How to protect yourself financially when your spouse earns more

Having more than one earner in a household is common in the U.S. For 48% of all married couples, both the husband and wife are employed, according to 2015 data from the Bureau of Labor Statistics. In households with children, both parents are employed 60.6% of the time.

Megan Ford, a licensed marriage and family therapist in Athens, Ga., and president of the Financial Therapy Association, a trade group with just over 200 members, says in her counseling experience it’s fairly common for one person to be a higher earner. And while women are still often not paid equal rates as men, 42% of mothers were sole or primary breadwinners in 2015, according to the Center for American Progress, a think tank in Washington, D.C. Another 22.4% were co-breadwinners, meaning their earnings constituted 25% to 49% of their family’s income.

Having one spouse as a higher earner presents some basic financial and psychological challenges, though. The lower-earning spouse may feel disempowered or that they are not protected financially. The task of planning a budget may be more challenging with unequal incomes.

Here are five tips for couples with disparate incomes to have meaningful conversations about money.

1. Make sure you have disability insurance

Because couples generally spend based on their joint income, if something happens to the primary breadwinner, the family can have a hard time maintaining their standard of living.

Both spouses should have life insurance, to start, but it’s especially important for the higher earner to have disability insurance. Disability insurance would replace a portion of the higher earner’s income if something prevented them from working for an extended period of time.

Couples could also set up what she calls a “rainy day fund,” putting aside enough money — based on how much they spend on their joint income — to cover household expenses for several months. An estimated 46% of Americans have a “rainy day fund,” according to the 2015 Financial Capability Study by FINRA.

2. Make sure both spouses have strong credit

The lower-income earner should also have a credit card in their own name that they use to build credit, says Felicia Garland, a certified financial planning professional with Greenberg & Rapp Financial Group in East Hanover, N.J. You can count your spouse’s income along with your own when applying for credit, which means you’re likely to qualify for a higher credit limit.

“If something happens to the higher-breadwinning spouse, they need to be able to have their own credit,” Garland says. “It’s hard to get it afterwards.”

In many couples, there’s one spouse who’s the designated financial person. If that person is the higher-income earner, Ford says, then the lower-income earner can become more financially knowledgeable and secure by becoming equally involved in “financial chores” like paying bills, long-term investment decisions, and meetings with financial planners.

“The biggest protection is going to be being financially honest with each other,” says Ben Mercado, an accredited financial counselor in Lubbock, Texas.

3. Plan for everyday and special occasions

Couples tend to spend based on a joint income, says Garland. Most couples also tend to deposit their money into a joint account and use it to pay shared household expenses like rent or the mortgage, utilities, and groceries.

Setting a dollar limit on spending outside of shared household expenses can help both income earners feel that their money is being spent responsibly, Garland says. They could agree that any expense exceeding that dollar limit coming out of the joint account would require both spouses’ approval.

Mercado uses himself and his wife as an example when he’s coaching couples on finances. While he went back to school to earn his bachelor’s of science in personal financial planning, she was the primary breadwinner, working as a security officer. They set up a joint bank account. After paying rent and other monthly bills, they discussed how to spend their extra money. They set aside a percentage of their disposable income to look forward to date nights or to save for vacations.

4. Acknowledge money often means power

When there’s income disparity in a household, the lower-income earner could feel disempowered about making financial decisions, which can put stress on a relationship. The higher-income earner also could struggle under the burden of being responsible for more of the family’s finances.

But if you and your spouse have communicated openly and created a financial plan, financial counselors say you have a strong foundation to start addressing these emotional issues and make sure both partners feel like they are equal.

“Contributing is certainly defined as more than earning income,” Ford says. “The person putting in hours both at a job and at home often helps the higher earner do what they do successfully, as other parts of the family’s life are attended to and managed.”

Having an individual side account in addition to the joint household account also could help the lower-income earner feel more empowered in their spending, Garland says. Couples could agree on how much money goes into those side accounts, but then use their own discretion on how to spend it.

This helps avoid the “Can I go buy lipstick or a pair of shoes or that kind of thing without every little expense going through a big brouhaha,” Garland says. “For some it’s nothing, for others it’s a big psychological deal. It could be a hammer that the higher-income person might hold over the lesser-income person.”

5. Talk honestly, openly, and frequently

Roommates have upfront discussions about who is responsible for paying utilities and turning in the rent money. Those conversations are even more important when you’re in a committed relationship, says Mercado.

Some people feel uncomfortable and awkward talking about money — especially if they’re making less in a dual-income household — but if the topic is ignored, it can create divisions in a relationship that can lead to heartbreak.

“I recommend couples start talking about money from the very beginning,” says Mercado, a member of the Association for Financial Counseling & Planning Education, an Ohio-based organization representing more than 1,000 financial counselors.

Set aside regular time to discuss your shared finances. You could even designate time limits, such as 15 or 30 minutes, and gradually increase the amount of time with the comfort level.

Ford encourages couples to talk openly about their frustrations or concerns about differences in income levels and to create a spending plan.

When couples begin with aligned expectations, even if they aren’t equal in terms of income or who is responsible for paying the bills, Ford says they prepare themselves for less awkward and more open future discussions.

MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.

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