The website CreditCards.com recently released a very sobering report. It was that 13 million Americans have committed (gasp) financial infidelity. What this means is that one person has hidden a credit card or bank account from their spouse or partner.
It’s like having an affair
Committing financial infidelity is a lot like having an affair in that you may be able to get away with it for some period of time but the odds are that the fact you hid that bank account or credit card will eventually be a major issue.
It can be tough
Sitting down with your significant other to talk about money can be very tough. It can actually bring up core issues that have to do with how you were raised or the fears you have for the future. Money can be a very loaded subject and can lead to heated battles. In fact, according to an article on Time.com, 70% of all couples quarrel about money, which is more than they argue about spending time together, sex or household chores. One thing for sure is never trying to have that critical money conversation during a heated argument. Instead, try to set aside a specific amount of time and a place to talk about the dreaded “M” word. Then set some ground rules such as no judgments — just a frank and open dialogue.
Confessing to financial infidelity
When you do sit down for the money talk share information about things such as your outstanding debts or any secret investment or bank accounts that might be floating around. If one of you has been practicing financial infidelity this would be a good time to “fess up.” This won’t be pleasant and is likely to create hard feelings on the part of the spouse or partner but it’s absolutely necessary. It is the only way you can start to solve any debt problem that resulted from your actions. And as a bonus, you will probably feel a lot better once you have confessed to your infidelity and gotten the secret off your chest.
Do you have a balance sheet?
If you have never created a balance sheet this would be the ideal time to do so. It’s easy to find a free spreadsheet program on the Internet and it will probably include a balance sheet template. Going through this process will help you determine what you owe and what you own. In addition, there’s a great website called Personal Capital that will help you work through this process and show you exactly how you stand financially. It’s easy to use and definitely worth trying.
The really not fun exercise
So long as you’re talking about money it would be a good time to create a list of the documents you will need to organize your estate. Yes, your estate. While this is not a fun thing to think about it’s very important. Make a list of your assets and note in whose name each one is held or if it’s jointly owned. Make sure to include your bank accounts with usernames and any passwords used for online access. If you have a safe deposit box, you will need to make a list of its contents and a note as to where the key can be found. Be sure to list any 401K accounts, traditional IRAs, Roth IRAs, and brokerage accounts – along with the broker’s name and contact phone number. If you have savings bonds you will need to make a detailed list of them. Be sure to also list your house and vehicles, making sure you have titles and deeds and, finally, any outstanding debts in your names.
Check your priorities
Another important thing to do in this conversation is to make sure that the two of you are on the same page when it comes to your financial priorities. Do you share the same feelings about retirement, cash flow management, and college planning? Do you want to keep your bank accounts separate or will the both of you contribute to a joint account? Incidentally, there is no right answer to this one.
When you have had that conversation, you need to next divide financial responsibilities. Try to do this according to each person’s strengths. For example, if one of you is big on apps and loves to track money then maybe that person should manage your day-to-day bill paying. If the other is more interested in the big picture of managing your finances and investments, then he or she should take responsibility for them. The big point here is to allocate your financial tasks according to each person’s interests and strengths. That way the both of you should feel comfortable with your responsibilities, which should head off the possibility of frustration and hard feelings going forward.
Schedule quarterly meetings
Believe it or not, it’s not uncommon for one spouse or partner to have absolutely no interest in all this financial stuff, especially your investments. If this is the case, schedule quarterly meetings to walk her or him through your most recent financial statements. One good idea is to start with what is your overall objective like “We have a balanced portfolio. This means we try to split our risk between stocks and bonds.” Then make sure you explain what exactly are stocks and bonds. Walk your partner through your statements and explain their different parts. In some cases, one person will be comfortable with risk while the other wants to be safe and secure. Don’t try to “win” that argument. If this is the case the two of you might benefit from working with a professional financial planner to determine the level of risk that would be appropriate given each of your personalities, objectives, and goals.
Have a plan
You can also remove a lot of strife by creating a financial plan that you both can agree on. Here’s a short video with tips for financial planning to help you get started.
Finally, like with most issues the key here is communication and empathy. Use these two tools and they will definitely help you navigate the rocky shoals of that conversation about the “M” word and probably head off a lot of possible friction going forward.