Four years ago this month, I published When She Makes More, a guide for higher-earning married women who want to master their finances and thrive in their relationships.
Earning more money, as the wife in your hetero-relationship, may seem innocuous. What does it matter if your salary is bigger or smaller than your mate’s?
But as my published study determined, there are unique complexities in coupledom when she makes more than him.
Compared to married women who make as much or less than their spouses, women who make more are less satisfied in their relationships, less happy with their financial planning status, and more likely to be the primary decision maker when it comes to paying bills and planning for retirement.
Separate past studies echo a lot of what I found to be true in my own research. One, by the University of Chicago, actually found that there is a higher chance of divorce when she makes more.
So when Mint user Nancy – who brings home about twice as much as her husband-to-be Ryan – came to me with financial questions just weeks ahead of her wedding, I was eager to learn more and offer some help.
Here’s a little more about Nancy, 33, and Ryan, 36:
Monthly Expenses Total: $6,800
Top Monthly Spending Categories:
Rent (joint): $3,400
Mortgage (hers): $1,400
HOA fees (hers): $305
Student Loans (hers): $800
Credit Cards (joint): $600
Savings/Emergency Account: $40,000 (placing about $1,500 per month into savings)
Nancy contributes 12% to her 401k
Ryan contributes 10% to his 401k
Credit Cards: $18,000 (Joint)
Student Loans: $50,000 (Nancy)
Mortgage: $150,000 (Nancy, a previous home that she rents out)
Bank Together and Separately
I can’t stress the importance of having financial autonomy in a relationship, especially when there’s an income gap. I’ve witnessed many couples argue about money and criticize each other’s spending behavior, only then to discover that all their money gets pooled into a single pot.
When there’s only one account the person making less may feel uncomfortable buying something for him or herself. Conversely, the person making more may inherit more entitlement to the money and spend accordingly.
My thoughts: I advocate for three savings accounts in relationships, especially when there is a big income difference: yours, mine and ours. In the joint account, each person distributes an equal percentage of his or her income per pay period. The joint account can then cover expenses that each pay and/or save for equally. Nancy and Ryan can get a head start by placing all their cash gifts from the wedding into this account.
Then, in a separate, personal account, each person maintains his or her own bank account. Here, again, allocate a percentage of your income and spend this money on whatever you want (within reason!)
This 3-bucket strategy may not work for all couples, but I think it can be a possible solution to avoid unnecessary money squabbles.
Give Each Person’s Money More Meaning
Nancy’s income is covering a lot of their day-to-day costs of living, including rent. Ryan contributes as much as he can to things like food, household expenses, etc., but the purpose of his money in the relationship is not as clearly defined. I’ve seen how this can be a potential problem in relationships (including my own).
Because net worth is so closely tied to self-worth, we want to feel as though our income (no matter how big or small) is serving the relationship and that each person feels like a true and meaningful provider.
My thoughts: Give each of your money more meaning. In other words, have each person’s financial contributions be clearly labeled and recognized. How you determine this should be based on financial capabilities, but also emotions and personal strengths.
A suggestion: Nancy continues to cover more of the day-to-day expenses that come up, while Ryan can act as the long-term saver/spender. He covers costs like vacations, their children’s college funds (later on) and consistently adding to their joint savings account for a future down payment on a home.
These allocations from him not only take away the burden on Nancy to fund what she may feel is everything; it will also be very rewarding for Ryan to know that, say, he was able to send his kids to college or fully fund the next big family trip.
Hire a Third Opinion
How to really level the financial playing field and clear a path for communication in a marriage with big income differences?
My thoughts: In the beginning of marriage, especially with an income disparity and various assets, working with a financial planner and gaining advice from an objective third-party, can be a smart way to go.
This person can help you to understand how to tackle your goals together as a newly married couple and identify holes or leaks in your budget and financial planning. As the studies have shown, when she makes more, she may feel she needs to take on all the financial decisions alone (even though he wants to be an equal partner in that). A certified financial advisor, who is a fiduciary, can be a great addition to the team, even if just for a couple of years.
Squash the Debt
Last but not least, the couple has $18,000 in joint credit card debt, which I think they should try to pay off within the next year. Currently they’re saving $1,500 a month in a rainy day account that already has $40,000 in it, which would cover about 6 months of living expenses if they both lost their jobs.
My thoughts: Take that $1,500 and redistribute it toward the credit card balance each month. This way, they can be debt free in a year. Once that’s gone, continue to pay into the emergency account just as before, until they have closer to 9 months of living expenses saved up.