Love is the foundation of every marriage, but financial stability is crucial to its longevity. Unfortunately, financial infidelity has become the common cause of the increasing number of divorces. Ultimately, it all comes down to trusting your partner, both emotionally and financially.
The good news is that preparing a financial plan with your partner that fosters honesty and trust can prevent financial infidelity and strengthen your marriage.
But, before we look at the steps of creating a trustworthy financial plan, let’s first find out what is “financial infidelity” and the common financial mistakes couples make.
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What is Financial Infidelity?
Financial Infidelity is the act of hiding, lying, or withholding financial information from one’s spouse. In simple terms, this occurs when one partner hides financial information or is engaged in secret financial activities that the other partner does not know about. This can lead to a betrayal of trust and put a strain in the marriage. Financial infidelity can manifest in various ways such as secret purchases, hidden debts, or unknown bank accounts.
Financial infidelity can be done unintentionally or deliberately, but it always leads to conflicts and arguments among couples. What can cause one spouse to hide financial information from the other? It may be because money was taboo in the family he/she grew up in. Or it may also be due to the development of poor spending habits. Irrespective of the cause, secrecy and mistrust can strain a marriage to the point of no coming back.
Financial infidelity is a serious issue that can significantly affect a couple’s relationship and financial stability. It can damage credit scores, lead to bankruptcy, and even end in divorce. This happens due to the lack of communication among partners and with no proper budget plans set aside.
Common Financial Mistakes Couples Make
Below are some common financial mistakes that couples make. Knowing and understanding this can help you avoid misunderstandings and build a stronger foundation for your marriage.
1. Hiding Debts
Debt is a state of owing money and is the most common financial problem affecting your credit score. Most people borrow money for education or a start-up. You may think hiding your debts can help you avoid conflicts, but it’ll affect your relationship with your spouse when it becomes tough to repay. Mistrust and resentment can make it difficult for both of you to reach your financial goals.
2. Secret Bank Accounts
While separate bank accounts may seem like a good idea, it can create division in your marriage. Keeping separate accounts makes it harder to track your expenses, savings and prepare budgets. It may also create a power imbalance as the person with more money may feel superior or entitled to make financial decisions.
3. Poor Spending Habits
Abundant spending on things you don’t need and hiding it from your spouse is the common marriage financial infidelity couples make, which leads to the breakdown of their “happily ever after”. This is more common in teams where one is a saver and the other is a spender. In addition, this habit can lead to financial stress, where one spouse may feel that their partner is not responsible or considerate when it comes to spending money.
4. Lack of Communication
Communication is very crucial in a relationship. Lack of communication is one of the many reasons why a happily married life ends. Money can be a sensitive topic to speak about with your partner. However, avoiding it can lead to assumptions and misunderstandings that can cause tension and stress.
Why Do You Need a Financial Plan?
Financial plans are a roadmap that helps you achieve your financial goals and makes it easier to manage your money more efficiently. It is even more essential to have a financial plan when you’re married, as you’d have to consider your partner’s financial situation, goals, and spending habits. A well-thought-out financial plan can help give you a sense of direction, security, and control, allowing both of you to focus on your personal and professional growth.
Steps to Create a Trustworthy Financial Plan
Now that you know about the importance of a financial plan and the common mistakes couples make when it comes to money, here are six steps you can take to build a trustworthy financial plan with your spouse.
1. Analyze Your Financial Situation
Before creating a financial plan, determine your and your spouse’s financial situation. This includes identifying your assets, debts, incomes, expenses, and savings. Be honest and transparent with each other when discussing these aspects.
2. Identify Your Financial Goals
Once you determine your financial situation, it can be easy to identify your financial goals. These can be short-term, such as paying off debts or saving for a vacation, or long-term, such as retirement planning, buying a house, or saving for your children’s college education. Whatever your goals may be, identify them together and prioritize them based on individual and shared values.
3. Create a Budget Plan
Budget plans are a good way to track your expenses, income, and savings. Preparing a budget allows you to achieve your financial goals. Make sure to take into account unexpected expenses and adjust your budget accordingly.
4. Classify Your Contributions
Once your budget plans are in place, you must determine how much each partner will contribute towards shared expenses and savings. Since you’ve identified your incomes and expenses, choosing fair contributions will become easier based on each other’s financial situations. For instance, one partner can pay the rent while the other can pay the utility bills. But, again, talk openly about these expenses with your partner. Putting too much pressure on one spouse can become stressful in the long run. Moreover, let your partner know if you cannot contribute in a certain area or for a time.
5. Plan for Emergencies
Unexpected expenses can occur at any time of day. But, with the help of your partner, you can manage your financial life during uncertain times together. Take the Coronavirus outbreak, for instance. Many businesses had to shut down, leaving just as many unemployed and in a terrible shortage crisis. Therefore, keep an open mind and save some of your income for medical or other emergencies. So, instead of hiding and keeping it off the books, share everything with your partner so you can adjust your budget plans as needed.
6. Establish Communication
As mentioned before, communication is the key to a long, successful, and financially well-off marriage. The most important thing is being respectful when talking about money. Don’t give your significant other a hard time just because they had to buy a new hat, for instance. On the other hand, if your spouse is a big spender, sit down and talk it out. Then, plan together how to help your spouse develop good spending habits.
7. Choose a Joint or Separate Account
A joint account helps couples manage their finances together and avoids the temptation to hide money. This can include checking accounts, savings accounts and credit cards. Having a separate account can provide financial independence and privacy. However, it creates mistrust among couples as the other partner cannot track the expenses. Choose the option that works best for both you and your spouse.
8. Consider Seeking a Financial Advisor
If you’re still struggling to create a trustworthy plan, consider seeking help from a professional such as a financial advisor or an accountant. They can provide you with options, support, and guidance in creating the perfect financial plan that is acceptable to both of you.
Another upside to seeking professional help is that they can also advise on understanding financial products, especially if you’re a homeowner, and whether or not you should take a loan based on your current financial situation.
9. Review and Update Your Financial Plan
Creating financial plans is not a one-time thing. Personal factors such as health, career change, age, and having children can affect your financial plan. Therefore, it needs to be reviewed and updated periodically to ensure you and your partner are on the same page and working to achieve the same financial goals.
Final Thoughts
Creating a trustworthy financial plan can help build transparency and honesty in your relationship. It’ll help avoid conflicts and financial infidelity and strengthen your marriage. These steps can help both of you achieve your financial goals and lead a well-off life together. Communication plays a pivotal role in this situation, so remember to share any expenses incurred so you can adjust your budget. A trustworthy financial plan can ultimately ensure long-term financial and marriage success.