Do you lie to your spouse or significant other about money?

Money may be one of the most popular issues causing strife in a relationship, but deeper issues are usually communication and values. Lying about money is one way to ensure that a relationship will fail over time, but for most people, small, occasional lies do little harm and help to ensure a smooth coexistence. According to a 2010 survey, 80% of married people keep some secrets from their partners about money.

When it comes to frivolous spending, many people don’t want to tell their partner out of embarrassment or because they know that it might start an argument due to a clash of values. 24% of husbands and 43% of wives lie about spending on clothing and accessories, 19% of men and 8% of women lie about spending on alcohol, and 12% of men and 21% of women lie about spending on gifts.

If a couple doesn’t agree on some ground rules, selfish spending can become an issue when it is inevitably discovered. Different couples have different approaches to managing household income and expenses.
When relationships decide to combine finances — or to keep finances separate — setting some ground rules can help.

In some states, marriage automatically combines finances from a legal standpoint. While a couple could decide to keep their finances separate, according to the law, all involved money, assets, and debt is owned and owed equally by each partner. The decision has been made for you in terms of the law, but you could still choose to operate finances separately for practical reasons.

If a couple decides to keep finances separate, implicit in this decision is for each partner to allow the other to make decisions with their own money, even if it affects the other partner. Perhaps one ground rule is necessary: keep your partner informed of anything that might affect the other. For couples who agree to keep finances separate, trust inherent must be strong.

For couples who decide to combine finances, the ground rules will be more involved.

1. In two-income households, each partner should contribute to shared expenses fairly. To contribute “fairly” can have different interpretations, so couples should decide what that means. For couples with roughly equal income, it could be fair for each partner to contribute exactly half of the rent or mortgage payment to this particular bill. It could be fair for each to dedicate half of the cable bill and other utility bills.

For a couple with widely divergent incomes, it might make more sense for each partner to contribute a percentage of his or her income to each expense, so the bills are paid according to the ratio of one person’s income to the other. If one partner earns $150,000 per year and the other earns $30,000 per year, should they both need to contribute $1,000 a month to the mortgage payment? It might make more sense if the partner earning more contributes $1,667 and the lower-income partner contributes $333 per month.

2. Each partner should contribute to shared savings. According to his or her ability, some remaining income should be saved in a high-yield online savings account. Whether each partner contributes the same amount or the same percentage of his or her income, both partners should agree on the importance of saving money for future flexibility and financial independence as well as saving for emergencies.

3. Have a debt repayment policy. More often than not, one person enters a relationship with more debt than the other. Decide whether paying off pre-relationship debt is a responsibility of the entire couple or just the individual who brought it in, and debt repayment should be a prioritized goal. Any debt accrued since the combination of finances should be considered joined debt, in line with the ownership of all finances. Debt payment, like all expenses, could be divided equally or by the best of his or her ability to pay back based on income.

4. Do you need a prenuptial agreement? This is something a couple should decide before getting married. There is a stigma with these agreements, and they shouldn’t be used for one partner to establish financial control over the other. Many people would simply be offended if their partner asked them to sign such an agreement, but for a business owner, prenuptial agreements can protect the business and shareholders would expect the owner to take all precautions to do so. If one person wants to sign an agreement and the other does not, there could be a barrier of trust on both sides of the relationship.

5. Set up a Fun Fund and don’t ask questions. If income and cash flow allow for it, even a couple who combines finances could benefit from each partner keeping small, private savings accounts. These can be used for spending on some items that the other partner might judge as frivolous, like hobbies or clothing. It’s also a great opportunity for spending on gifts for the other, as spending from a private account is the only way to surprise your partner. The Fun Fund should be a place where you can have the freedom to spend as you see fit without affecting the finances of the relationship.

Of course, the ability to keep a private fund relies on the strength of the relationship. Each partner must be able to trust the other. If you feel your partner may be cheating on you, it may be difficult to allow even a portion of spending to be undisclosed.

6. Stick to a budget. For a single person, a budget can be simple to follow. Expenses are relatively well-defined, and income can be, too, in most jobs and career paths. Adding a new person to the mix, as is the case when a couple combines finances, is adding another variable. A flexible budget can help a couple feel free to spend on what they want after the needs are covered, and in tight situations, can allow couples to borrow from themselves to cover the necessities. A couple who combines finances should agree to stick to the plan.

7. No lying about finances that affect the relationship. The Fun Fund allows for expenses that don’t fit into the couple’s financial plan. That should alleviate the necessity for the small lies that happen when one partner doesn’t want to admit to a financial decision for fear of disappointing the other partner or starting an argument. Keeping the Fun Fund relatively small means that spending in this fund shouldn’t affect the overall relationship and should prevent one partner from single-handedly making a decision that causes trouble. Still, with both partners having access to the couple’s money, there’s an opportunity for lying. By setting a ground rule to avoid this practice, couples would discuss the important spending decisions in advance and learn how to agree on the important financial values, like saving for retirement, paying for a child’s education, or supporting an elder relative.

What other ground rules do you or would you set with your partner?

Money Magazine

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I always encourage parents to find interesting ways to teach their children about responsible money management. When I do, I always lean toward behavior modeling. Children who, even at an early age, see their parents engaging in a positive relationship with money will subconsciously take what they observe to heart more than any explicit lessons they attempt to impart. Teaching financial literacy in schools is mostly a lost cause, as teachers aren’t trained for it, there isn’t enough room in the curriculum, and as Ramit pointed out, most students just won’t care enough about the subject for the lessons to have an effect. The responsibilities for teaching these lessons remains with the parents, and with many parents failing with their own money management, a good solution is almost impossible to design.

