6 Things You Must Do When You Make $10,000 More Than Your Partner

It’s no secret that money drama is a ruthlessly efficient relationship killer, and mismatched incomes can create friction everywhere, from monthly credit card statements to tense dinnertime discussions. Whether you’re married or not, own a home together, rent or even live apart, make these money moves as soon as your income surpasses your partner’s by five figures to prevent problems and to make the most of your growing salary .

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Revisit Your Budget and Tweak Your Spending, Savings and Investment Plans

Step one is to reassess your joint budget and shared financial plan when income parity becomes lopsided.

“This adjustment ensures that both partners are on the same page regarding spending and saving strategies,” said Michael Ashley, a former high-level employee of Wells Fargo, Citi and UBS who founded the personal finance site Richiest .

“It allows you to realign your financial plans, whether it’s increasing contributions to joint savings accounts, reassessing debt-repayment strategies or setting new financial milestones,” Ashley explained. “Consider diversifying your investment portfolio to improve returns and adjust your savings rate to accelerate reaching financial goals, such as retirement or major purchases. This is also an opportune moment to review your insurance coverage and estate planning to ensure they align with your updated financial situation. Effective management of this additional income can significantly impact your long-term financial health and security.”

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Reconsider Your Tax Withholdings and Filing Status

It’s wise to revisit your tax strategy with any significant change in income — and a $10,000 salary bump certainly qualifies.

“An increased income can shift you into a higher tax bracket or impact your deductions,” said Ashley. “It’s wise to consult a tax advisor to adjust your withholdings appropriately to avoid underpayment penalties or a large tax bill. Furthermore, reviewing your filing status, whether to file jointly or separately, can impact your overall tax liability and benefits. Ensuring proper tax planning can help manage your tax burden effectively and avoid surprises during tax season.”

Think Beyond Dollars and Cents

Sisse Marie, a certified psychotherapist and ambassador for Neurogan Health , thinks some of your most consequential decisions will involve not your money, but how you both feel about it.

“Earning more is probably never a bad thing,” she said. “It shows that you are valued and you know how to get your work done. But when it comes to relationships, suddenly earning a substantial amount more than your partner might leave them feeling inadequate.”

Marie said that a five-figure income gap can create the perception of a power imbalance.

“This feeling can have a very negative effect on your relationship, from your partner feeling that they can’t pull their own weight to resentment,” she said. “Especially if their feelings and consideration are not taken into account when making financial decisions.”

It’s complicated and consequential. Get out in front of it early with healthy dialogue.

“So, what should you do if you earn a significant amount more than your loved one?” said Marie. “Well, the best thing is to keep communication open and honest when it comes to conversations about finances, expectations and especially feelings.”

Seek Opportunities for Equal Contributions Wherever They Exist

Pooling some portion of each partner’s income for shared costs can go a long way in building camaraderie and alleviating the feeling of mismatched power and contribution.

“One thing that I would recommend you try is creating a fair system where both partners contribute to household expenses and general spending money,” said Marie. “Or you could say that the one who is earning more is liable for bigger expenses while the other partner will take responsibility for all the luxury spending like dining out, going to the movies and other general things.”

Focus on Shared Goals

Even couples that keep their finances separate or have unequal salaries can and should seek out common ground through a commitment to advancing their mutual aspirations.

“Even if you are earning more, don’t turn away from joint financial goals,” said Marie. “By creating shared goals, you can assist in creating a sense of partnership.”

Invest It Toward Your Combined Retirement

Neither party suffers if the couple decides to invest the increased earnings for their combined future — even if they do it in the higher earner’s individual account.

“I would open an IRA account and save for retirement,” said Loretta Kilday, Debt Consolidation Care spokesperson and a Chicago attorney with over 30 years of experience in personal finance, debt, business collections, bankruptcy and family law. “There are some other options, too, but I would consider a Roth IRA. It would help me take full advantage of compound interest and minimize my tax exposure. For 2024, the total contributions limit of traditional IRAs and Roth IRAs is $7,000, or $8,000 if you’re age 50 or older.”

If You Own a Home, Consider Forcing Some Equity

For couples who co-own homes, a five-figure income boost presents an opportunity to force equity through remodeling while you wait for it to grow naturally through appreciation.

“I can’t buy a big property with $10,000,” said Kilday. “But I may renovate my house or some parts of it with that money. As per today’s market rates, if I want to remodel my garage, it may cost around $7,000 to $15,000. So, if I am getting $10,000, I would work on renovating my house part by part, starting from the garage.”

Make Your Decisions With the Next Generation in Mind

Ashley said that an income boost presents an opportunity to revisit your estate planning. That’s because even if two people can’t agree on how to allocate the extra cash in the here and now, they might find a middle ground in how to hand it down to their heirs.

“Making sure you have your estate plan in place can help ensure your partner knows that you are working together to build the future you both want,” said Renee Fry, CEO and co-founder of estate planning platform Gentreo .

In the end, constructive dialogue is the antidote to potential financial missteps or avoidable relationship drama.

“The key to a healthy relationship is through mutual respect and understanding,” said Marie. “Ensure your partner that it is a win for both of you and that if they ever feel that they are not contributing enough financially you are open to having an honest conversation about it. This approach should assist you and your partner to ultimately strengthen your bonds while building a fulfilling life together.”

This article originally appeared on GOBankingRates.com : 6 Things You Must Do When You Make $10,000 More Than Your Partner