When we hear the phrase “income inequality,” it’s easy to think immediately of the haves and have-nots – or the ginormous, Mars-sized gap between the top 0.01% and the rest of us.
But the reality is that income disparity can happen much closer to home.
And no… I’m not talking about your next-door neighbor. I’m talking about your spouse.
It’s no secret that men generally outearn women, but we’ve been slowly closing the gap over the last few decades. In fact, according to the U.S. Bureau of Labor Statistics, 30% of working women are now the breadwinners in the family.
How to Financially Prepare and Handle a DivorceRead Post
While marriage is about teamwork, there’s something that makes finances incredibly sensitive and personal, so when one spouse outearns the other, it can be hurtful when it’s time to combine finances.
- Finances can be linked to self-worth. While we know you can’t place a monetary value on human life, it’s not uncommon for people to correlate their self-worth with their income. Add in stereotypical gender and provider expectations, and it’s clear why income inequality in relationships can be such a touchy subject.
- Jealousy and resentment are common. If one-half of the relationship feels like they’re the one pulling all the weight, it can lead to hard feelings. Even if there isn’t any jealousy, income disparity can lead to power struggles and control in a relationship, which is toxic as both partners should be considered equal.
- Opposites attract. Yes… this can mean contrasting financial philosophies and habits. For example, it’s not uncommon for a carefree spender to be attracted to a stable saver and budgeter – and vice versa. Therefore, it’s not uncommon for financial criticisms to be perceived as personal jabs.
Despite these challenges, it is definitely possible to share and combine finances, even with a large income discrepancy with your spouse.
Here are 7 strategies to share and combine finances in a respectful and healthy way!
#1. Set a Foundation of Transparency and Honesty
Just like every other area of your relationship, your family’s financial health and the foundation are built on transparency with each other.
In most cases, a lack of transparency in financial matters isn’t usually intentional. You see, there’s a lot of shame and guilt in finances. If one spouse earns less than the other, for instance, he or she may be ashamed to open up for fear of judgment. It’s not just income: the same is true for debt, savings, or assets. Embarrassment can cause people to hide their struggles, even from those they’re closest to.
In order to avoid shame, resentment, or jealousy, frame this conversation as a way to “begin the next chapter together.”
It’s not a competition.
It's not a race.
Together, you are a team fighting towards the same goals.
Sometimes the subtlest mindset shifts can be the most profound!
#2. Be Open with Your Needs
Do you feel like you need to go back to school to increase your earning potential?
Are you looking for more emotional support from your spouse as you pick up a side hustle?
Do you need more discretionary spending in your budget to improve your quality of life?
Whatever your needs, be sure to discuss these with your spouse! The more open you are upfront, the better it will be for your financial journey together.
However, it’s critical to differentiate between needs and wants. Put simply, needs are necessary for your survival, health, and peace of mind. Wants are expenses that are nice to have, but that you can live life without. Take an honest inventory of your needs so that you can discuss this freely with your spouse.
#3. Agree on a Budget Together
If you haven’t already created a budget, I recommend tackling the Budget Blueprint together. This way, you’re both on the same page when it comes to the household budget. This reduces any chances of miscommunication or financial mistrust. Instead, you have an agreed-upon plan to reach your goals.
In the most basic terms, the key to creating a budget is to determine your income, outline your expenses, and then determine how much money is spent in each budget category.
A budget is a plan.
Without a plan, your financial goals are nothing more than dreams.
With a plan, you can make those dreams your reality.
I did it; and you can, too!
Furthermore, you may be surprised at how the process of agreeing on a budget together will bring you closer together as a couple. This is an exercise in trust, vulnerability, communication, and appreciating the unique needs and wants of your spouse. As long as both parties remain respectful, this should be an extremely productive experience – in more ways than one!
Feel free to check out my previous posts on how to create a budget if you need help!
#4. Account for Variable Expenses and Income
It’s no secret that we’re transitioning towards a gig-based society.
More and more people are picking up side hustles and doing freelance work through sites and apps like UpWork, Fiverr, DoorDash, Uber, Lyft, and much more!
While freelancing is great for creating your own schedule and enjoying flexibility, it usually means that you have fluctuating or variable income. Unlike a salaried position, your income is likely going to be different from month to month.
So if either of you is a freelancer or has a side hustle, be sure to account for variable income in your budget.
In most cases, it’s better to underestimate your freelance income when creating your budget. This way, you can ensure that your baseline expenses are all taken care of.
If you make more than you projected, then you can simply apply the extra funds to your savings, debt pay-off, or discretionary spending.
However, the opposite is also true. Just as you should account for variable income, you should also account for unexpected expenses in your budget. This is why so many financial planners advise couples to save at least 3-6 months' worth of expenses in an emergency savings account.
Here are some of the most common unexpected expenses:
- New tires
- Job loss/layoff
- Medical bills
- Storm damage
- Rent increases
- Mortgage increases (variable interest rate)
Personally, I recommend keeping your emergency savings in a high-interest savings account like the CIT Bank Savings Builder.
#5. Schedule Regular Finance Meetings
Finance isn’t set-it-and-forget-it.
Your incomes change.
Your needs will change.
And your expenses will change.
This means that your budget will have to be tweaked and updated, especially early on.
By having regular finance meetings with your spouse, you can talk openly about what is and isn’t working. Take a look at your budget. Be sure to praise yourselves when things are going well, but also be sure to identify any opportunities for improvement as well.
Regular finance meetings also keep you on the same page, especially when you set the foundation with transparency. A good schedule recommended by financial planners is to aim for meeting once a month.
Finally, this is also a good time to talk about your dreams and goals. In other words, get out of the nitty-gritty details and also discuss your big-picture goals. This gives you something to aim for – together!
#6. Find a Way to Balance Responsibilities
To help avoid resentment or jealousy, it’s important to try to find balance in the relationship.
For example, if one spouse works 50 hours a week and the other spouse only works 25 hours a week, then the one who works less can do more housework or be responsible for driving the kids to school. Trying to balance responsibilities prevents one partner from feeling as though they’re pulling all the weight in the relationship.
How to Stop Fighting with Your Spouse About MoneyRead Post
On the other hand, what happens if both spouses work the same number of hours and there’s still an income discrepancy?
Well, it’s important that the spouse earning more does not penalize the other spouse for working less. After all, you can’t always control whether or not you get that promotion or raise at work. What’s important is that both parties are contributing to the relationship. If both spouses are working the same, then divvy up other responsibilities the same, regardless of salary differences.
Remember, you are a team, so treat each other like teammates!
#7. Spend Money Together
The money made by the couple belongs to the couple.
Be sure to treat yourselves to date nights, vacations, and impromptu discretionary spending (as long as it’s within budget, of course!).
In most cases, resentment builds because one party spends money while the other person earns it.
By spending money together, you are sharing the fruits of your labor as well as deepening your relationship with each other.
But it’s not just about discretionary spending.
This rule also applies to major decisions. From buying a car to getting a new television, be sure to make these decisions together. By ensuring that both of you are on the same page, you’re going to make a purchase you both will be happy with!