Finance can be an emotional flashpoint for couples, especially if one of you earns a lot more than the other. Make sure that money makes, not breaks, your relationship – just follow these five simple rules
Even in a happy and harmonious relationship, disagreements over money are inevitable – particularly when one partner earns significantly more than the other.
Anne McClean, a financial planner at Charles Stanley, says: “As much as we might like to pretend otherwise, there is a lot of emotion tied to money.
It can be a way of measuring our success or our value. With this backdrop, it can be difficult to make pragmatic decisions.”
Carl Roberts, a chartered financial planner at RTS Financial Planning, adds: “While it can be difficult to be equals when one side of the relationship earns or has more money than the other, this doesn’t mean the person with less can’t bring their own financial independence to the table.” So what are the secrets to financial and relationship harmony when one of you earns more than the other? Moneywise explains the five essential rules.
Talk about money
Being open is essential. A survey of 2,000 couples who had been together for 26 years or more, and were interviewed on behalf of pensions advisory firm Portafina, found that nearly three-quarters said honesty about finance, saving together, having the same goals and splitting things fairly were the keys to financial equilibrium.
Portafina’s survey also found that the most successful couples were those who knew each other’s income; 70% of couples who had been together for 26-plus years knew exactly what their partner earns.
Alistair Wilson, head of retail platform strategy at life insurer Zurich, says being open about your financial history is as important as telling your partner about past relationships. He says: “You need to know, has your partner ever been in debt or do they have a bad credit score, meaning they’ll likely be turned down for a mortgage? Knowing this prior to any decision making can also help you avoid damaging your own finances.”
Ms McClean adds that couples often don’t take time to discuss finances, either because it leads to arguments or because they lack clarity about the situation they are in.
Her tip is to tackle conversations around the topic with a sense of curiosity and openness, “not with the tactic of collecting evidence to try to win the argument”.
Teamwork equals happiness
How you manage your finances will depend on the stage of your relationship. Ms McClean advises couples who are moving in together to keep assets separate.
If you are buying a property and one of you is putting up more of the money, make sure the ownership reflects your contributions.
You may want to take a more pragmatic approach to income where one member of the couple earns less and is struggling to keep up. This should be discussed and explored.
“Couples often don’t take the time to discuss finances”
When it comes to dividing up bills, Ms McClean says the larger earner might choose to put proportionally more of their salary in that account, while the lower earner puts in less.
If one partner does want to deal with the finances that’s OK too, but you both need to understand your financial position.
Ms McClean adds: “You cannot make good decisions if you don’t know where you are today – for example, if the husband has debt with interest rate of 19%, while his wife has cash in the bank earning 1%. This is costing the family money.”
Discussing your long-term savings goals will help you focus your financial efforts.
Mr Wilson says: “Create a savings plan to achieve what you’ll need for your next down payment. Putting an equal amount of money into an Isa will help it to accumulate wealth over time. When you put that house deposit down, or buy a new car, you’ll know it was a joint effort.”
He also suggests seeing budgeting as exciting. “Of course, deal with the day-to-day expenses but also have a budget for treats and long-term luxuries, such as holidays.”
Don’t forget your tax-free allowances
Married couples or those in a civil partnership benefit from the marriage allowance. This is a tax allowance that lets those earning less than £11,850 transfer £1,185 of their personal allowance to their husband, wife or civil partner, provided they don’t earn more than £45,000 a year (£43,000 in Scotland).
This reduces their tax by up to £238 in the 2018/19 tax year. You can work out how much tax you will pay as a couple on Gov.uk.
Even if you are far off retirement, the higher-earning partner should consider contributing towards a personal pension for the other partner.
Anyone who has taken time out to bring up a family is also entitled to have their national insurance contributions (NICs) paid. This will count towards your state pension, but having a higher-earning spouse or partner means you can top up your personal pension.
There are no restrictions on the number of different pension schemes that you can belong to, though there are limits on the total amounts that can be contributed across all schemes each year if you’re to receive tax relief on contributions.
Be aware of the warning signs
Jackie Wells, partner and family and divorce lawyer at the international law firm Taylor Vinters, says when one parent gives up work or subjugates their career to look after their children, resentment can set in where they don’t have the same spending power as their spouse, or where access to spending is used in a controlling way.
While married couples are protected by law if they do split, cohabiting couples are not. Ms Wells says partners who are not married or in a civil relationship need to make sure things are drawn up fairly. She explains: “If you are cohabiting and have given up work to look after a family, be aware you are not entitled to any maintenance in your own right, only child maintenance.
If you don’t co-own the family home, you may struggle to establish any rights or a payout.”
Partners also need to be aware of the possibility of financial abuse and financial infidelity.
Financial abuse is a form of domestic violence where one partner attempts to take full control of money and, in particular, to exploit the other partner’s assets and sabotage their efforts to work, study or interact with others (see panel, right).
