We came across this intriguing question about income differences in relationships on Reddit: “I make a six-figure income, my boyfriend is a graduate student who barely makes $20,000 a year. Does anyone have some advice on making our finances work with these very disparate incomes?”
The background on this couple: One is a successful 28-year-old woman who started working a year ago after finishing her doctorate. She grosses about $120,000 annually, has about $125,000 in savings, and has no debt.
Her partner is slightly younger, still in graduate school, majors in English literature, and hopes to pursue an academic career. His current income is $20,000, which is likely to go up once he starts his teaching career, but his earning potential is unlikely to ever be close to hers. He also has $20,000 in student loan debt, and carries a credit card balance.
Right now they split the rent proportionally while she picks up all of the bills and most of the groceries. They maintain mostly separate finances right now, but the marriage discussion is starting to happen.
Some of the personal advice in response to her inquiry described what her partner could expect on his chosen career path and insight on how that will affect finances.
Unless he is very lucky and very talented, he should likely not count on getting a lucrative tenure-track position in English. Teaching at a community college or high school are far more likely outcomes.
The voice of experience
Two years ago, I got fed up with making so little money and started applying for any job that seemed relevant. I was hired by an engineering firm to do proposal writing and making far more than what I had been making in 60- to 70-hour workweeks teaching.
Making more money is awesome — I now make about 80% of my partner’s salary and I love everything I do. Even though I’m sort of sad that my dream job as a community college faculty member didn’t pan out, it’s important to have a realistic understanding of the academic job market.
Before we married, my partner and I split expenses 50/50, other than a few things we split proportionately based on our income. Once things got serious about marriage, we got a joint account and started funding it with what we each could afford to pay for all shared items.
Now we’re moving beyond this and in the next six months, we will be opening up additional accounts to improve our cash flow. For example, we’ll have a joint account dedicated strictly to auto pay our bills.
Six questions to ask yourselves
Another response to this situation suggested that, since the couple was already having the marriage discussion, communication might be improved if some of the following topics were sampled and dealt with:
1) How do we decide what cars to own and drive?
2) What will be the household responsibilities, as our careers becomes more demanding?
3) How will possible business travel affect the family?
4) What happens if work transfer takes the primary income earner far away?
5) How do we choose the cost and type of gifts you give to friends, family, and co-workers?
6) What might respective hobbies have on the relationship? And what if one is more expensive?
Some solutions to tackle income disparity
Finally, money management expert J.D. Roth, who has written extensively on personal financial challenges, offered the following counsel to marriage partners facing money issues.
“Some couples keep a single joint account where they put all their money,” Roth writes. “Others have a joint savings account for certain needs but otherwise maintain separate spending accounts. Most couples fall somewhere in the middle with a blended system — they share a joint account for household finances, but each partner has a personal account to do with as they please.”
With this hybrid approach, the real decision is about how to divide the household income. If one partner makes significantly more than the other, she could fund the joint account entirely on her own and keep the remainder in her personal account. Her husband could simply keep his own income in his personal account to do with as he wishes.
Some couples use a proportional system — if one partner earns two-thirds of the household income then she contributes two-thirds of the joint account. After funding the joint account, the partners can do whatever they want with what’s left over.
Another option is to use an “allowance” system. Both spouses put their entire paychecks into the joint account, and then withdraw a fixed amount into their personal accounts every month.
Roth continues, “If you use a hybrid system, it’s vital to let each person use their personal money however they want. You’ll always have some personal goals that don’t jive with those of your partner, but put shared goals first. No matter whether your finances are joint or separate, make sure your common objectives are met before pursuing personal passions.”
What’s most important is honesty and communication. Any system in which the partners are open about their money habits is a good one.