Are you a mom who is working full or part time? Are you considering being a stay at home mom? Are you a stay at home mom already? Perhaps you’re struggling with your finances or you’re trying to improve them. Perhaps you’re wondering if you can afford to be a stay at home mom. Sharon Epperson (CNBC personal finance correspondent) shares some financial advice for stay at home moms.
Financial Advice for Stay At Home Moms
You’re working harder than ever. You gave up the commute, deadlines and office politics to navigate a job that is often even more difficult and demanding: being a stay-at-home mom.But don’t neglect another major job responsibility: managing your money.
Try living on one income…
Do a dry run, and live on one income for three months. Salary.com calculates that the average stay-at-home mom’s services (housekeeping, cooking, laundry, etc., would amount to an annual income of $138,095. The reality is that when you are living on one income, all of the expenses and savings will come from one check.
Have a financial plan and review it regularly. Every couple, every individual, needs a financial plan. Now that you’re not working outside of the home and are relying on one income, having a roadmap to help make money decisions will be critical to ensure you reach your financial goals.
Make sure you and your husband know what’s in the plan and talk about your finances regularly. Discuss the big picture (retirement and college savings) and short-term money issues (hiring contractors or buying birthday party gifts).
1) Set a budget. Coming up with a spending plan or household budget is extremely important, whether there are one or two paychecks coming in. However, it’s essential when everything you pay for — and save for — comes from one income.
2) Maintain separate accounts. A joint checking account for household expenses probably makes sense for most couples, but separate your “fun money.” It’s important for a stay-at-home mom to have a bank account in her own name — and a separate credit card, too (just make sure to pay the balance in full each month).
If you’re following the 60% Solution, try allocating 5% of the gross household income into a “fun money” bank account for you and your husband. Money fights can be kept to a minimum when you don’t have to account for personal purchases. Set a limit and stick to it.
3) Continue to save for retirement. When it comes to savings, definitely make sure you have your own account. If you have a 401(k) from your previous job, it’s already in your own name and should be put into a Rollover IRA after you’ve left the company to give you more flexibility with your investments. Just because you’re not working outside the home doesn’t mean you have to forgo your retirement savings.
4) Make sure you’re adequately insured. Don’t forgo buying life insurance just because you’re not working. Figure out how much money your family would need to cover child care costs, housekeeping, cooking, etc. if you weren’t around. Estimate how much life insurance to buy. Term life insurance is relatively inexpensive.
5) Stay connected. Don’t forget about the professional organizations and contacts you’ve made over the years. You never know when you might want to return to the work force. Volunteer or consult on projects to build your resume for the job that you want to have down the road.
Most stay at home moms would not consider still putting money towards a 401 K or retirement because of the reduced income. However; it is a great idea because no one knows what the future will bring and having that peace of mind/security can be very beneficial.
Living on one income and talking things over with your spouse in depth can help to better a couples communication skills and may strengthen the relationship as well. Going to one income certainly requires creative thinking and financial advice for stay at home moms so they can achieve their goals.
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