How To Handle the Financial Pressure of Being the Sole Breadwinner
GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.
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As of 2019, two-thirds of mothers were either breadwinners or co-breadwinners for their families, and more than 4 in 10 were sole or primary breadwinners, according to the Center for American Progress. According to the group’s research, over time, there has been a significant upward trajectory of mothers’ breadwinning and co-breadwinning status. And while it’s exciting that women have been flipping gender norms, there’s certainly added stress that comes along with being the sole breadwinner of the family — especially if this status wasn’t a choice. In today’s column, we’ll explore how women can mitigate the financial pressures and stress that may come along with being the sole money earner in a family.
Create a Realistic Budget
“The best education women can have relating to their daily finances is to create a budget,” said Hirsch Serman, CPA, founder at Lifecycle Financial, LLC. “First, I have my clients list their essential [expenses] — housing, food, car, etc. Then, we look at the income and how much is left after these have been paid. Lastly, we list out the discretionary spending and rank what is most important and fulfilling to them.”
Once you see what expenses are less important to you, you can start eliminating them as needed. An important consideration in determining what expenses need to be cut or reduced is figuring out whether your role as the sole breadwinner is a temporary or permanent arrangement.
“If it’s temporary, reducing discretionary spending is recommended until life returns to normal,” said Allison Alexander, CFP, CPA, financial advisor at Savant Wealth Management. “If it’s permanent, there may be more significant lifestyle changes to be made, e.g., downsizing your home or moving to a more inexpensive community. Creating a budget at a granular level will be critically important. What expenses can be eliminated? Can household income be increased? Can a stay-at-home parent work remotely? Can a stay-at-home parent care for another child (niece/nephew/neighbor) for compensation? Can you trade services with another family? Are you tracking and seeking reimbursement for expenses related to work? All of these options should be considered in an effort to decrease expenses and increase household income.”
Have a Plan for Child Care
If your partner is unable to care for your children, figuring out an affordable child care option should be a priority.
“Child care can be a huge source of stress,” Alexander said. “Having a spouse, family member or another stable child care arrangement will reduce potential stress, especially if your career involves long hours or travel.”
Build an Emergency Fund
“Having an adequate emergency fund to handle unexpected expenses will be important,” Alexander said. “Typically, three to six months of expenses is recommended, but in the case of a sole wage earner, I recommend having easily accessible funds to cover six to nine months.”
Have a Backup Plan
One of the big stressors of being the sole breadwinner is wondering how your family would get by if something were to happen to you.
“It’s never too late to start a dialogue about retirement and beyond, such as ensuring you have a power of attorney or a trust,” said Nicole Watson, SVP, territory director for retail banking at UMB Bank. “You should have a network in place — especially if something should happen and you need help managing your finances. This starts by putting your wishes and objectives in writing, so your family, advisor and power of attorney have the information they need.”
You should also ensure you have adequate disability and life insurance.
“You are responsible for your family’s financial security,” Alexander said. “Many people have a vague understanding of their benefits, but typically what is provided through the workplace is not enough to protect your family. If you purchase policies outside of your workplace, those policies are portable and in the event of disability, the benefits are tax-free.”
Don’t Be Afraid To Ask For a Raise
Adding to the stress of being a female breadwinner is the knowledge that you might be making more money in your same position if you are a man.
“The wage gap is real and persistent for all women, but even more challenging for sole breadwinners who support their families,” Alexander said. “Women in America make $.82 for every dollar a man makes. The statistics are even worse for women of color.”
If you feel you aren’t being paid what you are worth, don’t be afraid to ask for more.
“It’s important to negotiate salary increases early and often in your career,” Alexander said.
Get Professional Help
If you’re unsure about how to best manage your family’s finances, ask for help.
“Find a financial advisor with whom you can openly and honestly discuss your finances,” Watson said. “When it comes to managing your money, there really is no such thing as an inconsequential question — regardless of whether you’re a woman or a man.”
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