On the Watch for Financial Abuse
October is Domestic Violence Awareness Month. The numbers are shocking, and there is a relatively unknown side of domestic abuse to be on the watch for: Financial abuse.
One in four women will be victims of some sort of domestic abuse in their lifetime, either emotional or physical abuse. Of these, 99 percent of them will also be victims of financial abuse, where the abuser uses money as a means of manipulation, often having such tight control over the household finances that the victim doesn’t have the means to get themselves or their children out of an unhealthy situation.
Domestic abuse does not discriminate. Domestic abuse occurs on all sides of the spectrum when it comes to socioeconomic status. I hear unbelievable stories of women who, with a household net worth in the millions of dollars, are still under the financial thumb of their spouse, having to ask for money and account for every penny they spend.
Money is a private matter, and people don’t talk much about their private finances. As a result, women end up not knowing whether their experiences with marital finances are normal or not. The more we raise awareness of financial abuse, the better we can reach those who are most vulnerable. Speaking even more broadly, the more we can empower women to take an active role in controlling their own financial health, the better.
In many marriages, women will often relinquish control of the finances to their spouse, regardless of their level of education or their level of experience with finances prior to the marriage. It’s not that men are necessarily better at managing the finances, but there is a natural division of duties that happens in the face of the time pressures we all experience.
As a result, there is an epidemic of women who are uninformed about the true condition of the family finances. This can make them vulnerable when they are widowed or divorced, and it can make them vulnerable to financial abuse.
I recently had a conversation with a woman who was getting divorced from her husband of 20 years. She told me that her husband had always been responsible with the family finances, or so she thought. Every year, she would ask about their retirement savings, and her husband would report that they were in great shape, that they were maxing out his 401(k) contributions. Now, as they are getting divorced in their late 50s, the woman discovered that there was only $50,000 in his retirement account, not the $2 million she thought was there. The money was squandered on a gambling addiction. There’s no way to get back that lost opportunity.
The point is clear: Women owe it to themselves and to their children to pay attention to the family’s financial health.
How to Ask for the Details
If you’ve never been involved in the family finances before, how can you express your interest in getting involved and gaining access to all of the financial statements?
One strategy is to mention that you read a story about a woman whose husband had died suddenly and who struggled because she didn’t know the details of the family finances. Then you might say:
“That really got me thinking. I don’t really have a good understanding of our finances. I know that we appear comfortable and we have enough to pay our bills, but, what if something happened to one of us? It just really made me uncomfortable. Can you show me some of the statements we get and explain to me what they mean?”
From there, I always tell clients it’s like a puzzle. It’s not going to become super clear until we can see all the pieces. This can include:
The cash flow – what money is coming in, and what is it being spent on?
The balance sheet – what assets and liabilities does the family have? The goal is to understand what they own and how each asset is categorized. Is it retirement? Is it non-retirement? What type of accounts are they in? What is the location of the account? What sort of debts and other liabilities are involved? At this point, we don’t want to know the details of the investments or what the overall investment strategy is. That comes later. Right now, we just want a high level understanding of where everything is.
Estate plans and asset titles – as we’re on this topic of understanding where everything is, it makes sense to look closely at estate planning documents. Many times, women discover that the Will that they thought was taken care of is only in draft form and was never executed. To take it a step further, what names are on the deed for the house, or the titles for the cars, those types of things?
Professional advisers – who do you call if you have a question? Who is the estate planning attorney? The financial planner? The accountant or CPA?
This is all part of that strategy of “Pretend one of us dies tomorrow. Does the other one have a handle on where everything is?” It really just begins with a high level overview. From there, you can work through a process of understanding the specifics, but most people aren’t even over the high-level hurdle.
If You Suspect Financial Abuse
If you are truly in an abusive relationship, and you’re trying to work your way out of it, go immediately to an attorney or a local domestic violence center. This can give you an understanding of what resources are available to you and what rights you have.
If you feel that you are in danger, it’s not the time to start peppering your spouse with questions, because that could escalate things. Safety first. Financial details second.
For those who suspect that a friend or colleague might be a victim of financial abuse, it can be the little things that tip off potential financial abuse. For example, someone who pays cash for everything. We live in an electronic age, with people using airline credit cards for every little purchase because they want the miles, or using Apple Pay on their cell phones. It’s odd for someone to pay cash all the time, and it might be because they don’t want their spouse to see that they went to that yoga class, or that they had lunch with a friend. It’s one thing to be on a budget. It’s another to have to keep a transaction secret for fear of discovery.
Knowledge is Power
Financial abuse, like domestic abuse, can start small and build over time. Money and self-worth are closely intertwined, so it’s not surprising that abusers use control over the finances as a way to manipulate, twist, and otherwise dominate their victims.
One way to combat this abuse is through education. First, we should all be aware that this sort of abuse is happening and is far more common than any of us might suspect. Second, all women should take an active interest in the financial health of their families. It’s fine to let your spouse have primary responsibility for investments and other financial issues, but you should pay attention to what is going on. Ask to see the statements. Insist on being at meetings with financial advisers. Know the names and phone numbers of key advisers. Trust, but verify.
One of my goals, through posts like this and events I hold periodically, is to have candid conversations with women about their financial health and, more importantly, their financial vulnerability. There is no easy way to define what might be “normal” in a marriage, because every marriage is different; but, there are times when things slip out of normal and start edging into the realm of financial abuse. Knowledge is an important way a woman can help protect herself and her children.