Financial Security for the Stay-at-Home Mom

Just because you're a stay-at-home mom doesn't mean you can't take charge of you and your family's financial security. In this guest article, Mill Valley mom and Certified Financial Planner™ Katy Song offers some financial tips to help stay-at-home moms take action and make a difference.

Women have different reasons for choosing to stay at home to take care of their children. Some mothers have always envisioned staying at home with the kids, while others might not make enough to cover the cost of childcare. No matter the reason, there are five important steps that every stay-at-home mom (SAHM) can take to protect her and her family’s financial security.

1. Value Yourself—Most moms would argue that staying home to raise the kids is the toughest job in the world. According to Salary.com, the average SAHM works 96 hours per week; if you valued this work as a care provider, teacher, driver, housekeeper and psychologist, it would add up to over $145,000 per year in Marin. So do not underestimate your value just because you’re not bringing in a paycheck each week. Valuing your role in the family should translate into having an equal say in financial matters.
2. Create a Spending Plan—Going from two incomes to one usually entails making trade-offs. Having a viable and intentional spending plan (a.k.a. budget) can help alleviate financial anxiety and allow you to direct your resources to the things that matter most. Take a critical look at your monthly expenses and see what you can do without temporarily or less frequently. Determine what you pay for fixed expenses (mortgage/rent) and then decide on an amount for all of your discretionary expenses (groceries, childcare, etc.). There are many tools out there that can help automate this process and keep you on track, such as Mint.com. Oh, and don’t forget to save some room for fun, be it a babysitter for date night or time for Mom to recharge.
3. Keep Putting Away for Retirement—Since there is no paycheck issued for the SAHM, the automatic funding of retirement does not happen. You can contribute up to $5,000 to an IRA in 2009 (as long as your spouse makes at least that much), or $416 per month, and ideally this would happen before any discretionary spending. To do this, establish an automatic transfer from your checking account to an IRA or savings account. By keeping up with your retirement savings, you are ensuring your own financial security.
4. Be Organized and Proactive—You need to have an accurate accounting of where your money is ---- this means when you are married, you both need to know! Plus, be sure that both spouse’s names appear on everything you own as a couple, including cars, houses, investment and bank accounts. In the state of California, most property acquired during marriage is considered owned jointly between spouses; however, it is advisable to have both names on accounts in the event of an emergency. Also, keep up to date designated beneficiaries on all bank, investment and retirement accounts.
5. Insure Your Life—The simple way to determine how much life insurance to purchase is by multiplying your income by ten. So, if you’re a SAHM what does that mean? As I said above, the average SAHM would earn over $145,000 on the open market for her services. That would mean every SAHM should have over $1,000,000 in life insurance. If you own a home, $1,000,000 is a perfect starting place to calculate your need. If this still seems high, calculate what it would cost to replace what you do on a daily basis until your children leave home or until your spouse felt s/he could operate without that supplemental income. Also, be sure to consider how much you would want to leave your children in total if the worst happened to both you and your spouse.

Take action now! Life is too short to wait for these things to make it to the top of your To Do List.

Katy lives with her husband and two young children in Mill Valley. Visit her online at www.katysong.com, or contact her at katy@katysong.com