Dealing with Financial Inequality in Your Relationship
Whether due to differences in income, spending habits, or financial goals, financial inequalities can happen in any relationship. If left unchecked, these disparities can lead to feelings of resentment, insecurity, and even power imbalances in a romantic relationship. As challenging as it can be to deal with financial inequality in your relationship, with open communication and collaboration, you can navigate these challenges and create a balanced relationship that respects both your contributions and needs.
Understanding the Root of Financial Inequality
How does financial inequality even happen in the first place? As complex as finances are, causes of financial disparity can be just as varied.
Income Differences: One partner may earn significantly more than the other due to career choices, education, or life circumstances. This might have been collaboratively decided between the two of you at some point, for example if one partner chose to stay at home to be the primary caregiver to children.
Spending Habits: Each partner may have different attitudes and values around spending and saving. If one partner likes to spend money on luxuries while the other partner tends to be more frugal, this can lead to financial inequality in a relationship, even if both partners are earning similar incomes.
Financial Backgrounds: Your financial background, like the financial status of your family growing up, can also have huge impacts on the way you handle your finances as an adult. One partner may have a ‘scarcity mindset’, whereas the other partner has an ‘abundance mindset’, which can lead to financial inequality in a relationship.
Life Stages: Partners at different life stages may have varying financial priorities, such as one focusing on saving for retirement while the other is paying off student loans. Or maybe one partner is not working while they complete their degree or training, whereas the other partner is in the workforce.
Understanding these underlying causes can help us approach the issue with understanding, compassion, and a willingness to find common ground.
How to Find Balance
1. Open and Honest Communication
Communication is the cornerstone of any healthy relationship, especially when it comes to finances. Financial inequality can lead to feelings of shame, guilt, resentment, or frustration, making it essential for you both to express your feelings openly. Don’t wait until you are too mired in your emotions to communicate your feelings calmly and clearly. Here are some tips for fostering effective communication about money:
Schedule Regular Financial Discussions: Set aside time to discuss finances regularly, such as monthly budget meetings. This helps prevent financial issues from building up and becoming a source of conflict. This can also help you approach the conversation in a more neutral way, rather than from an escalated emotional place.
Be Honest About Your Financial Situation: Both of you should be transparent about your income, debts, and financial goals. Hiding financial information can lead to strains in other areas of your relationship, like your partner feeling like you are no longer trustworthy, and feeling betrayed. It’s always better to be open and honest.
Listen Without Judgment: Encourage an open dialogue where you both can express your feelings and concerns without fear of being judged or criticized. Remember, these conversations about finances are an opportunity for you to have a calm and clear conversation about your goals, not a time to get into a cycle of conflict.
Use "I" Statements: Frame your concerns in a way that focuses on your feelings and experiences rather than blaming your partner. For example, say, "I feel stressed when we overspend" instead of "You always spend too much." Make the conversation about your experiences, not about blaming your partner’s actions.
2. Creating a Shared Financial Plan
A shared financial plan is a powerful tool for managing financial inequality and ensuring that you both feel valued and heard. This plan should outline your financial goals, budget, and how you'll handle expenses as a couple. Consider the following steps:
Set Mutual Financial Goals: Discuss and agree on short term and long term financial goals, such as saving for a home, paying off debt, or planning for retirement. Having common goals can help you both stay focused and motivated, not to mention foster a dynamic of collaboration and teamwork.
Establish a Budget: Create a budget that accounts for both your incomes and expenses. This budget should be realistic and reflect both your financial priorities.
Determine How to Split Expenses: Decide how you'll divide household expenses, like rent, utilities, and groceries. Some couples choose to split expenses equally, while others prefer to contribute based on their income levels. For example, if one partner earns significantly more, they might cover a larger portion of the expenses. It’s up to you two to decide which way feels best in your relationship.
Create Individual Spending Accounts: To maintain a sense of financial independence, consider setting up separate accounts for personal spending for each of you. Each of you can use this account for personal expenses without feeling like your spending is impacting shared financial goals.
3. Addressing Power Imbalances
Financial inequality can sometimes lead to power imbalances in a relationship, where the partner who earns more may feel entitled to make decisions unilaterally, or even use their financial power to control and mistreat their partner. To prevent this, it's important to establish a sense of equality and respect in your relationship:
Acknowledge Non Financial Contributions: Recognize that financial contributions are not the only valuable contributions to a relationship. Non financial contributions, like managing the household, caring for children, or providing emotional support, are also important and should be valued and acknowledged in your relationship.
Make Joint Decisions: Major financial decisions, like purchasing a home or making a significant investment, should be made together. Even if one partner makes significantly more than the other, big financial decisions should be a shared decision.
Avoid Financial Control: Using finances to control or abuse the other partner is considered financial abuse. The higher earning partner should not be using their financial advantage to control, abuse, or manipulate the other person. This can look like withholding money, restricting access to financial information, or making unilateral financial decisions.
Seek Professional Help if Needed: If power imbalances or financial control become a persistent issue, consider seeking the help of a therapist or financial advisor to mediate discussions and find a healthy balance. Conversations about money can be tricky, don’t be afraid of reaching out to a qualified third party to help you navigate these conversations.
4. Building Financial Empathy
Empathy is key to navigating financial inequality. By understanding your partner's financial perspective, you can work together to find solutions that meet both of your needs. After all, a relationship is about expanding your perspective to acknowledge and consider the perspective of your partner!
Understand Each Other's Financial Backgrounds: Take the time to learn about your partner's financial upbringing and how it has shaped their attitudes towards money. This can help you understand why they approach finances the way they do. This understanding can help you access compassion, especially if you feel you have been stuck in feelings of frustration, resentment, irritation, or anger.
Be Patient and Compassionate: Financial inequality can be a sensitive topic, especially if one partner feels inadequate or insecure. Approach discussions with patience and compassion, and avoid making your partner feel guilty or ashamed.
Celebrate Each Other's Successes: Recognize and celebrate each other's financial achievements, whether it's a promotion, paying off debt, or sticking to a budget. Celebrating these milestones together can strengthen your connection with your partner and reinforce your commitment to shared financial goals.
5. Planning for the Future Together
Financial inequality can be a temporary situation, especially if one partner is in the process of advancing their career or paying off debt. Planning for the future together can help you both feel more secure and aligned in your financial journey:
Discuss Long Term Financial Plans: Talk about your long term financial goals and how you plan to achieve them together. This could include saving for a home, retirement, or starting a family.
Revisit Your Financial Plan Regularly: As your financial situation evolves, revisit your financial plan and make adjustments as needed. This ensures that you both remain on the same page and can adapt to changes in income or expenses. As your financial situation changes, so should your approach to it.
Support Each Other's Financial Growth: Encourage and support each other in pursuing career opportunities, education, or investments that are important to your partner. Working together towards financial growth can strengthen your partnership and create a more balanced relationship.
At the End of the Day..
Handling financial inequality in a relationship requires open communication, mutual respect, and a shared commitment to building a balanced relationship. By understanding what is causing your financial disparities, creating a shared financial plan, and addressing power imbalances, you and your partner can navigate financial inequality in a way that strengthens your relationship. Remember that empathy, patience, and collaboration are key to finding solutions that work for both of you. If you want to talk about finances in your own relationship to pursue a harmonious and fulfilling relationship, please reach out for a complimentary phone consultation.