Prices have been rising for decades. During that time, wages stagnated for the middle class. It was a long and slow squeeze that reached its boiling point when Covid hit. Most of us felt it and certainly heard about it in the news.
This post aims to prevent the squeeze of higher prices from spreading into the stresses of your marriage.
Don’t Add Fuel to the Fire
It’s normal to feel the stress of managing the home in a home where the cost of what you buy is increasing faster than what you’re paid. But don’t make it worse by watching the entertainers on “the news” tell you how bad it is; that’s just adding fuel to the fire.
Talking about money with your spouse after watching “the news” is a great way to ignite a counterproductive conversation.
Don’t Be Fooled
The "pick your politics media" is notorious for highlighting whatever makes the other side look bad. It's up to you to decide whether this is a preferable entertainment, but it is not a responsible source for making data-informed decisions about your finances.
Here are essential data points you can use when building your family budget or spending plan with your spouse.
How to Talk About Higher Prices
First off, the most important step is to schedule uninterrupted time at a point in the day you are least likely to be stressed. These scheduled discussions are commonly referred to as money dates and should occur on a regular basis.
“You can’t manage money as a couple well unless you can manage your emotions first.”
If high prices are squeezing your family budget, you’re likely to feel emotions such as anger, frustration, or even resentment. Do not allow such emotions to be directed to your spouse. Work together as a team by labeling your feelings with each other and making it clear that your spouse is not the cause of your feelings.
Start with a Win
Start by tackling the low-hanging fruit. Delete subscriptions you don't use frequently. Review other automated expenses and judge whether they are worth the cost in the future.
Review your insurance premiums with your insurance agent. There may be opportunities for bundling or special pricing.
Use your money strategically. If you spend more using credit cards, as many do, use cash instead. Take the time to track credit card reward points if you're a credit card wizard. Choose the best strategy for you and your spouse based on your spending habits.
Tackle the "Big Stuff" Next
Moving forward, you need to take a data-driven approach to budgeting. The data you can draw from for your conversation follows.
Related: Use the automated budgeting program Tiller to Tackle the "Big Stuff!"
The Financial Facts for a Data-Driven Conversation
I'm going to share the data most useful for planning a future household budget rather than overwhelm you with copious amounts of financial data.
Not All Prices Rise the Same: Plan for It
Related: How to Budget as a Couple
Prepare for Volatile Gas Prices
Many households are sensitive to changing gas prices. The graph above shows the inflation adjusted gas prices over time. As you can see, gas prices level out, but the volatility from one year to the next is significant, and should be accounted for when planning for the future.
Future Vehicle Purchases
We are at a point in time where purchasing an electric car (EV) makes financial sense in some circumstances. I bought a Tesla Model 3 in 2019 and have saved significantly. We were not effected directly when gas prices soared in 2022.
Click here to use the Choose EV Calculator to compare the energy cost of electric to gas-powered cars.
Adjusting to New Food Prices
The interactive graphic below compares median earnings (blue line) to the price of food (red line) over time. In plain language, what this illustrates is that our dollar has been capable of purchasing less and less food over time, and is squeezing us hardest now.
We can't wish for prices to roll back, they won't. We must plan for the new high cost normal.
Rent and Housing Prices
Illustrated above are rent prices over time (red line) and wages over time (blue line).
Renters are feeling a serious squeeze. With rent prices so high, couples have two unappealing options: buy a home or rent.
Illustrated above are home prices over time (red line) and wages over time (blue line). It's not a good time to buy, despite being a terrible time to rent.
Realtors and lenders might suggest you buy now and refinance later if rates go down. I don't see hope as a plan, so that's not an option I'd recommend.
With rising rents, couples have two unappealing options: buy a home or rent. Realtors and lenders might suggest you buy now and refinance later if rates go down. I don't see hope as a plan, so that's not an option I'd recommend.
Related: Should I Buy or Rent a House?
Settle for now
Personal finance is more personal than finance, particularly when buying a home. It's personal to both people in a marriage, however. Including the emotions and preferences of a second person complicates the decision, especially if one partner is blinded by their dream home and doesn't understand the math of a mortgage.
Your marriage will suffer if you purchase your dream home at the expense of your financial health. By keeping your overall housing expenses below a third of your household take-home pay, you're trading a nicer home for financial safety and security. After all, you can purchase your dream home later in life.
Wait and save
Consider waiting to move if you can afford to remain where you are. Housing market improvements are expected. The number of active listings has increased by 35%, indicating a cooling of home prices.
There is more good news for those who are willing to wait. The rates on high-yield savings accounts exceed 5%, which is higher than the current inflation rate. Wages are also rising. It could pay to wait.
Plan for the High Cost of Childcare
Take the long view. I know, easier said than done. In a country where nearly half of households include a woman making as much or more than her partner, we need to reevaluate the traditional solution of calculating and comparing "her income" to the cost of child care.
Women who care for children and adults who need it forgo an average of $295,000 in lifetime income.
Some couples have the luxury of piecing together leave to prolong paid child care using paid leave opportunities from each of their employers. According to SHRM research, paid maternity and paternity is now being offered by 32 percent of employers.
Wage Expectations
Despite the fact that the American worker is increasingly more productive, wages have stagnated for decades. Heck, making $100,000 in the year I was born, after inflation, is like earning $537,000 today. Click here to calculate your own curiosities.
However, rising wages are now outpacing price changes. The latest figures show wage increases average around 5%. It's essential to note that wage increases are not the same as getting a traditional raise, often born from a promotion. Wage increases are referred to as COLA (Cost of Living Adjustments).
Consider negotiating with your employer If you haven't experienced a cost of living adjustment of late that is at least 5%.
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