Most of us see it in our relationships. As monthly expenses tally up, and the bills get paid on thinly stretched paychecks… tensions begin to rise at home. This, despite the fact that many of us have two earners in the household. According to 2013 research out of Kansas State University, financial disputes are a significant contributor to relationship issues.
“Arguments about money [are] by far the top predictor of divorce,” said Sonya Britt, assistant professor of family studies and human services and program director of personal financial planning. “It’s not children, sex, in-laws or anything else. It’s money — for both men and women.” [ 1]
I have been with my wife for nearly 15 years. Like any couple, we have had financial ups and downs in our relationship but financial arguments have never been a major concern. How has this relationship kryptonite been rendered inert? I have found that the following strategies have been significant contributors to our financial coupled bliss.
Yours, Mine, and Ours Checking and Savings Accounts
Despite having been married for 7 years and legally our financial accountability to the outside world is inextricably tied, we still keep up most of our financial independence. My wife and I deposit our separate income in our own personal checking and savings accounts, just as we did when we were dating. Together we have a joint checking account and a joint savings account. Each month, like good roommates, at the beginning of the month we each deposit an equal amount into the joint accounts to cover the month’s expected bills and to save for higher priced irregular expenses and indulgences such as vacations or new furniture purchases. Through this approach, we each contribute as equal partners to our shared financial obligations. We only have to hold each other accountable to making our single monthly contribution to the joint account. As long as I cover this critical obligation, my wife does not worry when I spend on personal hobbies, or pricey luxuries. In turn, I am wholly unconcerned about her day-to-day spending because she has also done her part. Because we put our joint account, and our joint needs first, it is easier to find financial stability and comfort together.
Spend only what you each can afford
In order to each be able to afford our monthly joint account deposit, it is critical that we budget all of our monthly expenses off of the earning power of the lower earner. It may seem tempting to follow the traditional mantra of budgeting expenses such as rent or mortgage, car payments, cable television packages, and cell phone contracts based on the total household income. This is especially true, since financial institutions are more than willing to give loans and lines of credit based on our total household income. But, if the incomes of the two household earners are uneven, it becomes an uncomfortable burden, when even possible, for the lower earner to contribute evenly. It is no wonder that this disparity often serves as a source of stress, feelings of inequity, and arguments.
When you limit the core expenses of your lifestyle together off the income of the lower earner, two amazing things can happen. As a team, you learn to live richly with less. As individuals you become free to invest what money remains on the personal passions and pursuits which make you truly happy and uniquely you. Living below the household’s total means also provides opportunities to pursuit career moves which other couples might not risk. If the higher earner cannot tolerate the stress of their job, they have freedom to pursuit a job change to a lower paying job without impacting the household standard of living. If the lower earner loses their income, the higher earner has a surplus to help buffer the shock.
Save for tomorrow
I have a challenge for all the higher earners out there: In addition to any savings that you have factored into your joint budget, save or invest every penny that you make above your partner’s income. By doing so you will be taking tremendous steps to break the cycle of living paycheck to paycheck for yourself and eventually gain financial independence for you and your family. Although your partner may not worry about how you spend your income over and above your contribution to the agreed upon joint expenses account, your partner has already proven they can live off of less, so you surely can too! Just because you make more does not mean that you need to spend more. Why not take up the challenge and invest in your combined future.
Successfully living off of less also provides evidence that you should be able to live together off of less in the future. Before you know it, your modest but rich lifestyle together could be covered in perpetuity solely from the income derived from these investments. This is how you achieve true financial independence. You can retire early, or continue to work toward even greater goals.
Do you think this solution is workable for your household? Why or why not? Please let me know your thoughts in the comments below.
[1] http://www.k-state.edu/media/newsreleases/jul13/predictingdivorce71113.html
I like what your saying. I wish I was able to follow your lead but my job is unreliable. I have been called at home in the middle of the week while on my regularly scheduled day off for that week and been told, “We are off the rest of the week, no orders came in.”
This has happened in the past once in a great while. Lately the orders are short or non-existent. The crazy thing is they just hired a couple of people. It is obvious to me that they have work in the future that will accommodate the new people. Ups and downs account for a lot of our issues right now and budgeting depends on a regular paycheck. When money is good My wife who makes a great deal more than me, dreams of a vacation like she used to take before we were married almost four years ago and two years together before we were married. So… I asked for us to stay home again this year which would mean we would only do something in the area for our vacation. Now she has received a bonus which she says should allow us to go away again. I disagree!
I feel until our credit rating is put right again we have no business spending anymore than we need to. I have a house that I want to complete work on so I can sell it and be in better shape again but she keeps telling me we don’t have the money for the repairs. I have given up my vehicle so we could afford to buy a new truck that she had been wanting. We didn’t share Christmas gifts, birthday or wedding anniversary gifts to also help. We love the truck! I lost some freedom but we found a way to make it work. My big problem was that I allowed her to take care of the financial issues and stayed out of it feeling she should be allowed to make the decisions since she made so much more money but then I was upset at my credit scores plumiting. In essence I realized I had created my own problem by not being involved. This has been remedied and I now have an interest in what happens with the bills. I am hoping that things improve at work and that being informed about the money will prevent future financial issues.
We are at least talking about decisions in stead of being left in the dark.