Money Tips for Stay-At-Home Spouses
Most stay-at-home spouses work more hours than the average 9-to-5 employee. Most stay-at-home mothers and fathers work at least 94 hours each week, more than double the average 40-hour workweek.
Consider that the average stay-at-home spouse’s duties include cooking, cleaning, laundry, behavior management for kids, and teaching, just to name a few. In theory, one should earn more than $100,000 a year with those skill sets.
However, stay-at-home spouses don’t get a paycheck. As a result, they feel financially powerless. They also feel down because they don’t have money to spend on themselves. Going out with friends or buying a new dress would feel like taking something out of the family budget.
Some people think that they need to justify their personal expenses. Others feel guilty about buying things for their own consumption. Here are financial tips for stay-at-home spouses.
How to Get a Credit Card
The best way to keep personal spending separate from business expenses is through a credit card. However, spouses who don’t have an income can’t get their own card because of the CARD Act US legislation. The homemaker can only get a credit card via one’s partner, as a joint cardholder or an authorized user.
When you open a joint credit card account with your spouse, both of you are responsible for the account. If you and your partner are working on your finances as a team, this is a good idea. You need to open a new joint account together to get the card, since you can’t convert an existing account into a joint one.
Keep in mind that you share responsibility in paying the balance on a joint credit card. You should use it responsibly to improve your credit. However, missing payments could hurt you and your partner. Therefore, is important to monitor the balance and payments so that you don’t make any mistakes.
Another option is to be an authorized user on your partner’s credit card. You can do this through online banking or by contacting the company’s customer service hotline. An authorized user also gets a card bearing that person’s name.
Only the principal cardholder is responsible for paying his or her bill in this case. That means late payments would affect only the credit score of the actual cardholder and not the authorized user’s credit. If the authorized user has a higher credit score, the partner would get a boost in his or her credit score.
If you manage your finances well with your spouse, sharing credit is a no-brainer. You can improve your credit score together through proper communication and trust.
Protecting 401(k) Retirement Fund
Stay-at-home spouses rely on their working partners for retirement funds. The 401(k) fund is one of the largest assets couples own. According to federal law, a married worker needs to get the signature of the spouse if he or she wants to change the beneficiary of the fund. However, the person can cash out the retirement fund if jobs are changed. The person would be able to put the funds into another retirement account with the same or a different beneficiary.
In the past, stay-at-home parents couldn’t contribute to IRAs. It wasn’t until1996 that the US tax law allowed non-working parents to contribute to investment accounts. The working spouse can open a spousal IRA as a pre-tax Roth account or a tax-deferred option.
IRAs don’t have the same requirements as 401(k) funds. Spouses don’t have the rights to IRA except for the states that have community property laws. The law has no requirement for the spouse to be named as the beneficiary.
Saving for Retirement
As a stay-at-home spouse, you might not have a paycheck, but you can still save up for your retirement by setting up an IRA in your name. The purpose of an IRA is to help people start retirement funds.
Homemakers can contribute a maximum of $5,500 a year and the contributions they make can be deducted from the gross income of the couple, if the contribution is to a Traditional IRA. However, they come with restrictions. It is important for stay-at-home moms or dads to have retirement funds in their own names.
To prepare for retirement with a single income, couples need to talk about their retirement lifestyle. They should also discuss their savings goals. It is important that both parties agree with the goal in order to improve the chances of reaching it.
Optimize Social Security
Homemakers who haven’t earned a salary for a long time would suffer when they retire because their Social Security payout will be based on their lower earnings. When it comes to divorce, couples need to be married at least ten years to get 50 percent of their former spouse’s benefits.
Filing Income Tax Returns
Homemakers who earn little or no income don’t need to file separate income tax returns. They can choose to file a joint return with their working partners, which is less costly than filing taxes separately. Filing separately causes the Internal Revenue Service (IRS) to treat each person as having an individual source of income. That means that both will be taxed at higher rates, and the total will usually be greater than filing a joint return.
It is important to make sure that taxes are filed correctly, so that both partners are responsible for the figures sent to the IRS. If one person includes false information, both people may be considered cheating.
Create a Budget for the Household
It is important to create the budget for the household as a whole, with both parties having the same access to the money. It is also important to create equal savings funds so that the stay-at-home spouse doesn’t feel like a second-class citizen because of not contributing income to the family.
There really is no formula on how much to allocate for each partner, but make sure that it is fair for all. Both parties should consider anticipated needs, such as food, clothes, and other necessities. The amount allocated to each partner should be theirs to control with no questions asked.
The money allocated for the stay-at-home spouse is not called an allowance. It should be known as a personal budget or expense account. The term “allowance” would make the person feel he or she isn’t in an adult relationship, and it connotes that someone else has control over that person.
The working spouse should also discuss applying for loans with the partner. Although the former would be responsible for paying the unsecured loan, it could greatly affect the budget of the household.
Earn through Savings
The stay-at-home parent can find several ways to save, which includes using coupons. Even a little money can start a savings fund. It is hard work to reduce the overhead costs of the family. Achieving it is a great achievement. and it is only fair that some part of the savings goes into a savings account.
The stay-at-home parent is responsible for childcare and household management. Taking care of the monthly budget is vital to ensure that a single income goes a long way. Both parties should consider all the expenses and how the retirement of the working spouse would affect their lifestyle.bellyitchblog.com+1 more Over 9 million people have enjoyed Bellyitch's Award-winning Celeb "bumpwatch" pregnancy and parenting blog. Trying to Conceive? Download our FREE Fertility 100 ebook. Hunting for Top Maternity or Kids Brands? Our Bellyitch 100 is the free resource for you. Baby Shower Shopping? Check out out Top Picks on Amazon or our Gift Guides.