About Your Financial Future

by Jen Singer


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When my mother was in college in the 1950's, women (half-jokingly) went to college for their "MRS" degrees. They sought out men to support them financially in exchange for providing childcare and running the house.

Today, though, with the divorce rate at around 50 percent and the economy faltering, stay-at-home mothers need to prepare themselves financially, legally and career-wise in case they find themselves suddenly single or otherwise in need of a job. MommaSaid has asked the experts what you can do to protect and prepare yourself in case of divorce or a spouse's sudden job loss or death.

Establish Credit: Open a credit card account in your name to establish a positive credit profile. This is particularly important if you find yourself suddenly single and in need of refinancing a home, renting an apartment or even getting a job. Some employers consult credit reports as another means of evaluating a candidate's level of responsibility. Also, a strong credit profile gives you more financing options and often lowers your interest rate on various lines of credit.

"Once the credit agencies see you are a good credit risk, the rest is cake," says Brian O'Connell, author of numerous books including the CNBC Personal Financial Handbook, who also counsels that you should pay your utility, rent/mortgage and other bills on time. "All of that stuff shows up on a credit report. And credit reports are the single biggest factor in evaluating credit risk."

Keep at least one separate bank account: "If you have money from before your marriage or inherited during your marriage, tactfully keep it in a separate account, because it is your separate property," says Tracy Stewart, a CPA specializing in divorce financial planning in College Station, Texas. Depending on the state in which you live and the length of your marriage, you may be entitled to retain some or all of the money you brought into the marriage. (Note that if you spend this money on household or family items, you probably won't get it back in divorce proceedings).

You should maintain your own bank account even if the money comes from your husband's earnings. A separate bank account will protect you if your spouse dies suddenly. In some states, joint accounts may be frozen until the deceased party's will is executed. Having your own account with at least two to three months' worth of expenses will give you access to cash when other accounts may be unavailable to you.

"It would be a good idea to have a separate credit card in the wife's name and a separate bank account in her name, which she uses to charge things and pay the bills," says Jordan Goodman, author of Everybody's Money Book on Credit. "The money that pays the bills can be earned by her husband, but it should go from a bank account in her name to a credit card in her name (tied to her Social Security number)."

Know where the money is: With all of the responsibilities you have at home, it can be easy to pass off decisions about your investments, savings and other financial issues to your spouse. Some at-home mothers may even feel guilty for handling the family finances when they're not contributing money to the household. But this can be a big mistake. You need to have an accurate accounting of your assets in case of divorce or death.

Stewart tells the story of one woman whose husband didn't change the beneficiary of his pension plan from his first wife to her. When he died, the first wife got his retirement money, while she and their kids got nothing.

It's also important to keep track of all your key financial documents, including mortgage papers, the deed to your house, bank statements, tax returns for the last three years, and statements from retirement funds and investments. "Keep as many big budget items in your name as possible, such as bank accounts, mortgage and 401(k)'s," says O'Connell. "If hubby bolts, he can't get his hands on the stuff without your permission."

Understand your investments: While it's important to know where the money is, you also need to know what to do with it. Issues such as liquidity, tax implications, return on investment and risk are important factors to understand. Educate yourself through books, seminars and computer tutorials.

O'Connell recommends consulting financial planning websites, such as CBSMarketwatch.com, MotleyFool.com and Vanguard.com. "All have good basic investment tutorials. Also, if a financial advisor advertises one of those investment seminars in your town, go to one. They will answer your questions for free."

He adds that you should hire a financial advisor if you have a substantial amount of money. "It might cost one or two percent of your total assets (annually), but it's well worth having a pro on your side."

Maintain job skills: You never know when you may need to re-enter the job market, so it's critical to keep yourself marketable. While this may be a challenging task with small children at home, it's important that you brush up on computer or other relevant skills. Take continuing education classes at a local community college or business school. Start a part-time or consulting business from home. Volunteer at a local school, library or non-profit organization, so you can keep up on your organizational, phone and math skills.

"The biggest problem I see my clients facing today is a lack of job skills," says Stewart. "Stay-at-home moms should keep one foot in a career. Work part-time when the kids are in school. Keep contacts with career associates. Keep up with continuing education to retain professional licenses."

Keep track of what's happening in your field: Read industry trade journals, visit related websites and stay abreast of trends and news. "Staying in the game mentally will give you a leg up on knowledge for when you're ready to get back to work," says Tory Johnson, creator of Women For Hire and the co-author of Women For Hire: The Ultimate Guide to Getting a Job. "Your social circle need not revolve only around other stay-at-home moms."

Maintain a journal of your transferable skills: Johnson says you should pay particular attention to your participation in school functions and committees. Running a school fundraiser or organizing the town soccer program require the same kind of skills you need to run a corporate event or plan a research project. And by documenting it, you'll be amazed at how much you've accomplished - all while raising your children!"

Nowadays, stay-at-home mothers need to protect their financial futures in case of divorce or a spouse's death. Maintaining good credit, assessing and understanding assets and keeping up job skills are just a few of the ways you can assure a successful financial future for you and your children.

Three Financial Steps You Can Take Today

Insure yourself properly: Take an inventory of the insurance that you have and make sure that it covers you and your family adequately. If you die, your husband may have to hire someone to do much of the work you do now, including childcare, cooking, cleaning, tutoring, chauffeuring and more. Make sure you have enough life insurance to cover the cost of replacing you. Since a catastrophic illness can wipe out your family's finances and send you into bankruptcy, it's critical that you maintain at least a basic health insurance policy.

Plan your retirement: Be sure that you know how you will finance a retirement that may be without your spouse. You may invest up to $3,000 a year in an Individual Retirement Account (IRA), a personal savings plan available to anyone who receives taxable compensation during the year. IRA accounts are available to you even if you do not have a job. For more information on the different types of IRAs and their restrictions, check out www.MotleyFool.com.

Plan to pay off your debt: Even the best-laid financial plans can be ruined by debt. Here are several ways to handle it:

  1. Consolidate your debt onto one credit card with the lowest possible interest.

  2. Contact creditors to work out a payment schedule that works for both of you.

  3. Save a little money from every paycheck for emergencies, so you can pay the auto mechanic or the plumber in cash, rather than with your credit card.

  4. If you have a substantial amount of debt, contact a local non-profit credit counseling agency, which will reduce your interest rates and negotiate with creditors on your behalf.

Jen Singer is the creator of MommaSaid.net, the stay-at-home mom's coffee break (TM).

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