Infidelity – of the financial kind

Leisa ToomeyFinancial Infidelity is the new phrase for when one spouse secretly spends family money or creates debts without the knowledge of the other spouse. This can be anything from secret shopping, gambling addictions, secret credit cards or compulsive ebay purchasing.  Such spending is normally funded from family savings, hidden credit or store cards or even from using the redraw facility on the home loan.

Essentially this, for many people, is a breach of trust which often results in separation. With separation comes property settlement and divorce.  It is still common in relationships for one party to be the “financial controller” and in these relationships it is particularly easy for such behaviour to occur.   Sometimes this is one of the causes of a separation.  If the financial infidelity is not discovered until after separation it is commonly referred to as a STD or “Sexually Transmitted Debt”.

As a general rule any spending during the relationship will be born equally by the parties regardless of who did the spending and who did the earning.    There are ways you can protect yourself before the event such as by having a carefully drafted “pre-nuptial” (before marriage) or “post-nuptial” (during marriage) financial agreement.

Parties who fall victim to financial infidelity need to take steps, pre and post separation to protect and preserve the remaining family assets.  Sound legal advice early on or even prior to separation can give a person tools and techniques to protect assets and discover financial infidelity before there is nothing left to divide.

Some hints and tips to uncover and avoid financial infidelity:

  • Become actively involved in family finances;
  • Watch the mail – be aware of sneaky behaviour eg opening mail in private;
  • Go through the filing cabinet – become aware of what the family finances consist of;
  • Get on internet banking and regularly check statements and transaction histories;
  • If you discover financial infidelity – keep copies of the evidence it may just come in handy in your property settlement;
  • Change permissions on redraw facilities and credit cards to restrict spending limits;
  • Protect savings by creating an account with limited access – eg passbook only;
  • If it is necessary to preserve funds, transfer them to an account that can’t be controlled by the irresponsible party.
  • Seek legal advice and counselling.

 

Financial Infidelity – it is real and it can happen to you!

I have previously discussed this topic but as a result of the number of clients I see who are victims of this financial infidelity I thought I would raise it again.

In layman terms “financial infidelity” is a term coined to describe the activities of a partner who is hiding the real financial picture from you.

It comes in many guises but in its simplest form it could be anything from secret shopping to having secret credit cards.  However, at the other end of the scale it could be gambling debts or a business venture that has gone bad – and it could be eating away the equity you have in your home – and all without your knowledge.

There are many reasons people seek to hide the truth from their partner.  They range from being ashamed of their actions, a sense of entitlement to being scared about what their partner will say or do when the truth inevitably comes out.

Unfortunately many people don’t know that there partner has been financially unfaithful until it is too late and there is a large debt to be paid off or they no longer have an asset worth what they thought it was.

However, you can have some degree of protection by ensuring you and your partner have a basic understanding of where each other is at financially. Even if one person handles the finances in the relationship, the other should at least understand the basics of how much is being spent and how much is being saved.  It is important to also seek the advice of your accountant or solicitor when committing to large business dealings to ensure you fully understand your obligations, especially if you will not be actively involved in the business. I see way too many couples who did not realize the implications of acting as a guarantor for their spouse only to find that they ended up with a massive debt after they separated and the business subsequently collapsed.

The bottom line is that lack of honesty can and does ruin marriages, especially when it comes to finances. So be up front with each other, obtain independent advice if necessary, and ensure your financial future is as protected as it can be.