5 Expert Tips for Achieving Financial Freedom as a Stay at Home Mom
A finance expert coaches moms on how to become financially independent, even on a career pause. Find financial freedom as a SAHM with these smart tips.
Source: Liza Summer
Parenthood is rife with rough transitions, from welcoming a newborn to dropping them at preschool. But one change we scarcely discuss is the shift many mothers make from earning a paycheck to not. This financial transition can be its own emotional roller coaster, filled with enough anxiety, confusion, and shame to make anyone feel bruised and overwhelmed.
But just because your earning power is on pause for the time being, doesn’t mean you shouldn’t be involved in your family’s finances. “Having a handle on our family finances gives us power and freedom in our choices,” says Ashley Feinstein Gerstley, the founder of The Fiscal Femme and the author of The 30-Day Money Cleanse and Financial Adulting. “That might mean spending a few years working in the home and raising kids, downshifting a career, taking a sabbatical, or leaving a partner. Our finances are inextricably linked to our ability to make choices.”
When it comes to stay-at-home mothers and moms who choose to downshift their careers, Feinstein Gerstley says we’re often battling against a societal belief that’s never served us. “There can be this stigma that if we’re not currently earning money, we have less of a financial say. But that couldn’t be further from the truth,” Feinstein Gerstley says.
To help ensure moms feel financially secure—even without an income of their own—Feinstein Gerstley shares five steps to achieving financial dignity and stability as a stay-at-home mom.
Meet the Expert
Ashley Feinstein Gerstley: Author, founder of The Fiscal Femme, and feminist on a mission to end inequality through financial well-being. As a trusted money expert, she has been featured by Forbes, NBC, Glamour and the New York Times, among others.
What Is Financial Freedom?
Financial freedom is the feeling of confidence and security about your finances. While the definition may vary from person to person, achieving financial freedom likely includes creating a plan for the income you and/or your partner bring in, building an emergency fund to cover three months worth of expenses, paying off credit card debt, and establishing long-term savings and investing goals. In fact, considering what financial freedom means to you may help you think through the most effective and meaningful money moves for your family.
How Can Stay at Home Moms Protect Themselves Financially?
1. Separate Your Income From Your Worth
It's imperative that both you and your partner understand the value you bring outside of your paid job. This sounds simple but it's foundational to keeping that balance when you are taking a career pause or deciding to work in the home. It's important that the person earning more financially doesn't have more power or choice in the relationship. It's a partnership and each of you is supporting the other. Know that the domestic labor and childcare you provide makes it possible for your partner to work outside the home. It’s important to acknowledge and recognize non-monetary contributions to the partnership and family.
2. Revisit the Family Budget or Financial Plan
Whenever there are big financial changes in our lives, we want to look at what that means for the family financially. If someone is no longer earning a salary or takes a pay cut, there may be the misconception that they will be the only one to change their lifestyle to adjust—cutting back on individual spending and saving. But remember, you are a team and this is a family decision.
Any lifestyle changes—such as cutting back on certain purchases or services—can be decided equitably and proactively and shouldn't only affect the person taking the pause. When you sit down to review your family budget with your partner, it’s a good idea to discuss what your career break will look like for the entire family. How will you adjust your spending, saving, and investing? To get you started, we partnered with Ellevest, a financial planning company for women, to detail exactly what you need to discuss, adjust, and plan for financially before and during your career break.
It's important that the person earning more doesn't have more power or choice in a relationship. It's a partnership and each of you is supporting the other.
3. Revisit Long-Term Goals
In some cases when someone takes a pause or decides to work in the home, there will be a decrease in retirement savings. It’s important to understand how that will affect your goals, but just because you aren’t saving as much as you want right now, doesn’t mean you won’t save more in the future. If your savings are not where you want them to be, small adjustments over time can get you closer and closer.
With a career pause or downshift, you may lose access to a company 401(k) or other retirement plan, or the reduction in income might not allow for the same contributions to long-term goals. This is important to assess proactively so we can adjust our plans. That might mean we move the timeline of certain goals or change our expectations, or it might mean we want to make lifestyle adjustments. When we go into these big life changes with more clarity and information it can make for fewer surprises and less potential for resentment later.
If you no longer have the option to contribute to a company retirement plan, know that you still have options for saving. These options include:
A spousal individual retirement account (IRA), which allows an income-earning spouse to make contributions to the retirement savings of a non-earning partner.
If you have a high deductible health insurance plan, you can also contribute to a health savings account (HSA), which can be used to pay for qualified medical expenses pre-tax, or the funds can be invested and you can receive tax-deferred growth.
If you have your own business or side hustle, there are many other retirement options that may be available like a SEP-IRA, solo-401(k) and SIMPLE IRA.
No matter what, if you choose to pause or downshift your career, it’s a smart idea to continue saving for your retirement years.
4. Protect Your Financial Well-Being
Speaking of retirement savings, it's important to understand what would happen to your retirement assets in the case of separation or divorce. Retirement accounts like 401(k)s and IRAs are typically owned individually, making a good case for establishing a spousal IRA if you’re not bringing in an income. You want to make sure your financial well-being is protected.
5. Stay (or Get) Involved in Family Finances
This is advice I have for all people in relationships, but it's especially important for women who are taking a pause or deciding to work in the home. You still want to understand what's happening as far as your family financials and goals are concerned. And just because you may be earning less right now doesn't mean you have any less of a say.
Not to mention, studies show that women are better investors when they do invest. Just look at this 2021 study from Fidelity Investments that found female investors outperform men by 40 basis points.¹ Not only is it important to your own financial well-being, it's actually a win for your family for you to stay or become involved in decisions around money! Plus, you're modeling that financial equity for the next generation.
Regardless of whether you are working inside or outside the home (or doing both), it’s important to feel confident and secure about your family finances. You may not be earning a paycheck for now, but the work you do within your home has immense value—and you are contributing meaningfully to your partnership and family. While studies show that depending on a partner financially is a top concern for stay-at-home moms, you can ease your money fears, achieve financial dignity, and protect yourself long-term with a thoughtful, measured approach to money.
References
Fidelity Investments. (2021). 2021Women and Investing Study [PDF]. Fidelity.com.
