From the outside looking in, it seems like you have it all. You have a high-earning spouse and get to handle the finances. However, this is an invisible and seldom-appreciated job. While your spouse might bring in the income, it's up to you not only to pay the bill but also to build wealth. You also have to deal with a range of other issues, such as a partner's burnout, decision fatigue, and the "on-call" nature of their work, which means you often have to make financial decisions alone. Your job is more than paying the bills. You should see yourself as the Household CFO (Chief Financial Officer).
Pillar 1: Communication Systems ("The Money Date")
At the end of a long day, your high-earning partner gets home and wants to relax. They don't want to discuss finances. They just want to let their stress go and relax doing something they enjoy. You need to start setting a monthly meeting to discuss the state of your finances. It doesn't have to take hours. You can cover the basics and keep them up to date on the important matters in around 20 minutes. On your agenda, you should include a review of your network and any upcoming large expenses, including a vacation or tuition. Add one "dream" goal to the agenda to make it more entertaining.
Pillar 2: The Logistics (Who Pays for What?)
Your partner might be a high earner, but you are not. So who pays for what? Many couples opt for a proportional split method for joint expenses. For example, if one of you makes around 75 percent of the household income, then that person would pay 75 percent of the joint household expenses. This ensures everyone is paying their fair share. You should also create a sanity allowance. This is a set amount of money that each partner gets to spend on whatever they want. It's guilt-free spending.
Pillar 3: Protecting the "Golden Goose" (Risk Management)
When your lifestyle depends on the high earner's income, you must have that income insured.
If your lifestyle depends on one person's high income, that income must be insured. An Own-Occupation Disability Insurance policy should top your list. Most standard group policies aren't enough to meet the needs of a specialized high earner. You also want to review Term Life insurance policies. These policies should be large enough to pay off a mortgage and fund education for your children if the worst were to happen.
Pillar 4: Estate Planning Basics
When you have a high-income earner in the family, estate planning becomes more necessary and more complex. To avoid probate, you want a revocable living trust for much of the estate. If one spouse is incapacitated, you need a power of attorney in place. Each spouse should feel empowered if something were to happen. You might want to change your mindset. Instead of saying, "I just spend their money," say, "I manage our empire."
Contact Us at HEFCU to Learn More About Our Banking Services
Your partner in banking services can provide you with support in other financial matters beyond offering you a checking and savings account. You want to work with a financial institution that can help you with the big picture to ensure your finances run smoothly. Contact us today to learn more about how we can help you.
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