I Chose To Stay Home With The Kids. Now I’m Freaking Out.
A few months ago, we asked you what money questions are on your mind. We got nearly a thousand responses, and one theme that came up over and over was the financial trickiness of being a stay-at-home parent. Today, we turned to CPA Ariel LaFond to help answer one reader’s query about maintaining security and independence as the non-earning spouse… CoJ reader: I’ve been a stay-at-home mom for eight years, since my first child was born. I made this decision; my husband has always been 100% supportive of any choice I make about this. While this setup still feels best for our family, I’m now completely dependent on his income — and I have no idea what I would even do if something happened to him. I don’t like this feeling, but I’m not sure how to get around it. I’m the primary parent — responsible for getting the kids to school, taking care of them when they’re sick, handling sports practices, homework, and playdates, and carrying most of the housework and mental load. Those things don’t leave me with much bandwidth for a job that would earn more than ‘fun money.’ Did I make the wrong call? Help! Ariel: There’s actually no ‘wrong’ call here. For many families — and for many reasons — it makes sense to have one parent stay home. Depending on what you each earn, it’s often the most cost-effective route. But you do have to game it out over the long haul, which often means considering the uncomfortable “what if” scenarios. In an ideal world, all prospective parents would hash out these details before kids come into the picture. In reality, no one wants to talk about that stuff! In other words, you’re not (at all) alone. Many stay-at-home-parents find these worries creeping up on them several years in. So do many working spouses for that matter — this is a family issue, and both partners need to be involved. When couples come to me for advice, here’s where I tell them to start: Step One: Have a chat. Both partners, working or not, should have a clear picture of the family’s finances. If you don’t, there’s no need to approach with panic (even if that’s what you’re feeling). Instead, try leading with curiosity. It’s tax season — no better time to say, “Hey, how’d we do last year? I’d really like to have a better sense of things.” Just knowing what you have together is a great first step. Be honest about your concerns: “I want to be more involved. Some people lose their spouses and are left unprepared. I want us to feel safe.” Money talks can be stressful, but they’re a part of life — and marriage. Approach it with a team-minded attitude, because that’s what you are: a team, working toward the same goals. Step Two: Have a checking and savings account in your name alone. If you’re the non-earning partner, or you’re planning to be, you should also plan to have some money in an account that only you have access to. There are a lot of reasons for this, because there are a lot of ways that money — even in a shared account — may be temporarily inaccessible. You don’t need to go down every rabbit hole of possible scenarios (medical incapacitation, desert-island shipwrecks — are you terrified yet?). Just ensure that you can pay the bills if something happens to or with the person whose name is on the paychecks. You’ll both sleep better! Step Three: Create full visibility, and a routine to maintain it. On that note, make sure you know how to pay the bills. Many people tell me they don’t actually know how the mortgage or rent gets paid. Both partners should have a clear sense of the family’s day-to-day expenses and income. I suggest a monthly meeting, just to look at bank statements, bills, etc. Know the logins and what gets paid from what account. Make sure you understand your partner’s salary, as well as any changes that may come on that front. At the risk of stating the obvious: Just because you’re the non-earning partner right now does not mean you have no responsibility when it comes to family finances. Do not abdicate that position. Step Four: Have life insurance and/or disability insurance. This is another scary chore no one wants to deal with, but you should absolutely have life and/or disability insurance. A policy on both the earning and non-earning spouse would be ideal (families often need urgent childcare in the wake of a primary parent’s death or injury), but everyone’s situation is different. If you can’t afford to insure both partners, I’d typically suggest prioritizing the earning spouse. Many employers offer life insurance, but not all policies are created equal. Read the fine print, and consider whether or not you need to take out an additional policy to ensure you’re truly covered. Again, no one’s favorite task, but trust me, you’ll breathe MUCH more easily once it’s done! Step Five: Have a retirement plan (for you!). It’s easy to forget about saving for retirement once you’re out of the workforce, but the good news is it’s also easy to start again, and it’s a great financial move for your whole family (team spirit, right?). Spousal IRAs enable the working partner to contribute to the non-working partner’s retirement account. I know the idea of “getting paid” by your spouse may feel awkward for some. But contributing to your retirement account means more tax-free dollars in the family pot. And if the end goal is a comfortable retirement together, this really is a win all-around. Finally, if I were to suggest one optional Step Six, it would be this: Don’t write-off the “fun money” job. It’s not so much about the income, but the potential value of keeping a foot in the door. And by the way, you may find you don’t even have the bandwidth for that right now, and…
