WHAT I’M THINKING ABOUT: Income Disparity within Couples
Nearly 30% of married women in the U.S. now earn more than their husbands. This reversal of the traditional norm of male breadwinners can lead to conflict, depression, and downright awkwardness, as both The New York Times and The Huffington Post examined this month in worthwhile articles.
But the reality is any substantial income disparity within couples — regardless of gender — invites friction. Since the beginning of time, the dynamic of one dominant breadwinner has bred conflict and unhealthy attitudes around money. Here’s how couples with an income disparity can develop a more unified front for their finances:
1) Tune out the noise
Whichever half of the couple is making more, there are going to be norms and opinions exerting pressure on you from the outside:
She should be at home with her children.
He should be the one supporting his family.
He makes more, so he should be making the financial decisions.
If they’re really a forward-thinking couple, why aren’t they both working?
These external voices need to be tuned out. Someone will always have an opinion about your circumstances, but what matters is your relationship and what works for you as a couple. From traditional careers to freelance gigs and couples alternating career prioritization between them, nearly anything under the sun can work today — so long as it works for you as a couple.
Of course some of the pressure may come from family and friends, and while it’s important to consider the thoughtful views of those who love you, even well-meaning advice must come second to the convictions of you and your partner.
2) Where’s your self-worth?
Think about your current income. How would your perception of yourself change if you doubled it, or even added an extra zero? Or if you don’t have an income, what if you were suddenly making six figures?
A dynamic underlying income disparity within couples is our tendency to attach our self-worth to our money and career. Tying self-worth to income, net worth, and professional prestige is particularly pervasive in urban areas where the professional rat race runs at full speed.
If you’re the one with the swanky job, you might bring a sense of superiority and entitlement to the relationship. If you’re the one making less (or nothing), you might be prone to feeling inadequate and perhaps powerless. Neither is helpful or truly reflective of reality.
There’s more to life than money and career — much, much more. Learn to see the value in your contributions to your family beyond money. More importantly, recognize that ultimately your self-worth is intrinsic, and not based on your money or your contributions.
3) Team up on your finances
Most of the money conflict I see within couples boils down to poor communication and failing to act as a team. Often the one who makes less silently struggles for clarity and power over their finances but goes unheard. Conflict tends to arise after a prolonged habit of overspending and living above your means. Eventually this catches up with you, and credit card debt starts to accumulate which triggers stress and then conflict. Then comes the loop of victimhood, laying blame, and feeling shame.
The key is to approach your finances on a united front from the outset. Regardless of who makes more, both halves of a couple need to be involved in and communicating about your finances and financial goals. Here are some practical steps couples can take:
Be transparent and honest. Act like a team and commit to communicate. Set aside a time every week or two to check in on your family’s financial circumstances and air any grievances.
Set shared goals (and be willing to compromise).
Create financial clarity and order — where is your money, where does it go each month? Work together to create a combined net worth statement (by listing out all of your assets, accounts, and debts) and a budget. (You can grab our budgeting toolkit here.)
Hire a therapist or financial planner. Sometimes you need the help of an objective third party.
Regardless of who makes more, strong communication and an organized financial life will go a long way to fostering unity.
4) Put the smaller income to work
It’s common for the one with the smaller income to feel like they’re not making a meaningful contribution. After all, if your partner makes $200K, your $50K (a piddly $30K after taxes!) barely moves the needle, right?
But imagine if $30K dropped in your lap right now. That’s a lot of money. What meaningful contributions could that money make to your family? What financial or life goals could it help you achieve?
Deciding on a specific goal for the smaller salary will infuse that money with new purpose, making both halves of the couple feel good about what that money is achieving. It could be a savings goal (like saving for a sabbatical), a spending goal (like a specific vacation), or a giving goal (like donating a certain figure to a non-profit). Set a specific goal and consider using a separate savings or checking account to hold those funds. And when you finally achieve that goal, you’ll have a tangible way to recognize the value of that smaller income.
Ready for more? Our online course for couples, MERGE, is specifically designed to help couples combat conflict around money and stand on a united front.
WHAT I'M READING
Behind on Retirement Savings? It’s Not Too Late to Catch Up
By Anne Tergesen, The Wall Street Journal
While this article is most immediately relevant to those facing the empty-nester phase of life, there’s an encouraging message here for those in the child-rearing years. Yes, your savings take a hit when you have kids, but you can regain lost ground in later years. (Just don’t use this as an excuse to be lax with your saving and spending in your 30s.) You’ll have work to do when your kids head to college, but it’s possible, especially if you plan for it.
“Rather than assume it’s too late to make a difference,” people in the empty-nest phase should recognize that “now is the time to take action,” Mr. Kitces says. “Don’t think of yourself as behind.” After all, he adds, many people with children are in the same situation and “by saving 20% to 30% or more of your income, it’s possible to bridge a retirement savings gap pretty fast."
Countdown to Retirement: A Five-Year Plan
By Peter Finch, The New York Times
This is another great article about what to do in the years leading up to retirement. This article lays out a smart 5-year action plan by identifying one major financial life task to focus on in each of the 5 years leading up to retirement. Most of you aren’t closing in on retirement, but perhaps your parents are. Use this action plan as a guide for helping your parents get themselves organized and possibly find the right advisor to help them with the heavy lifting.
Your first step is, admittedly, a daunting one. But the rest of your retirement planning depends on it. Before anything else, you need to see where you stand financially. How much have you saved, and will that money, plus Social Security and any other pension income, generate enough cash to cover your expenses in retirement?
You may already have a bad feeling about what these numbers will tell you. Don’t sweat it, advisers suggest. This is the moment to confront the truth, knowing that there’s still time to change your investments to generate bigger returns, cut back your current spending to find more money for savings or (worst case) rethink your retirement expectations.