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A Clear Direction for Retirement: Financial Fibbing – The Dangers of Financial Infidelity?

A Clear Direction for Retirement: Financial Fibbing – The Dangers of Financial Infidelity?

Financial Fibbing – The Dangers of Financial Infidelity?

Would you say it’s appropriate to cheat on your spouse? I certainly hope not since infidelity is the primary cause for divorce. Yet, there’s more than one way to lie and cheat. Experts have a term called  “financial infidelity” which is the act of lying about or hiding money from one’s partner and it is unfortunately an all-to-common practice. It is also in the top 10 reasons for divorce.

According to a study by Forbes Advisor and Prolific, 38% of U.S. adults have lied to their partner about their finances at some point in their lives. Interestingly, 54% said dishonesty about money is just as bad as other forms of infidelity. This is not a one-off study either, CreditCards.com did a poll that found 42% of adults said financial cheating is equivalent to having a “physical” affair.

From the perspective of this financial planner, lying is not only bad for relationships in general, but when it involves finances, it creates major challenges for us as their planner and can be disastrous for the couple due to “unknowns” lurking in their estate. It also creates a very uncomfortable situation in a meeting when we must confront one partner in front of the other, typically due to finding the fibbing accidentally and then having to flesh it out. Not fun! Most of the time, the action being done isn’t what’s wrong per se’, it’s the lying about it to the detriment of their partner.

So, what are the major areas found in the study mentioned above that tend to be the most problematic when it comes to a financially cheating spouse? I’ve listed three below and can attest to its accuracy having worked with families as long as we have.

Hidden Purchases

The most common area of financial infidelity — 49% — was lying about or keeping secret, purchases that were made. This could be both small and large items. In my experience, it’s the little things that get you and catch up with you the most. Smaller is easier to conceal but adds up fast. Also, if you tell me (your planner) your expenses are “X” but you’re really spending “Y” secretly, that can have devastating consequences to long-rang financial planning.

It may seem like no big deal to the perpetrator, but keeping a spouse in the dark about finances is essentially stealing or minimizing their authority and ignoring their intellectual capital, neither of which is beneficial for a relationship long-term.  Your spouse may not understand everything about what you’re doing, but it’s detrimental to have them find out the hard way when you’re living and especially to blindside them at your death.

The Debt Bomb

Debt was No. 2 with 37% of respondents hiding or lying about how much money they owed.

To be sure, most conceal their debts from their partner due to embarrassment or fear, but shame is also real and most married couples simply want to avoid an argument. However, debt, especially if hidden, is a major reason for divorce consideration and marital avoidance altogether.

Over the years, we’ve seen situations where debt was concealed and with all the best intentions by the perpetrator. Many times, there is one spouse that is the “financial head” of the household and does everything related to money and investing. Sometimes, it’s because they’re controlling and sometimes, the other spouse simply isn’t comfortable and wants nothing to do with the money role. In either case, being in the dark on your outstanding liabilities is not a good place to be.

Spending Patterns

The third most common area was “spending patterns,” meaning not just hiding a purchase but hiding a habit of overspending. Basically, repeated fiscal irresponsibility (you know, like our government).

Many times, we’ve seen situations where one spouse charges up credit cards (secretly) and the other spouse finds out and bails them out by drawing down savings accounts. Then it happens again, and then again. It is more than just a hidden expense, it’s a character flaw and a habit (an addiction in some cases). This causes the non-perpetrator spouse to worry about drawing down retirement savings, being burdened with debt that they didn’t create and being able to trust who they’re with.

In some cases, this type of activity goes beyond financial planning world and into the need of financial therapy. Dishonesty in a relationship is typically rooted in something and it must always be addressed. As a fiduciary planner, honesty and transparency is required of us. The same should be said in a marital relationship.

I hope this is helpful to your retirement journey. Call us, come see us or visit us at www.woottonfinancial.com, we’d love the opportunity to help address your questions and concerns and provide you Clear Direction for Your Retirement®.

Investment Advisory services offered through Game Plan Advisors, Inc., a registered investment advisor. Insurance services offered through Wootton Financial Group, Inc. Game Plan Advisors, Inc. and Wootton Financial Group, Inc. are affiliated through common ownership. Neither Game Plan Advisors, Inc nor Wootton Financial Group, Inc. offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.

Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.

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