Oct 15, 2024
Secrets about money are common in relationships, with 1-in-5 people saying their spouse or partner has hidden debt from them, according to a report by Achieve.
Katie, from Los Angeles, recently found out she was one of them. However, as she told Dave Ramsey on an episode of his show, what shocked her was the size of the debt her husband had been concealing from her.
Advertisement
A complex mix of multiple mortgages on the family home, a commercial loan on the warehouse for her husband’s business, payroll arrears, tax bills, multiple credit cards, personal loans and auto debt from “ridiculous cars” has left the couple with a whopping $4.5 million debt burden, she told Ramsey and his co-host, Rachel Cruze.
“I’ve been living with my head in the sand, for the last few years, as he managed the money and I just recently discovered how poorly he’s been doing that,” she confessed. Katie’s husband only came clean and shared his situation when a foreclosure notice arrived at the family’s residence.
Katie’s story is an eye-opener for many who, like her, may not realize just how deep the financial hole their partners have dug for them.
Optimism veering into delusion
Despite the multimillion-dollar debt burden on their shoulders, Katie says her husband is optimistic that his business can turn around and solve their financial woes. Ramsey believes this pattern of thinking is common with entrepreneurs.
“You do have to be an optimist to operate a business,” he says.
Borrowing money can a great tool entrepreneurs can use to supercharge their expansion plans. And it’s very common. For firms that employ more than one person, about 75% of them had some debt, with 8% with balances exceeding $1 million outstanding as of 2023, according to data from the Federal Reserve. So, a seven-figure commercial loan isn’t unusual in the end.
But there’s an important difference between looking on the bright side and leaping before you look. And if a business can’t generate enough revenue to sustain a hefty debt burden, it can quickly lead to bankruptcy. That’s not something even the most optimistic of dispositions can change.
Advertisement
Unfortunately, this is what many entrepreneurs and business owners face every year. In the first six months of 2024, 1,176 small businesses filed for bankruptcy, 61% higher than the same period last year, according to Epiq Bankruptcy.
Katie’s husband risks being part of this statistic, but his efforts to hide the problem from his partner make him part of another unfortunate statistic — Americans who commit financial infidelity.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Financial infidelity
Financial infidelity is just what it sounds like: when you keep secrets about money — whether that be how much you actually make or what you’re spending on — from your partner. Keeping debts secret is a common form of financial infidelity, something 15% of people admitted to doing in a recent survey.
But these secrets take a serious toll, with 11% saying they’ve been in relationships that ended because of debt. And 38% say they’d end a relationship if their partner lied about debt or spending.
To salvage their relationship, Katie and her husband must move fast. Cruze encourages Katie to set a deadline for husband to turn the business around, or give up and find a job. For his part, Ramsey encourages a “scorched earth” fire sale of all their assets, including the family home, the commercial warehouse and their vehicles.
Fortunately, Katie estimates that the house and warehouse are worth more than their respective outstanding debt so offloading these assets should help the couple make considerable progress.
However, the couple needs to have honest conversations about money going forward or these secrets may well end up costing them their relationship.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
Managing Money • Mar 30
