Let’s face it, talking about money with your partner can be awkward. Whether there’s a huge gap in your incomes or just a slight difference, it’s not always easy to bring up. But open and honest conversations about finances are essential for any relationship that’s built to last.
Wondering just how common financial differences are? Well, as of 2024, the average HelloPrenup couple has a whopping $250,000 difference in net worth! So, how do you navigate this tricky topic? This article is your guide. We’ll dig into the nuances of handling income disparities and offer practical advice on keeping your relationship rock-solid, regardless of your bank balances.
How to deal with income inequality in a relationship
Income inequality in relationships is more common than you might think. For example, according to a report by Paw Research Center, about 16% of heterosexual marriages have a breadwinning wife. This means the wife makes most, if not all, of the money in the marriage. On the flip side, there are generally more men who make more money than women in marriages. So… how do you deal with this income inequality (whether male or female-dominated)?
1. Talk about your money, people!:
- Start by having an open conversation about your financial situation. Transparency is key.
- Discuss your financial goals, spending habits, and how each of you views money.
- Avoid the temptation to keep up with your partner’s spending if it’s beyond your means.
2. Goals, goals, goals:
- Create shared financial goals that both partners contribute to, regardless of income disparity.
- Consider setting up a joint savings account for these goals, whether it’s for a vacation, a new home, or an emergency fund.
3. Get money on your mind (money mindsets, that is):
- Explore your financial backgrounds. How were you both raised around money? What habits did you inherit from your parents?
- Discuss your financial fears and dreams. Understanding your partner’s financial mindset can help bridge the gap between differing views.
4. Create a Budget Together:
- Work together to create a budget that accommodates both of your financial habits. This will help manage expenses and prevent overspending.
- Consider using budgeting apps like YNAB (You Need a Budget) to track your spending and stay on the same page.
Let’s look at an example of a couple with a significant income gap. Taylor Swift and Travis Kelce. Taylor Swift is a b-b-b-illionaire, whereas Travis Kelce is worth around $90 mil. If Tayvis wants to ensure that this income disparity doesn’t become an issue, they should make sure to talk about money, set goals together, understand each other’s money mindsets, and create a budget…well…. Maybe they don’t need to be super strict on that budget, but, hey, even billionaires need budgets, right?
Should relationships be 50/50 financially?
The idea that relationships should be 50/50 financially is a popular one, but it doesn’t always reflect the realities of modern relationships. A more equitable approach might be to contribute according to each partner’s means. Let’s see what this looks like in practice:
1. Proportional Contributions:
- Instead of splitting everything down the middle, consider contributing proportionally based on income. The person who makes more contributes more, and vice versa.
- For instance, if one partner earns $100,000 while the other partner earns $200,000, then their total household income is $300k. This means the person making $100k should contribute about a third of the expenses while the other spouse should contribute the rest.
2. Flexibility and Fairness:
- Be flexible. If one partner temporarily earns less due to job loss or another reason, adjust contributions accordingly.
- Ensure that both partners feel their contributions are valued, regardless of the amount.
2. Splitting 50/50 can just be…easier:
- Sometimes splitting things 50/50 is just…easier. There’s no “I make X, so I owe X” it’s just half and half, and that’s that.
- For example, let’s say Spouse A makes $200k while Spouse B makes $170k. They split things 50/50 no matter what, even though Spouse A makes a bit more. It’s easier, saves them time, and Spouse A tends to treat Spouse B to dinners every month and buys them cutesy gifts to boot.
In reality, a 50/50 split might not always be feasible or fair. Instead, contributing according to your means while maintaining flexibility can create a more balanced relationship.
Should you date or marry a partner with financial problems?
Deciding whether to date or marry someone with financial problems is a personal choice, but it’s essential to consider the implications.
1. Assess the Severity of the Situation:
- Determine how severe your partner’s financial problems are. Are they temporary, or do they stem from long-standing issues?
- Discuss how these financial problems might impact your relationship in the long term.
