April 9, 2008, 6:00 am

Couples With Different Levels of Income

by: The Financial Blogger    Category: Personal Finance
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Managing your own money is hard enough for most of us. We need to establish a budget according to our needs and priorities. Once everything is written down, you basically have a few sources of income and several expense accounts. It’s only a matter of balancing both sides of the equation. However, things are getting a little bit more difficult when you are trying to manage money with your better half. If both of you make about the same income, there should not be a problem. But what if you are making twice than your spouse?

Does finance really matter in your couple?

For some people (like me) money does not become an issue when it’s time to blend everything together. I look at my couple as a team and we both contribute our ways to the family. It doesn’t really matter if one makes more than the other as we share everything. The decision was easy to make as we started going out at the age of 15. At that time, there was not much financial wealth to share (it was more debts than anything else!).

However, things are getting a little bit more complicated when you meet someone that is making twice your income and already have assets. What can you do when you cannot obviously buy half of what she/he has? This is where you need to address this situation and have a good discussion about it.

If both of you are in for the long run, you should eventually find a way to pool everything together. However, things are not that simple at the beginning. If you can’t afford a $200 restaurant bill and the other one can, there is unfortunately room to dispute.

Define other than financial contributions

A solution I might think of would be considering all kind of contributions to the household. Cooking, cleaning or taking care of the house would be an interesting way to compensate. This solution is based on the probability of ones making less hours than the other one and has more time to take care of the house. If it’s not the case, it may be seen as an unfair solution as well.

Become a team

As I don’t really see how the splitting game would work in the long run, I still believe that, after a good discussion, both must decide to pool everything together and start living as a team. It will obviously not occur during the very first months of the relationship. However, there is certainly a point where both individual will feel comfortable with this option… hopefully!

If you have any tricks about how to handle this situation, please let me know!

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It is a touchy issue, that I had to discuss with Princess (my spouse). She has three (now grown-up) children from a previous relation, while I have none, so pooling our resources was not exactly the best way to do things. And the respective income have been quite different for most of our relationship. I was jobless when we met, but usually have a larger salary than she does (although the gap has been diminishing).

What we do is treat each other as a partner, as if we were in a business together. We each have our own accounts and manage our money independently (although we help each other and talk about our situaitons a lot). We bought a house together, using a 60/40 ownership to represent our different income. We have rules of thumb to determine how spendings must be split. For example, structural spending for the house follow the 60/40 split, while expenses for living in the house (public services) are split 50/50. With two of her children still living at home (age 20 and 24), you can imagine how things can get complicated, though!

But we talk a lot about these things, and have a great time together for over 5 years.

I agree you have to act as a team to get anywhere. I know I make about 13 times what my wife puts on her tax form each year. I also know there is a lot more to life that just that.

If your a team, this won’t matter at all.

Good post.

by: The Financial Blogger | April 9th, 2008 (7:52 pm)

Hey Tim!
I hope your wife makes 50K ;-D
I strongly believe that working as a team is the only way to handle the family’s money.

I think communication is most important, along with the realization that how much money you bring to a relationship does not give you more ‘power, leverage, etc.’. I make twice as much money as my wife but seeing as my life would be pretty bankrupt without her, I say it all evens out!

One thing that has worked in my marriage:
We have two separate bank accounts and a joint account for mortgage, joint bills, etc. We calculated the budget for what we would need to put in that joint account to pay all those bills and some extra for joint savings. Essentially, our shared budget. Then we determined our total income and what percentage we would have to take from each account in order to put in the amount of money needed. For example, that might be 50% from each paycheck, but one person’s 50% might be more than the others. In the end though, we both put in 50% and we both have the other 50% for spending money. If someone gets a raise, they raise their contribution in order to come up to the same percentage (otherwise after a few years, you’d only be putting in 30% or whatnot).

