Financial Infidelity: When Divorce Exposes a Different Type of Dishonesty

Financial infidelity is a term that has become more prevalent in discussions around relationships and marriages, particularly when discussing romantic betrayals. Financial infidelity refers to any form of deception or dishonesty that occurs around money matters between partners. It may include hiding spending habits, secret accounts, incurring debt without the other partner’s knowledge, or even falsifying financial information. Financial infidelity can have significant consequences not just on the relationship itself, but also on a person’s financial well-being and their perspective on money, especially after a divorce. 

In our work with clients going through divorce, this is, unfortunately, an all-too-common reality that comes to light. In fact, in a recent study done by BankRate, more than 4 in 10 U.S adults who are married or living with a partner say they’ve kept financial secrets from their significant other. It may manifest in several ways, including: 

1. Secret Spending: One partner hides their purchases or engages in spending habits that the other partner is unaware of. This could range from small purchases to major spending sprees on items or activities that the other partner would disapprove of.
2. Hidden Accounts: One partner might open bank accounts or credit cards without the other’s knowledge. This could include savings accounts, investment portfolios, or even gambling accounts that are not disclosed to the other person.
3. Debt Concealment: A partner might secretly rack up debt, such as credit card balances, loans, or gambling debts, and fail to disclose them to their spouse, thereby creating financial strain without the other person being aware. For example, during divorce proceedings, one client found that her ex-husband had taken loans against his retirement accounts without her knowledge – telling the story that the money had been coming from his side business.
4. Falsifying Income or Assets: A partner may misrepresent their income, assets, or financial situation to maintain control over money or to avoid sharing financial resources. This can include hiding income from a side business, overstating personal debt, or underreporting financial assets.
5. Withholding Information: A partner may purposely fail to share critical financial decisions with the other. For instance, one may make large investments, purchase high-value assets, or engage in risky financial behaviors without involving the other person in the decision-making process.

Financial infidelity is particularly damaging because it undermines trust, a foundational element of any healthy relationship. When one partner engages in financial deception, it can lead to feelings of betrayal, anger, and a breakdown of communication, much like relational infidelity. The secrecy surrounding money can cause long-term emotional distress and often results in financial consequences that may take years to rectify. 

It’s important to note that, according to information from Gavel.io, “During divorce proceedings, a spouse can pursue legal remedies if financial infidelity has led to the dissipation or concealment of marital assets. In such cases, the court can be petitioned to make adjustments to the division of assets or award damages to compensate for the financial harm caused by the infidelity. This is often handled within the divorce process rather than as a separate lawsuit.” 

 The Emotional and Financial Impact of Financial Infidelity 

The effects of financial infidelity are multifaceted, both emotionally and financially. From a psychological standpoint, the individual who has been deceived might experience feelings of shock, betrayal, and grief. Much like discovering a partner’s romantic infidelity, financial infidelity can evoke a sense of loss of control and trust. 

From a financial perspective, financial infidelity often leaves the deceived partner with significant financial burdens. If debts were hidden, the betrayed partner may find themselves responsible for paying off credit cards, loans, or other financial obligations they were unaware of. Similarly, if assets were hidden or misrepresented, the victim of financial infidelity may not receive a fair share of the couple’s combined wealth in the event of a divorce. In extreme cases, financial infidelity can lead to bankruptcy or serious financial hardship if one partner has incurred substantial debts without the other’s knowledge or consent. 

If before or during divorce proceedings, you begin to fear that something is off: get organized: “The more proof you have of your spouse’s financial misconduct and misrepresentation, the easier it will be for you to hold them accountable for their behavior. Financial records and confessions from one spouse can play a major role in negotiations and even mediation sessions” says Rebecca Gumaer at Front Range Family Law.  

Recovering from Financial Infidelity Post-Divorce 

Divorce is already a financially and emotionally taxing event. However, when financial infidelity has been a factor in the dissolution of a marriage, it can significantly alter one’s perspective on finances, trust, and future relationships. 

Loss of Trust in Financial Matters 

Financial infidelity can severely damage a person’s trust in others, particularly in the realm of finances. Someone who has experienced financial deception might become overly cautious, or even paranoid, about sharing financial information with others in the future. This loss of trust may extend beyond romantic relationships to business partnerships or even relationships with family members. 

After a divorce, a person might feel a deep sense of betrayal, especially if they believe they were taken advantage of or manipulated financially. As a result, they may have difficulty trusting future partners with money-related decisions, or they might decide to keep their finances completely separate from others.  

Increased Financial Vigilance and Control 

For many people who have been victims of financial infidelity, divorce can lead to a heightened sense of control over their finances. They may become more meticulous about budgeting, tracking spending, and monitoring credit reports. They may even adopt a more aggressive approach to managing their finances, ensuring that they are always fully informed about their financial situation.  

This increased vigilance can have both positive and negative effects. On the positive side, the individual may become better at managing their money, avoiding the pitfalls of debt, and achieving financial independence. On the negative side, the fear of being deceived again may make the person overly cautious or unwilling to take risks that could benefit them in the future. 

Financial Independence and Empowerment 

On a more positive note, some individuals may see financial infidelity as a turning point in their lives, leading them toward financial independence and empowerment. In some cases, divorce can prompt a person to take control of their financial future, particularly if their spouse was responsible for the financial mismanagement. This newfound financial autonomy can foster personal growth, as the individual learns to make decisions without relying on a partner and gains the confidence to build their wealth independently. 

This shift in perspective can result in the person becoming more financially literate and proactive in seeking out professional advice, such as hiring a financial planner or pursuing financial education. The experience of financial infidelity may lead them to develop a more informed, strategic approach to managing money and securing their future. 

Heightened Awareness of Financial Compatibility in Future Relationships 

After experiencing financial infidelity, a person might develop a stronger awareness of the importance of financial compatibility in future relationships. The desire for transparency, honesty, and shared financial goals becomes more pronounced, and individuals may be more discerning when entering into new relationships. This awareness could lead them to have more direct and open conversations about finances early on, setting clear boundaries and expectations about money management. 

While financial infidelity can initially lead to a negative outlook on future relationships, it can also serve as a valuable lesson. Those who have experienced it may develop a more balanced, informed view of financial partnerships, making them more cautious yet better prepared for future financial collaborations. 

Gavel.io “Financial Infidelity: Grounds for Divorce” https://www.gavel.io/resources/financial-infidelity-grounds-for-divorce#  

Gumaer, Rebecca. “Can you hold your spouse accountable for financial infidelity?” December 2022, https://www.frontrangefamilylaw.com/blog/2022/12/can-you-hold-your-spouse-accountable-for-financial-infidelity/. 

Thangavelu, Poonkulali. “Survey: Younger generations more likely to keep financial secrets from partners.” Bankrate. 22 January 2024, https://www.bankrate.com/credit-cards/news/financial-infidelity-survey/.