2. Consider Your Financial Compatibility:
- Financial compatibility is as important as emotional compatibility. Can you work together to overcome these challenges?
- Be realistic about your willingness and ability to deal with potential financial stress.
3. Are they willing to change?:
- Figure out if they are willing to work towards a better financial landscape. If they are willing to change their ways and/or work towards financial health, then it is something to consider.
- For example, if your partner took out a bunch of unnecessary debt due to online shopping when they were in their early twenties, are they still doing it? Do they still have poor spending habits? Or are they working towards a new way of spending? This should be taken into consideration.
Ultimately, financial problems don’t have to be a relationship deal-breaker, but it’s crucial to assess the severity of the situation, your financial compatibility, and their willingness to change for the better.
How do you support your partner when they are struggling financially?
Supporting a partner who is struggling financially can be difficult, but it’s essential to approach the situation with empathy and understanding. Let’s discuss how you can do so below:
1. Be Empathetic (Put yourself in their shoes):
- Listen to your partner’s concerns without judgment. Financial struggles can be a significant source of stress and shame.
- Offer reassurance that you’re in this together and that financial issues don’t define the relationship.
2. Be their teammate:
- Work together to find solutions, whether that’s creating a debt repayment plan or looking for additional income sources. You are their teammate, so try to be there for them and work on it like you’re a team.
- Encourage your partner to seek professional financial advice if needed. For example, they may want to reach out to a financial expert.
3. Emotional Support:
- Besides all of the practical stuff, there is also the emotional side of things. If your partner is struggling in any way, even if it’s technically their fault, they still need emotional support.
- For example, if they took out a bunch of debt when they were young and dumb, they may have learned their lesson by now and have regrets. They learned from their mistakes and now need some emotional support from you.
4. Celebrate the wins with them:
- Like any good teammate, you should celebrate everything–even the little wins. For example, if they meet their short-term goal of paying down $1,000 of their debt in a month, then treat them to a little gift or a night on the town.
- Celebrating the wins helps them feel supported and excited about hitting their next goal. Plus, who doesn’t love a reason to celebrate?!
How a prenup can help with income disparities
With a prenup, you can ensure that your wishes are met, whether you have a partner who makes more or less than you. Whether you want to split things 50/50, go proportionally, keep things totally separate, or somewhere in between, you can set out your intentions in your prenup.
For example, let’s say John and Larissa are getting married. Larissa makes much more than John–she has an income of $1,000,000, whereas John makes about $50,000 a year. Larissa wants to ensure her assets and income are separate, but she still wants to make sure John receives something in the event of a divorce. So they create a prenup that keeps all of Larissa’s assets and income separate. However, there is a lump sum clause in the agreement which states Larissa will pay John a lump sum of $300,000 in the event of a divorce. This helps balance out the wealth inequity in a way that the couple deems to be fair.
In addition, the prenup process can help you and your partner with a financial disparity talk through certain financial topics and ensure both of you are on the same page.
Final thoughts on income disparities in relationships
Income disparities and financial differences can be significant sources of tension in relationships, but they don’t have to be. By approaching these challenges with openness, empathy, and a willingness to collaborate, you can build a strong financial foundation that supports your relationship for years to come. And don’t forget about that prenup! It can definitely help with those financial disparities and ensure everyone is on the same page. Remember, money matters, but love and mutual respect matter more.
Laura Tynan is the founder of The Witch of Wall Street, a personal finance and investing community, where women are shown how to manage, multiply and manifest money, using simple strategies. Laura holds a BSc Hons in Finance, is a Chartered Accountant, and is certified in EFT Tapping, Breathwork, and RRT. She has been recognized by the Financial Times as a Top 20 Future Female Leader and by Yahoo! Finance as a Global Champion of Women in Business. She is a multi-award-winning speaker who has spoken at, and been featured in, Forbes. Laura hosts The Witch of Wall Street podcast and is the author of the personal finance and investing book for women, by the same name, which is available now on Amazon.
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