It has been a great way to a) ensure the bills are paid before the spending money is spent and b) build up a joint savings account. Thanks to automatic paycheck delivery, we can have the contributions automatically forwarded to the joint account so I don’t even feel like I am losing any money anymore. I just know that the bills get paid.

We never fight over what we spent our money on. Of course, we discuss joint expenditures, like a new TV or something – but if we don’t agree, then we’re free to spend our separate spending money on such things. I don’t care what she buys and she doesn’t care what I buy.

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I think if you are married it MUST be a team or you shouldn’t have married. Splitting is what dating around is for. I’ve been lucky, my wife and I have always been within 20k of each other, each taking our turns leading over the past 11 years of marriage. All that flipped when she took 10 mos off after our son was born. Still, it was OUR MONEY, not mine. It didn’t seem odd at all for her to buy stuff she wanted/needed. Then again, we are both quite practical.
I’ll get to flip the burden back to her in a few years if she can make enough for me to invest full time. 🙂

Coming from the otherside of things, my significant other and I have always (and will continue) to have seperate finances. When we met, I was 19, and he was 29. HUGE difference in income. At first, we just kind of went with the flow. I started spending a lot of time at his place, so I started contributing grocery money. After I officially moved in, I put in half the rent. Things that apply to only one of us (we each have our own cell phone) was payed by that person. 6 years later, Things have evened out, although I’m not quite graduated from college. Beginning in June, I’ll be making more than he does!

The key to making this work, is agreeing on it and not keeping score. He had no problem ‘supporting’ me during college. Sometimes this was picking up my half of the rent, and for most of college it was paying all the utilities himself. Going out to eat will always be whoever wants to ‘treat’ unless we agree to split. When we buy a house in a few years, most of the downpayment will likely be mine. He has credit card debt he’s still paying down (I’m a good influence) and I’m a bigger saver than he is. You can still be a team with separate finances, I just think it might be harder to not keep score. The easiest way for that is to just truly love the other. Then it just comes naturally.

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Here is a question: I am a medical resident and make a living wage at this time. I have over 200k in debt from medical school. With my chosen specialty I will make about 200k a year if I work full time–which I will except for some time to have kids in the future. My fiance has no school debt, works a radiology tech and will probably make in the 40-60k yearly area. However his father recently passed away and he inherited 100k, multiple stocks and has trust fund moneys that he will recieve at intervals predetermined by his did. Thus our conundrum is figuring out how to combine our current and future debt, savings, and income in a way that feels fair. Any ideas??

by: The Financial Blogger | April 22nd, 2009 (9:07 pm)

Hello Emily,

I don’t know what is your relationship look like right now. This is why I would remain cautious and tell you to keep your stuff separately until you decide to buy a house, get married or make any other significant step as a couple.

Communication will remain an important point considering the future salary gap you will live as a couple. Don’t worry, I make more than twice my wife’s income and we live pretty good with it 😀

I agree with your 100/100 contribution from couples.
There are lots of problems associated with 50/50.
The 50/50 creatse emotional separations and its directly telling the other couple that there is an extent I can go with you.
If realy you are in a marriage, I don’t see any reason why couples can’t function 100% as a team.

Me and my GF have quite different incomes despite that we have an almost equivalent education. To compensate the gender wage gap, we decided to make our contributions to our “common wallet” proportional to our wages.

by: Catherine | June 30th, 2011 (11:22 pm)

Hello –

I make a lot more money than my fiance (~5x-6x more). We contribute toward our household expenses in proportion to our incomes (which means I cover majority of our bills). Additionally, I pay my student loans (which of course he does not contribute to).

My question is: what is the best way of saving (e.g., for individual retirement) on such unequal incomes? What about the money I have saved already after paying for majority of our bills and my own student loans? Should we create a “household savings account” as one of the budget line items? Should each of us make individual decisions on what to do with leftover money once the household expenses are paid? If something were to happen and we were to split up at some future time, would we split savings in proportion to our contributions?

Would appreciate any thoughts or advice on this.