Yahoo Finance Income inequality: How to deal with an earnings gap in a relationship
Money can be a tricky topic of conversation for many couples, particularly if one partner earns more than the other. Income inequality is never an easy issue and it can put strain on a relationship, especially when so much emphasis is placed on the ‘breadwinner’ of the household.
Not everyone can be the main earner, however — and this doesn’t have to be a problem either. By having open conversations, planning carefully, and changing the way you think about money and power, you can avoid the problems that a wage gap can create.
Talk openly about money
“A wage gap can impact the lower earner’s self-esteem, or it may be that the higher earner thinks they have more control, or that they should make the decisions about holidays or big purchases,” says Anna Goodwin, an accountant who offers personal finance training and mentoring services. “The key is to communicate and respect each other even if the one person brings less money into the household. The biggest thing is to talk about it.”
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However, it’s important to remember that both partners can carry a burden when it comes to money worries. Those who earn more may feel pressured by the responsibility to keep the bills paid and the fridge stocked. The partner with the lower salary may feel guilty about earning less or feel pressured to contribute more to the household income. If not dealt with, this burden can cause problems such as resentment.
Change the way we think about the ‘breadwinner’
We place a lot of significance on the term ‘breadwinner’ in a relationship, but earning more doesn’t equate to being more important — and it doesn’t mean you have more power than the other person.
How much you get paid for what you do doesn’t necessarily mean you work harder or that you are of more value than your partner, too. A higher salary doesn’t correlate with skill. It may be that the lower earner works in an industry which pays less, which is an issue outside of their control.
“The breadwinner can be male or female, and it can be that two accountants have the same job, but the woman earns less, because they are discriminated against,” Goodwin adds.
It’s also important to remember that not all work is paid work, too. One person might earn less by working part-time, but takes on the burden of unpaid childcare.
Agree on a budget
“Prepare and agree on a budget,” Goodwin says. “Agree how much should be included on personal budget and each individual’s own use. It might be that the higher earner agrees to put more towards household costs, or tops up the money of the lower earner.”
When creating a budget or talking about spending, it’s important to make financial decisions that suit both partners. Most people assume the fairest way to split the rent or mortgage is to divide it equally, but this isn’t always the case. It may be fairer for the higher earner to pay a little more and the lower earner to pay less, for example, by splitting monthly payments 60:40.
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The same fairness should be applied to all financial decisions. If the higher earner wants to go on holiday somewhere expensive, but this would leave the lower earner strapped for cash — they may have to pay more to cover the other person, or settle on a cheaper trip. Discuss the pros and cons before reaching a decision that everyone is happy with.
“Remember to review the budget regularly to make sure you still agree,” Goodwin says, adding that situations can change over time. One partner may earn more because of a pay rise, or they may earn less because of a reduction in hours or redundancy.
Be careful about ‘our money’ and ‘my money’
Wage discrepancy in a relationship can also make it difficult to decide what is household income and what is your personal income — the money you do as you like with. How you resolve this depends on each couple, but it can help to have both a joint account as well as a personal account each.
“Some couples have separate money but then they come together to pay bills or mortgage — but keep the money they earn to themselves apart from that,” Goodwin says.
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You could fund the joint account proportionally to cover the rent, mortgage, bills or food costs. Then whatever you have left will remain in your personal account, as your own money to spend as you please. If one partner wants to take money from the joint account for personal use, discuss it first. “Money can be a very closed topic,” Goodwin adds. “Communication is the key to it all working.”
