How to Handle Financial Inequities in a Relationship

January 25, 2022
Jackie Porter

Article written by Jackie Porter

You are starting to think long term and what forever might look like… But you can’t help but think about how some of your stark differences might impact the relationship over the long term. How will you work to overcome them as your relationship grows? It has not occurred to you to have a conversation with your new love about your differences, mostly because you are uncomfortable. Especially when it comes to discussing money and how different your financial circumstances are.

You have always earned a good living and have not really needed to budget all that carefully. Your partner earns significantly less than you and has comes from a very different upbringing. How do you address the personal and practical considerations? Those necessary to ensure all parties are heard and their needs are met as you look at making the relationship more permanent? Read on for 5 Takeways you can use Tomorrow to Tackle Financial Inequity in a Relationship Head On.

If your partner earns significantly less than you may need to ditch the 50/50 rule when it comes to expenses.

The 50/50 rule only makes sense when your incomes are very similar. For example, assuming you both are paying for similar expenses like rent, or a mortgage, childcare expenses, transportation and earn significantly less income. Say you earn 300,000 and your new love earns 60,000. Is it fair to spilt the expenses 50/50 if you live together and pay the bills? Or even if you don’t and you are doing more things together that cost money such as vacations or hobbies? In most cases no. In a scenario where there is a gross imbalance between incomes a more effective approach would be an income percentage approach versus a 50/50 expense approach.

This approach involves dividing the lower income into the higher income. Then you use the proportional number to allocate how much expenses each party should pay. For example, $60,000/ $300,000 x100= 20 percent. In this case the person with the lower income who would be responsible for 20 percent of any joint expenses. Unless of course your new partner is living rent or mortgage free and has free cashflow of $60,000 that may be a different story.

One partner has significant debt and tends to be irresponsible with debt… the other partner does not like debt.

Okay so your new love may be more freewheeling when it comes to debt than you are. Maybe this also causes more financial inequity. Perhaps they are constantly carrying credit card debts and financing their wants this way without paying too much attention to their future. This attitude can signal a major difference in money values. If you are contemplating cohabitating, it is a good idea to set clear boundaries on how you will manage debt as a couple. Encourage your partner to seek credit counselling before combining finances. Keep in mind that how responsible your partner is with money will have major implications on the health of your relationship for many years to come.

One person in the relationship tends to dominate the financial agenda.

If one person in the relationship is used to setting the financial agenda for the couple now is the time to turn a new page and reduce the chances of financial inequity. To put both of you on more equal financial footing its important to understand what is important to your new partner when it comes to money goals. You can work on getting on the same page where both individuals in the relationship feel their voice is heard. Get in the habit of talking to each other about your financial priorities. Create a financial priority check list where both parties list what is important to them. Also create a financial agenda that includes goals, joint net worth statements and strategies for how you will get there. You can even make a date night out of it after talking about your individual and joint goals as a couple!

Your partner loses their job and now you are the only income earner?

There has never been a more important time to talk about financial inequities and how you will overcome your fears around money. Take a closer look at your total monthly expenses. See where you can cut back on expenses in the household. Look into what benefits your partner will have access to and for how long. Also look at reducing any double-digit interest debt on credit cards by consolidating them in lower interest options. This can include refinancing a mortgage, loan, or line of credit.

If you find it difficult to discuss money imbalances. Seek out the services of a financial professional.

Over the course of any relationship, you will likely experience numerous financial inequities. Perhaps your partner has taken off time to raise children. Perhaps you receive an inheritance, or you face another life event that creates a financial imbalance. Seek out the services of a trained financial professional such as a certified financial planner, or financial professional. They can help facilitate difficult money conversations, and cultivate a more equitable relationship when it comes to finances.

If you are going through a divorce and are just not contemplating the financial differences, please reach out to us. We are here for you.