expected to be disapproved of by one’s romantic partner and intentionally failing to disclose this behavior to them”. Secondary data from TD Bank collected from 12,743 across 13 countries in 2017 indicated that 35.7% of individuals engaged in some form of financial infidelity. In an iFidelity Survey that drew on a nationally representative sample in the United States, it was found that at least half (58%) of the respondents admitted to having deceived their partners as far as financial issues were concerned while 51% of the respondents revealed that their partners had financially deceived them. According to Credit Canada, 36% of adults in Canada have admitted to have kept a secret about their finances from their partners.
In their paper “Love, Lies and Money: Financial Infidelity in Romantic Relationships”, published in the Journal of Consumer Research, researchers pointed out that financial infidelity included positive and negative financial behavior. For instance, positive financial behavior that could be concealed from a partner included making extra income savings in a personal account without their knowledge. On the other hand, negative financial behavior could include lying about paying bills, directly harming one’s spouse financially, hiding one’s spending, credit cards and loans. A report in The Times indicated that some wealthy couples purchase villas and holiday homes and keep them a secret from their partners.
In African countries such as Kenya, there are several cases of men and women who have purchased properties, and established businesses without the knowledge of their spouses. In one of the most disturbing cases, there were reports where a man was paying rent for almost ten years in a house which was purchased and owned by his wife without his knowledge! There are cases of women who are actively involved in “merry-go-rounds” and Saccos, where they make daily, weekly or monthly cash contributions without the knowledge of their husbands. Coincidentally, some women use the money that their husbands set aside for daily running of the house requirements. Even when the paycheck for their contributions is out, the money is rarely disclosed to the husband. Surprisingly, some women may borrow huge sums of money from the Saccos without the knowledge of their husbands, spend the money, and when the Saccos come calling for the debt to be paid, the news becomes so devastating that the foundation of the couples’ relationship is shaken.
In most cases involving financial infidelity, individuals do not believe that their partners will support or approve their spending. Consequently, they find deception as the most viable option available. For instance, a partner may decide to spend money on their family member such as a brother, a sister or mother, without informing their partner because they do not have confidence that such spending would be approved. Similarly, some individuals have gambling problems and losing money in such ventures is something that they do not admit to their partners, until it is too late and their accounts are drained. In cases where individuals run separate accounts but agree on sharing financial responsibilities, some spouses find it uncomfortable disclosing their true financial status to their partners and they believe that it is their right to spend whichever way they like because it is their money and they worked to earn it. Therefore, they never see a valid reason to disclose their spending to anyone, let alone their partners.
Impact of Financial Infidelity
According to the social engagement theory, the interaction between relationship rewards, costs, expectations and alternatives largely determines whether individuals will stay in, modify or abandon their relationships. If the outcomes (costs and benefits) that a spouse accrues from the relationship is equal or more than what they expected, then they will experience satisfaction in the relationship. However, if the outcomes fall below their expectations, then they will experience dissatisfaction and they may decide to make changes aimed at changing relationship to achieve their desired objectives, continue living a dissatisfied life within the relationship or leave the relationship.
Whether an individual engages in minor or serious financial infidelity, such an act has significant impact on the quality of a relationship as well as the happiness of the couple. Couples enter into relationships with the expectation that their partners will embrace honesty and faithfulness and anything that falls short of such expectations spells the beginning of trouble. Studies indicate that financial reasons, alongside lack of commitment and romantic infidelity, are a major reason for the falling apart of most marriages. When the truth about a partner’s lies about finances come out, the trust that the marriage was seemingly built upon is shattered and the relationships starts shaking.
A study conducted in 2021 by The National Endowment for Financial Education (NEFE) highlighted that 43% of individuals in the United States who had opted to combine their resources confessed to have engaged in financial deception and 85% of the individuals who admitted to such a behavior revealed that it had had a significant negative impact on their relationship. For instance, the discovery of financial infidelity caused couples to argue (44%), have broken trust (35%), divorce and separate their finances (13%) and separate as couples (10%). A Bankrate report indicates that 38% of individuals who have experienced financial infidelity consider it to be at least as bad as physical cheating and 5% consider it to be even worse than romantic infidelity.
A study conducted by Hristina Nikolova, an associate professor at Northeastern University and her colleagues, Jenny Olson from Indiana University and Joe Gladstone from the University of Colorado, found that relationships in which couples contain one individual who is more prone to financial infidelity record less satisfaction and have fewer total assets. On the other hand, cases where both partners were transparent about their financial issues showed that such couples enjoyed higher levels of financial wellbeing and greater satisfaction in their relationships. This means that when financial infidelity is asymmetrical, then there is misalignment in the financial objectives thus, resulting in reduced couple wellbeing.
In an iFidelity Survey conducted by the Wheatley Institution and National Marriage Project, 62% of respondents who indicated a lack of financial deception in their relationships were likely to be very happy in their marriages compared to only 36% of those who reported having experienced financial deception. Additionally, 62% of the couples who never experienced financial deception in their relationship reported that their relationship was unlikely to experience divorce compared to only 33% of those who had experienced financial deception. Although the survey may not be a true indication that financial infidelity causes unhappy marriages, it does emphasize the importance of upholding honesty and transparency about financial issues in a relationship.
Handling Financial Infidelity in a Relationship
Embrace financial transparency by discussing and sharing details of past or current debts. In cases where one has one or more accounts, it is essential to ensure that the partner knows them. Each individual should also ensure that their spending habits are made clear so that the couple is on the same page. This discussion may never be an easy one to handle because of the emotional aspect involved. Furthermore, discussing one’s finances is a thorny issue that requires trust and courage to address.
Once partners are on the same page about the state of their finances, the next item of discussion should be sharing of financial goals. This involves a couple holding discussions around making savings tailored towards retirement, purchasing properties, building, setting up business, or paying debts. A 2017 State of Finances in the American Household Survey conducted by Ramsey Solutions found that 87% of respondents who confess that they have “great” marriages also reveal that they work with their spouses to set long-term goals for their money compared to 41% of respondents who describe their marriage as being “okay” or “in crisis.” Furthermore, the survey demonstrated that 94% of individuals whose marriages were “great” engaged in discussions about their money dreams compared to only 45% of participants who described their marriages as being “okay” or in crisis.
Having a clear target and working together to achieve it promotes teamwork and ensures that there is reduced stress about financial issues. In cases where there is financial infidelity asymmetry, setting aside appropriate time in a conducive environment to discuss financial matters is essential. This can be considered a “money date” where a couple goes out specifically to do a post-mortem of their financial status, celebrate the gains made, make appropriate spending adjustments, and establish new goals for the future.
According to Rachel Cruze, #1 New York Times best-selling author and personal finance expert, “Talking about money is often more valuable than the money itself.”In some cases, especially in financial infidelity asymmetry, discussing financial issues may attract defensiveness from partners. When this happens, some individuals may feel used, cheated or largely ignored by their partners. Such feelings can have a significant emotional impact that may lead to loss of trust, anxiety and resentment. When such cases arise, it is essential to consider seeking the services of a professional such as a couple therapist or a certified financial planner. These experts can play an essential role in assisting a couple to confront their financial issues instead of turning against each other.