Published:

11/16/2010 05:06pm

FINANCIAL SELF-DEFENSE - WOMEN MUST KNOW THEIR WORTH

(This article was originally published on Technorati.)

Earning power in a marriage consists of:

1. Income earned through employment, Social Security benefits
2. Savings achieved through cutting costs, freeing up income
3. Potential future earnings
Let’s take a brief look at each aspect of your earning power.
1. Income earned through employment. This one is pretty obvious. Earning power is easily calculated if you currently have an income stream from a job or if you receive Social Security benefits. It’s also beneficial to understand your before and after-tax earnings to effectively set up a budget.
2. Savings achieved through cutting costs, freeing up income.
This is not as apparent, and women need to be able to calculate it. A stay-at-home mom may not have an independent source of income through a full or part-time job, however, that doesn’t mean what she does on a daily basis doesn’t have monetary worth.

A wife and husband have built an economic partnership and in many cases have raised a family together. Even if she doesn't have a paying job, understand that she still has part ownership of the household income. The husband may be the sole money maker, nevertheless that money isn’t strictly his to control. He wouldn’t be able to take care of the children and manage the household all on his own without creating more expenses, so the wife makes an economic contribution to the marriage by performing tasks that don't cost the household anything.

A stay-at-home-mom creates income, not only by performing tasks he'd have to pay for, but by freeing up money to pay for other expenses or to put into savings. The total household income, even if she doesn't have a job for pay, is an important part of her personal income calculation and worth.

To illustrate this value, below is a list of the tasks she might perform regularly that result in monthly cost savings for the household:

AVERAGE OUTSIDE COST (Monthly)
Job Example
Transportation 200
Housekeeping 200
Cooking 400
Childcare 500
Laundry 200
Tutoring 100
Elder Parent Care 200
Event Planning 200
Other
TOTAL (After-tax dollars) $2000

Using these sample figures, in order to have the $2,000 per month to pay someone to do these tasks, a person would have to earn approximately $2,500 per month before taxes. In this case her efforts would result in cost savings equivalent to earning $30,000 per year..

So even if the stay-at-home-mom doesn't have a paying full-time job, she provides real economic value to the household by lowering expenses, and therefore has real personal economic worth in the relationship. She needs to recognize and embrace this value.

By the way, any individual who earns income can establish an individual retirement account (IRA) and contribute up to $5,000 annually, and any husband (or wife) who is eligible to set up an IRA can also create a spousal IRA for a non wage-earning spouse up to the same amount. If you are over 50 years old, you can contribute up to an additional $1,000 per year. So, if the husband is the primary wage earner who contributes to his own IRA, the stay-at-home-mom should speak to her spouse about setting up an IRA for her, if he hasn't already.

3. Potential future earnings. This is very, very important to a woman’s future financial survival. Women must consider their future income earning power even when they’re stay-at-home moms. Recent studies have concluded that 9 out of 10 women will be responsible for their finances at some point in their lives, and, because of divorce or death of a spouse, women will spend more of their lives unmarried than married.

When a woman interrupts her career to have children and raise a family, she must still have a financial plan for the future. Divorce rates are high and employment opportunities may or may not be readily available five to ten years down the road. So it is a good idea for a stay-at-home mom to keep up her professional skills, network within her professional circle, or, if sh