In the early to mid-1960s, less than half of US households had two working spouses. Today, 67% of US households are dual-income. That shift, coupled with the dramatic rise in median household incomes ($5,600 in 1960; $80,610 in 2024), represents perhaps one of the most significant social and financial trends in our society. While it was formerly the norm for one spouse to “take care of the money stuff,” that paradigm continues to shift toward a more shared responsibility for financial decisions, budgeting, cashflow, and investment planning.
We’re all familiar with the concept of the “power couple,” even if it gets overused. But the fact is that more and more couples, while not as famous as others, are creating significant wealth together, and it’s important that their financial planning take that into account. Let’s take a look at a few helpful concepts that you can use, whether you’re already a power couple or aspire to be one.
The Family That Budgets Together…
One of the big advantages of having two incomes is the opportunity to allocate more money to savings and investments. But that requires agreement on a budget that allows for the extra funds from both paychecks to be systematically set aside. Too often, the word “budget” evokes negative connotations. Probably the most fundamental key to building wealth is spending less than you earn. Your budget is your number-one tool for accomplishing this. Discussing and delineating “discretionary” spending (shopping, entertainment, subscriptions, etc) vs nondiscretionary spending (housing, utilities, food, health, etc) is a big first step towards empowering your budgeting conversations. Once those costs have been identified, couples can begin to prioritize what is important to them and aligning their budget with those items.
Goal Setting
Now that we have tackled identifying recurring discretionary/nondiscretionary spending, it is important to have an aligned vision and shared agreeance with any residual income that may be present. Many individuals have different intentions with excess income – be it travel, saving, providing for family, charity, or other causes. For younger “power couples,” buying a first home may be an important shared goal. Later on, financing education for kids may take center stage. Later in your careers, you may want to focus on paying down as much debt as possible in order to free up your retirement cash flow. For each of these important financial goals, you should work together (emphasis on “together”) to break the goal down into small, actionable steps that can be taken systematically, often a month at a time. Then, you can hold each other accountable by re-visiting your goals every so often to assess how you are progressing. It is important that your budget and actions are true to these stated goals. A plan is nothing without action! One of the best and most bonding things you can do as a couple is to achieve an important goal together. And it’s a win for your finances, too.
All Eyes on Debt
The number-one financial stressor for marriages—and the most frequent culprit for the failure to achieve financial goals—is too much debt. A 2022 study indicated that nearly 66% of all marriages start with debt. But debt and the stress that accompanies it account for as many as 22% of all divorces, with “financial infidelity” listed as a top reason for filing to dissolve the marriage. Younger couples may need to form a plan to pay off student debt for one or both spouses; later on, credit card debt may become the primary target. The important thing is to have a plan, whether it’s a cascading payoff strategy, a “snowball” plan, or a debt consolidation loan. On the other hand, remember that all debt is not created equal. Debt that enables you to control an appreciating asset, such as a home or perhaps even a business, can be constructive for your financial future. The key is to build the service of “good” debt into your budget and, at the same time, not allow “bad” debt to take control of your cash flow.
Managing Risk
One part of sound financial planning that is often overlooked is the need for the right insurance. We all assume risks every day. The simple acts of driving to work or forgetting to turn off the oven can expose us to the risk of both physical harm and financial liability. Especially for two-income couples with children, having the right amount and type of life insurance for both spouses can provide a financial cushion against the risk of the loss of income due to death or disability. Health insurance can help to insulate you against catastrophic medical costs in the event of an accident or serious illness. Property coverage for your home and automobiles is essential.
Communication
In a way, everything mentioned above is predicated on having good communication as a couple. Whether it’s having an honest conversation about debt, setting goals, or hashing out the household budget, everything comes down to openness and mutual respect—and nothing builds openness and mutual respect like good communication. And by the way, part of good communication is connection—having a regular “date night,” engaging with friends and family together, discussing current events. All of these can help you stay in touch with each other, and that creates a climate where communication can thrive.
Recognize that Marriage Is Correlated with Financial Welfare
The fact is that by being married, you’ve already taken a step toward a brighter financial future. A study at Ohio State found that married couples’ wealth exceeded that of singles by 93%. In other words, there is a kind of synergy that happens when a successful couple share a focused strategy for gaining wealth. Two-income couples can share the responsibility for household expenses, and when the cost is borne by both, income is freed up for other useful purposes. Also, married individuals often are able to maintain a better credit score than single persons, since their combined income may make them less dependent on debt. This opens up possibilities for cost savings on necessary or strategic debt, such as that required for a mortgage or even a business opportunity. Having two incomes also helps to insulate couples from lapses in employment; if one spouse is downsized, the income of the other spouse can help bridge the gap until new employment is found. The key here, of course, is making sure that some portion of that “extra” income is saved and invested, not simply spent on maintaining a lifestyle.
At Rothschild Wealth Partners, we believe in the power of relationships. In fact, the most important time we spend with clients involves learning all we can about their lives, their goals, their most important plans, and their personal priorities. Only in this way can we help them design a financial strategy that works for them.
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Disclosure: This article reflects the personal opinions, viewpoints, and analyses of the author and is developed from sources believed to be providing accurate information. The information presented is not a comprehensive analysis of the topics discussed, is general in nature, is not personalized investment advice and should not be construed as a recommendation to purchase or sell any particular security or strategy. Investments contain risk and may lose value. Investment advice offered through Rothschild Investments, LLC, an SEC registered investment adviser and FINRA registered broker dealer and through Rothschild Wealth, LLC, a registered investment advisor.
