Last week, I wrote about how my wife and I assessed the damage caused by her financial infidelity. Although I can consider myself fortunate that the amount she spent was relatively small, it still had an impact on our family finances.

To clean up the mess, we used a 4-step process:

Prioritize Debts
Whether this step is easy or excruciatingly painful largely depends on how much debt has been incurred. This is a time to take a good hard look at your financial needs, and make adjustments. If the amount you owe is large, this could mean scaling back on your wants, and limiting yourself to basics, such as housing, utilities and food, while you focus on debt repayment. Perhaps it might be time to trim back your visits to the local coffee house, to disconnect your cable TV or cut back on your cellular telephone service.

In our case, we were fortunate that the only debts we carry are our home mortgage and our automobile loan. Our credit cards were paid off last spring, so we were able to make this debt a high priority. The first time my wife committed financial infidelity, however, it was a much different story. We were substantially under-earning, and we carried quite a bit of credit card debt. This time, it was a relatively straightforward list. Last time, we had to make some vary hard decisions that ultimately involved refinancing our house.

Create a Payment Plan
There are many ways to pay off debt. Whether you use the debt snowball technique, or a multi-pronged approach to paying off credit cards, it boils down to creating a budget, and then working the plan.

Our repayment plan was relatively straightforward. We dipped into our emergency fund for the bulk of the amount, and decided that my wife and I would limit the amount of money we spent on gifts for our birthdays which fall in October and November. Lastly, we both stopped paying ourselves allowance until the end of the year so that our emergency fund could be rebuilt.

Create Financial Transparency
In order to prevent future incidents of financial infidelity, it’s important to create a certain degree of mutual transparency into your finances. In our case, our money is arranged into three categories: hers, mine and ours. The bulk of our money is deposited into our joint checking and savings accounts, and a monthly allowance is paid to each of our personal accounts. We’ve decided, at least for now, to fully disclose all spending. My wife and I have exchanged passwords for all our online accounts, including banking, credit card and loan accounts. We are collecting receipts for everything, even for incidentals, so that we both know what’s going on. We’ve discontinued using credit cards, and are instead spending cash and tracking the receipts.

Now our financial situation may not work for everyone. Not all queer couples combine their finances to the extent that we have. In the case of couples who keep their money completely separate, financial infidelity might not even be an issue. If there are few or no jointly-owned assets, it matters less what your partner is spending.

Attack the Underlying Problem
Of course no amount of prioritizing, planning and transparency can prevent a reoccurrence of financial infidelity if you aren’t able to address the root cause of the problem. Financial lies are relationship killers, so it’s important to create an environment where they aren’t necessary. The causes can be as simple as one partner feeling financially deprived, to more complicated problems like compulsive spending. Often, at this stage, a queer-friendly counselor or therapist can be a huge help.

In our case, we were already seeing a counselor in preparation for our 13-year-old daughter’s upcoming adoption, so we brought this discussion to the table. We discussed the reasons for my wife’s spending (she was afraid we couldn’t make room for the things she wanted in our regular budget) and how we planned to move forward. During our counseling session, we discussed our priorities, the debt repayment plan, and how we would create financial transparency. It took some time, but in the end we were able to create a plan with which we both felt comfortable.

If your partner has jeopardized your family finances by secret spending, what did you do to recover from it? Is your relationship still working, or has this turned into a deal-breaker?

In my next post, I’ll address some of the day-to-day issues we face now that we’ve moved beyond the crisis.

Next in the series: Working the Plan

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