Money in a relationship – my partner earns more than me.
A question all the way from Australia regarding money in a relationship.
Currently my partner makes about $50,000 a year working full time. I’m studying full time at university with part time work and I’m earning around $18,000 a year.
We live together and split everything evenly, I pay 50% of the rent, bills and any other regular expenses. This does lead to a bit of a disparity between us in terms of spending money and savings.
My partner likes spend a lot of money on impulse buys, his attitude is “If I have the money for it and I want it, I should have it” I don’t mind it because it’s his money and I have no right to decide how he spends his money.
The issue is it makes me feel very cheap and when things like buying groceries come up or he wants to eat out and I can’t afford the place he wants to go to.
Is anyone else in a similar situation? How do you spend responsibly while your partner earns and spends more than you?
For me, to organize your money in a relationship, you both need to do two things: plan & communicate.
It is important for all couples to have a system. If you can come to a pre-defined agreement on spending, 95% of potential problems, issues and arguments can be prevented before they start. Most couples split expenses/costs in three ways:
- 50-50 – Split all costs 50% each. This goes for utilities, rent, mortgage, eating out, clothes shopping, charity donations and absolutely everything else. The 50-50 method is only really appropriate if both partners have comparable earnings, have similar attitudes towards spending and spend around the same amount each month on discretionary spending. For the majority of couples, this isn’t the case.
- Proportional – This splits all expenses according each respective person’s income. Imagine that partner A earns £20k per year and partner B earns £30k per year. In this scenario, partner A would pay 40% of all expenses and partner B would contribute 60%. This, on the face of it, seems like a much fairer system. However, it too has its flaws. Firstly, if partner B works many more hours to earn this money, they may feel slightly aggrieved to be contributing a larger proportion. Equally, if partner A has extremely frivolous spending habits and partner B has a close control over their spending, it won’t take long for partner B to become annoyed that they are paying more to fund their partner’s over-spending.
- Fixed/discretionary split – As a result, a third method could be the most appropriate. Look at your detailed monthly budget, and divide your expenditure into fixed expenses (those which are necessary for both partners to live – rent, transport, groceries, utilities, etc) and discretionary expenses (eating out, jewellery, perfume, etc). For fixed expenses, split the cost proportional to your income levels. This will include mortgage/rent, transport, utilities, shared holidays, etc. Then, for variable expenses (discretionary spending) each partner will pay for their own expenses.
The third option appears the fairest. However, as Sarah specifies in the question, this won’t resolve all issues. Take, for example, the scenario that Sarah raises regarding restaurant spending. Sarah’s partner has expensive tastes when eating out, which Sarah cannot afford. Therefore, we can build in certain rules for specific scenarios which will regularly occur.
One way to resolve this specific scenario would be for Sarah to state the level of expenditure she would wish to spend on a restaurant. Say this is £15 for the meal, Sarah could then find a reasonable option that would satisfy her tastes and spending habits. If her partner then wishes to go elsewhere for a more expensive meal, he would be liable to pay for his own meal and any excess cost on Sarah’s meal. Of course, this would need to be agreed to beforehand by Sarah’s partner.
However, whichever plan you select (and however you refine this for certain circumstances), something new usually comes up which isn’t planned for. Therefore, the key to making finances work in a relationship is communication.
A recent report from Lloyds TSB in the UK, determined that British couples hide £2.1bn from each other in “secret savings”. The headline is a little misleading, and this actually equates to 63% of UK couples keeping their savings in their sole accounts, rather than shared accounts. I wouldn’t recommend that you ever “hide” savings from your partner. I’m not an agony aunt, by dishonesty in any walk of life doesn’t seem like the best basis for a successful relationship!
Equally, another survey found that arguments over money are the top predictor of separation in couples. In fact, it concluded that couples who row over finances are more likely to divorce than those who argue about children or sex.
Therefore, it is clear that communication is a key factor when it comes to marrying finances with a successful relationship.
As long as you are willing to discuss your financial situation (as you should be willing to communicate about everything in your relationship), you will be able to tackle any financial problem which comes your way. As boring as this may sound, I would recommend setting up regular slots (twice per month perhaps) to discuss together everything related to your finances (budgets, spending, investments, your rules, etc). Not only will this ensure that you are regular addressing your financial progress, it will guarantee that you are addressing any potential problems as they are occurring rather than letting them build up into larger problems with potentially disastrous consequences.
Have a pre-defined plan for how you split expenditure and talk about it, and all other aspects of your financial situation, on a regular basis.
So, I hope that answers your question Sarah.
If anyone has any other questions they would like answered, please send me an email at email@example.com.
Remember, this website discusses the very small steps which we can make with very little impact on our lives in the short term, but which have huge financial benefits over time.
Happy climbing one and all!