This might seem like a silly question, but it’s not.
A whopping 43% of couples don’t know their partner’s income, according to this study conducted for Fidelity Investments. Of that 43%, 10% guessed the wrong amount by a margin of $25,000 or more!
Previous generations have taught us millennials that money and income are taboo subjects. And while your parents may have been right about some things (your first boyfriend/girlfriend really WAS a jerk), they’ve got this one all wrong.
You and your partner absolutely must be open and honest with one another about your financial situations, or your relationship is already in a danger zone.
WHY YOU AND YOUR PARTNER NEED TO KNOW EACH OTHER’S INCOME
Your financial plan begins with knowing your income. You must know how much money you have coming in so you know how much you can spend without going into debt.
When you’re in a committed relationship, it’s important that you approach financial planning as a team. Presumably, you and your partner have many of the same financial goals: traveling, buying a home, having kids, retiring, etc. It’s way easier to achieve those goals when you’re working on them together!
This will likely require a shift in the way you think about your income. Luckily, there’s an easy equation to help you:
Your income + Your partner’s income = Your total household income
Think about your financial plan using your total household income rather than just your own. Your and your partner’s goals seem a lot more achievable now, don’t they?
And remember, couples fight about money more than pretty much anything else, even sex. The more open you two are about your money, the better your relationship will be!
WHEN TO HAVE THE INCOME TALK
Knowing how much your partner makes may not matter so much in the early stages of a relationship.
But if/when your relationship reaches a point when it’s clear you two are in it for the long haul, it’s time to talk income. To be clear, this means having a financial conversation BEFORE doing any of the following:
- Moving in together
- Getting engaged or married
- Having a child
- Buying a home
As for the actual conversation, have it when both of you are relaxed, in a good mood, and have plenty of time to chat. This isn’t a discussion to have on the subway on the way to work or shout about in a loud bar.
Feel free to have the discussion over a bottle of wine, but keep your wits about you—this is a conversation you need to remember the next day!
WHAT TO DO IF YOUR PARTNER MAKES MORE/LESS THAN YOU
We actually already talked about this.
It doesn’t matter who makes more, because you’re a team now, remember?! Get rid of the notion that your income is just for you. You are including another person in your life, and your financial plan, for good. It’s time to view things as “ours” instead of “yours.”
Of course, lots of couples still want a little money to call their own. It can be hard to surprise your partner with a new Omega watch or Cartier bracelet if you charge it to your joint bank account.
For this kind of purchase, we recommend creating small “side stashes.” Agree on how much you two will put towards separate side stashes (individual checking accounts) each month. Set up automatic transfers in the agreed upon amount to those accounts, and only use the money for purchases that are either strictly for you, or for gifts for your partner.
And remember, the bulk of your income should still be going to your joint accounts. There’s no “I” in “WEALTHY!”
To read more financially savvy articles about couples and money click here.