Using money as a motivational tool for children is dangerous, yet it’s common for parents to reward their children for bringing home good grades on the report card. Policies range anywhere from incentives only for As to a staggered system of rewards for any passing grade, with As receiving the highest monetary prize. These types of reward system broadcasts a few messages:

• Results are what matter, regardless of effort or method of achieving those results.
• Good results are rewarded with money.
• In the case of the tiered system, mediocre results are rewarded, as well.
• Money is the best type of reward, and success and effort are only worthwhile if a monetary reward is available.

I don’t see how any of these messages reinforce a positive relationship with money.

Results are what matter, regardless of effort or method of achieving those results. Children will link good grades with money. While most students achieve good grades by studying, working hard, paying attention in class, perfecting homework, and performing well on tests, a select frustrated few might take some shortcuts. Cheating is one way to get good grades, at least until the cheater gets caught. On the other hand, for a child who excels “naturally” in a class, they might achieve an A without any effort. In this case, the student could believe they will be ale to sail through life without developing the skills that will be necessary for their success in other tasks. Results matter, but so do attitudes and values.

Good results are rewarded with money. I often hear parents say that they wish to pay students for the work they do because this is how the real world works. I have two issues with this as it pertains to grades. First of all, students will come to expect to receive money when they perform well. Anyone who has worked in an office where people receive a pay increase just for being there or where people receive promotions based on their coziness with the boss rather than performance can attest to financial rewards are not necessarily linked to good results in the “real world.” THe distribution of money is often unfair.

Mediocre results are rewarded. Any monetary reward is enough to associate money with grades, and if there isn’t much perceived difference between the rewards for receiving grades of C, B, and A, then the children subject to this system will aim for the lowest rewarded score.

Money is the best type of reward, and success and effort are only worthwhile if a monetary reward is available. The world needs people who are solely motivated by money. I don’t think this is a complete loss unless every child decides to seek a path that they believe will lead them to the most money throughout their lifetime. This is the result of an increased focus on giving only money to children as rewards. Education and performance should be its own reward. If children see parents who value the lessons taught by schools and if parents reinforce the teachers’ goals and side with the teachers when it comes to completing work on time and accurately, they might have a better chance of getting the impression that what they are learning is important and knowledge is valued in society.

Bribing children with money if they bring home good grades is often a last resort to motivate a student when nothing else seems to work. I can’t fault any parents who have tried everything possible to help their students perform well in school, including finding tutors and seeing behavioral psychologists who specialize with children. Motivating with money doesn’t always have to be bad. If it is balanced with other messages, there is a better chance of children growing up to have a healthy relationship with money.

Disclaimer: I do not have any children, so I haven’t had any practical experience with this. I’m interested in hearing readers’ thoughts, especially from those of you who have children and have considered paying or do pay rewards for report card performance.

Update: A few days after writing this article, I came across this review and summary of Drive: The Surprising Truth About What Motivates Us by Daniel H. Pink. The research outlined in this book confirms some of my thoughts about motivation that can be applied to this situation, and goes much further.

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The National Endowment for Financial Education (NEFE) has concluded through conducting an online poll that 31 percent of people who combine finances with their spouse or partner have been deceptive about money with the individuals who trust them. Some lies are more hurtful than other lies, so the study looks at the type of financial infidelity.

More than half of the respondents, 58%, hide money from their spouse. 54% hide minor purchases. Almost one third, 30%, hide bills or statements from their partner. 16% lie about a major purchase. 15% have a hidden bank account. 11% of those surveyed lie about their debt, and another 11% lie about how much they earn.

Although my finances are an open book, I understand why lying about money comes easily, particularly in new relationships. If you’re meeting a potential husband or wife for the first time, you want to put your best foot forward, and that often involves making yourself sounds like the ideal person, someone you want to be, other than sticking to the more boring truth. That embellishment could easily turn into a lie, and at the beginning of the relationship, some might be afraid of the other individual losing interest. At some point after that, you can’t go back and tell the truth because he or she doesn’t want to be branded a liar.

Unfortunately, long-term relationships can be founded on a misunderstanding of finances, and there may be no turning back.

If the temptation to exaggerate is so great, finances should probably be kept out of discussions until the couple is more intimate. When money doesn’t play a role in the initial attraction, there will be less of a need to embellish the situation in order to attract someone else.

The survey revealed that men and women were just as likely to lie about their finances, but women more often said they caught their partner in a lie. Men were significantly more likely to say that their partner was lying about a purchase, while women were significantly more likely to say their partner was lying about income or debt.

If a couple has decided not to combine their finances, there may be no reason to lie to your partner; what’s yours is yours. For those with combined finances, there is a trust that should not be broken. A therapist from Boston who has been working with couples who have experienced financial infidelity, offered his opinion to Forbes Magainze. Carlton Kendrick lists four primary reasons an individual might lie about money to his or her spouse, pragmatism, control, guilt, and fear:

The pragmatic lie may result from planning an eventual split and not wanting the other to know how much money is available. Financial infidelity for control may include revenge spending, as one partner overspends to prove their independence or to get back at the other for something lacking in the relationship. Knowingly irresponsible behavior may cause guilt and embarrassment, so the person attempts to cover it up. Deceit may also occur because they fear their partner’s reaction to the truth.

If it doesn’t affect your ability to pay for the expenses you need to cover, and if it doesn’t change your ability to meet other goals, you may have the opportunity to save money on the side for a surprise gift for your partner. This is a lie with good intentions. I’d prefer not to see savings on the side take the form of a lie, however; you can agree with your partner to have separate funds set aside for such occasions.

Are there any situations when it is justified to lie about money to your spouse?

The National Endowment for Financial Education, Forbes
Photo: klaaspieter

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