“Financial abuse is a form of domestic violence, attempting to control a partner’s money”
Kerry Russell, family lawyer at Gorvins Solicitors, recommends keeping an eye on joint bank accounts.
“If there are any unusual transactions, it is important to discuss these together and also consider contacting the bank to suspend telephone and online banking or reduce the overdraft limit to prevent your partner running it up.
She has seen plenty of examples of financial infidelity in divorce cases. “After a marriage breakdown, I often see it where one spouse discovers the existence of credit card debt belonging to the other, which he or she wasn’t aware of during the marriage. Although this debt will ultimately remain the responsibility of the borrower, this may have a financial impact on the other spouse and may have to be repaid out of the family budget.”
If you have any shared liabilities, it’s important to remember that a couple is likely to be “financially associated” and this means your credit score could be negatively impacted if your partner has a poor financial history.
‘I earn 10 times more than my partner, but he still pays the bills’
Sami Wunder, 29, who set up a dating and relationship coaching business in 2016, earned £525,000 last year, while husband Chris, 31 (both pictured above), brought in £50,000 from his role at the National Space Centre. The couple split their time between Germany and London. But now, despite earning considerably more than her husband, it’s Chris who still organises and pays the family bills.
Sami says: “The roles Chris and I have in our relationship have not changed since the day we started dating, and I believe that this is one of the keys to our success.
“Chris has always been the provider in our relationship. He paid for all our dates and, even today, he still takes care of the basic household bills and groceries. I would say that Chris is still the leader and provider in our relationship.
“What I provide is an additional ‘bonus’ income, which we use for long-term plans. For example, my money has allowed us to build our dream home. It’s a decision we have made.”
Chris adds: “When I married Sami, we were still young and making our way. I was the financial leader and provider in the relationship, and I was comfortable with that role. However, even today I still see myself as the ground level support in our household, taking care of all financial necessities. For us, that works.”
‘My husband pays the bills, but our finances are a joint effort’
Hannah and Phil Clarke (pictured above) live in Grantham, Lincolnshire, with their children Toby, three, and Martha, two.
Hannah, 31, says: “I gave up my job to set up my business 18 months ago. I went from earning a reasonable salary to earning nothing.
“My website, Apples & Pips, is an online shop that sells parent, baby and toddler products. It does have a turnover, but I’m not taking a salary from it yet.
“We’ve always been collaborative when it comes to finance. We have a joint account, which we do all our banking from. We don’t have separate accounts. We have a joint savings account too.
My husband is a designer and he earns around £50,000 a year.
“I am earning money from my website, but everything I earn goes straight back into the business via a business banking account.
I do still earn a small amount copywriting, but my husband is largely paying our household bills for the moment.
“If I need something, such as buying clothes for our children, as long as it’s not a large expense I will do so. We’ve always been careful with our food bills and we don’t have any credit cards. We both have the same approach and it works for us.”
Phil, 41, adds: “Hannah has a business account, and she puts everything she earns back into the business. We agreed she would leave her job because this is important to her. We don’t argue about money and we plan for the future together. When we want to buy presents we do it using PayPal, so the other can’t see from the bank statement.
We have Junior Isas for Toby and Martha, and we always discuss major purchases.”
‘I left my financially abusive partner’
“I was a victim of financial abuse, but it’s only now I’m eight months out of the relationship that I can see exactly what happened,” says Louise, who lives in London with her two children.
The 35-year-old explains: “My ex-partner had a fledgling business when we got together. I was attracted to his dynamism, but the signs were there – I just didn’t see them because I felt sorry for him. For example, his business was bringing in money but he didn’t have loo roll in the house.
“I got pregnant, not planned, and gave up my job, but I ended up working for his business. He didn’t pay me a salary, but he gave me all the financial responsibility for the company and none of the power.
“He expected me to balance the books and if he overspent £500 I would somehow get the blame even though I didn’t have access to his money.
“I would have to beg for £5 to buy nappies or milk and bread, but it would be OK for him to take money out of my purse to go to the gym or have his hair cut.
“I even took a part-time job and ended up putting my money in his account because he would blame me if there wasn’t enough money there.
“We had two children together. The mortgage ended up being in my name, but he gave me a £50,000 deposit, which he is now trying to get back. However, I paid his debts off when we were together, so it’s legally complicated.
“I even sold the jewellery that my mum left me, to make ends meet. It came to a head when he was physically abusive to me; it happened once and I then ended the relationship.
“What he did to me as an individual, a career-focused confident woman – I feel it could happen to anyone who falls in love.
“I’m back working and I’m planning on setting up my own company. While I may have lost myself for a while, I’m getting stronger and trying to learn from what happened. For the sake of my children, if nothing else.”
If you’re experiencing domestic violence, contact the 24-hour National Domestic Violence freephone helpline, run in partnership between Women’s Aid and Refuge, on 0808 200 0247.
SAMANTHA DOWNES is a personal finance and consumer journalist and author. She writes for The Guardian, Glamour, Woman’s Own, the BBC World Service and the Financial Times