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Financial Planning for Working Moms Thumbnail

Financial Planning for Working Moms

By Sarah Carlson, CFP®, CLU®, ChFC®

Historically, working mothers have had even higher ambitions in the workforce than working women in general.1 This ambition may drive them to excel in budgeting and financial matters that can help them manage their family's finances. What should working moms know about financial planning, and what steps can they take to help their family work towards a confident financial future? Here are five financial planning tips for working moms.

Create a Budget (or a Spending Plan)

Many tend to think of budgets as restrictive—like being on a strict diet. Reframing your budget as a spending plan may help you monitor your income and spending without feeling that you are being too tight or wasteful with money. Have a plan for every dollar, whether it goes toward paying monthly bills, paying down debt, saving for the future or even having a fun splurge.

Have an Emergency Fund

If you are low on cash and have an emergency that requires instant action — such as a flat tire on the way to work, a sick relative across the country or a broken HVAC system during the heat of summer—you may find it necessary to go into debt to help pay for this expense. Credit cards and cash advances may have hefty interest rates and strict repayment terms. 

Having a few thousand dollars, or more, set aside in an emergency fund may help you with a temporary problem, and it may also help you avoid increasing your debt load or paying more in interest.

Eradicate High-Interest Debt

Every dollar you waste paying interest charges is a dollar you do not save or spend on something more rewarding. By focusing on paying down high-interest debt or refinancing it into a lower-interest loan, you might work to manage the amount of interest you pay. The benefit might be increasing the amount of money in your pocket each month. 

Using a method called "snowball," once you eradicate one debt balance with the highest interest rate, take the payment you were putting toward that debt and apply it to the debt with the next-highest interest rate. This technique used to pay off your debt has momentum once it gets going, like a snowball rolling down a hill.

Invest Early and Often

After you build up an emergency fund, it is time to start investing. Although the stock markets rise and fall daily, in general, "time in the market beats timing the market"—that is, the longer your funds are working and earning dividends in the stock market, the higher your average return might be. Investing may include contributing to a 401(k), an Individual Retirement Account (IRA), a Roth IRA, a 529 college account, or any combination of these accounts, some of which may be tax-advantaged.

Don't Forget Self-Care

Many mothers struggled to find time for guilt-free self-care even before the pandemic. With the upheaval of the last couple of years, self-care fell even further by the wayside for many. However, carving out time and money to pursue activities you enjoy might be crucial for your mental and financial health. Whether self-care looks like an evening with no interruptions or getting a monthly "allowance" to spend, no questions asked, putting self-care on your schedule may reap many benefits—both financial and non-financial.

1 https://www.mckinsey.com/featured-insights/diversity-and-inclusion/for-mothers-in-the-workplace-a-year-and-counting-like-no-other

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Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.   Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess. 
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