Money is one of the leading causes of stress in relationships, however, it’s not necessarily money itself that causes the pain, but rather the lack of communication and transparency around money. Whether you are the financial cheater, the victim or just looking for ways to avoid it all together, it leads us to the same question – How do we prevent and overcome financial infidelity?
Often times our shame around money can lead us to behave in ways that are totally outside of our character. The shame of not being able to afford our lifestyle, the shame of being irresponsible with credit cards, the shame of not being as “together” as everyone thinks we are. You may be the ‘responsible’ person in your family. You stayed out of trouble, you got through school, you got a good job, but no one knows that even with your salary, you are barely getting by – and no one sometimes includes your significant other.
Often times in relationship arguments, there is the paradigm of the perpetrator (the person that did something wrong) and the victim (the unknowing recipient of the wrongdoing). We strongly suggest that perpetrator/victim could be the wrong paradigm in most cases of financial infidelity. First, let’s define financial infidelity and then talk about reasons why the perpetrator/victim model may not help you overcome it.
Financial Infidelity – The willful and deliberate concealment of financial transactions from a partner in a relationship in which there is financial interdependence.
Financial interdependence can be as simple as splitting the cost of a meal or complex as completely combining your finances. When people in a relationship begin to have joint financial transactions, it creates expectations which require communication and transparency.
The Perpetrator/Victim Paradigm
If someone is walking down the street and gets robbed. The victim has no responsibility to the thief. Anything the victim could have done differently to prevent the thief from robbing them is irrelevant. The thief committed the crime, gets 100% of the blame and goes to jail. Financial infidelity is often not that cut and dry, so before you condemn your significant other to relationship jail, consider there may be a different way to approach the problem.
We Are Often Irrational When it Comes to Money
We are constantly making irrational decisions with our money. For example, if a $100 item is on sale for $40, we’ll convince ourselves we saved $60. We actually spent $40 and saved $0. We spend hundreds of dollars per year on bottled water that in most cases are not measurably better in any significant way to the water in our kitchen sinks. So let’s begin with the idea that we are not purely rational beings when it comes to money.
According to recent studies, the median lifetime earnings for a U.S. college graduate is $2.3M (average of $57K/year for 40 years). That’s almost $5 million for a couple who are both college graduates. $10K in credit card debt or $100K in student loan debt may seem overwhelming, and definitely not helpful in building wealth, but let’s also keep it the context of a larger perspective of $5 million.
We Have Different Money Personalities
We also bring different habits and perspectives to money in our relationships. ‘Opposites attract’ also applies to perspectives with money. Many times in relationships you may have a rebel and a conformist dynamic. The rebel lives in the present, appreciates spontaneity and enjoys the discovery. So one of the reasons they didn’t tell you about the $500 purchase beforehand is because they literally decided to make the purchase in that moment. The conformist, on the other hand, is more likely the planner, the one that actually likes to budget and craves organization and doing things ‘a certain way.’ (a.k.a. My way is right and your way is wrong)
Even without financial infidelity, those different perspectives are bound to create conflict. In order to mitigate some of those inevitable conflicts, communication and transparency need to be at the forefront.
Our Foundation for Financial Transparency is Faulty
The foundation of financial transparency and communication is the responsibility of both parties. Have you had “The Money Talk” in your relationship? A few questions to assess your relationship’s financial communication:
- Have you recently (within the past year) seen each other’s credit reports (not just the score, but the detailed report)?
- Do you sit down together and discuss your budget monthly? quarterly?
- Do you have a dollar limit that you cannot spend without your partner’s prior knowledge/approval? (even out of your individual account)
In many cases of financial infidelity, the answer to those questions will likely be no, thus the seeds of deceit were planted. In heterosexual relationships, for example, there are often rules of conduct regarding interactions with people of the opposite sex. As an example, dinner and drinks solely with a co-worker of the opposite sex may be inappropriate. Those boundaries will typically be made clear in the course of a relationship. Financial boundaries, however, are less likely to be addressed and without those boundaries, both parties are setting themselves up for failure.
Shame and Guilt Can Cause Us to Rationalize Deceit
If lack of communication and transparency are the seeds of financial infidelity, guilt and shame are the fertilizer.
“Shame is a soul eating emotion.” – C.G. Jung
Shame is a very difficult emotion to overcome and can often be at the heart of financial infidelity. For example, if the way one presents themselves to the public is connected to their financial success, admitting financial trouble is like admitting one is a complete fraud. This is another reason why the perpetrator/victim model is flawed. There may actually be multiple victims. It is often difficult to admit failure to yourself, much less a partner or spouse.
“The difference between shame and guilt is the difference between “I am bad” and “I did something bad” – Dr. Brene Brown
Shame can make a liar out of even the most honest person. The extent to which we internalize our actions makes it more difficult to discuss with others. If racking up credit card debt in our mind makes us a terrible human being (as opposed to someone that made poor financial decisions), we are much less likely to admit to someone we are a terrible human being.
Shame lives in hiding, through secrets and deceit. Anger, judgment, blame and contempt only make it worse. The only real way to overcome shame is through vulnerability in an environment of empathy, understanding, kindness and respect. If that sounds too mushy for you, then ask yourself two questions:
- Who have you revealed your deepest secrets to?
- Were they someone who you knew would be empathetic, kind, understanding and still love you regardless?
If you haven’t created a loving and open environment for your significant other, then you should have no expectation your significant other will be transparent about their shame.
It Takes Two
The perpetrator/victim model doesn’t often work with financial infidelity because the victim doesn’t have any responsibility to the perpetrator. There are certainly extreme cases of gross deceit, identify theft, fraud and financial abuse where perpetrator/victim model does apply (many of these cases are actually illegal). However, in most cases of financial infidelity, both parties have a responsibility to develop a foundation of open communication and financial rules of the road for their relationship. Both parties also have a responsibility to create an environment of mutual respect and empathy from which shame cannot grow.
Financial infidelity, particularly early in a relationship, can be a wake-up call and catalyst for both parties to grow together with their finances. That was certainly the case in my relationship with my wife, which we will share in Part 2.