I recently lead a meeting for my local Mothers & More chapter on “The Six Biggest Money Mistakes Mothers Make.” Here are the mistakes I discussed with the mothers of Mothers & More:
1. Making “To Work or Not To Work” Decisions Based Solely on Short-Term Family Budget
When mothers wrestle with questions about whether to stay employed or not, or whether to scale back employment to make room for family, the conversation usually centers on whether the current family budget can afford those changes. Can we still pay the mortgage or rent? Could we trim expenses to make up for lost income?
Too often, all the longer-term implications are left out. How will this decision impact my ability to save for retirement? My Social Security benefits? How will this decision impact my future earning potential?
Whenever faced with an employment or financial decision, ask yourself:
How will this decision affect the short- and long-term finances of my family?
How will this decision affect my own short- and long-term financial security?
2. Falling into the “Can I Make Enough to Pay for Childcare?” Trap
When our daughter was born, my husband had just started his second year at a law firm and I had just been laid off from a part-time job. We sat down together to decide whether I should look for a new job or not. Estimating the income we thought I could make in a job with reasonable hours, we subtracted taxes, childcare, and work expenses. There wasn’t much left. Working for pay didn’t pay much. So we decided I wouldn’t, because we could afford for me not to.
Three different things lead many mothers into this trap.
- An outdated assumption that “mothers are responsible for and are naturally better at children and family.” So if childcare is part of the equation, mothers (and fathers) tend to assume that mothers are the ones responsible for finding and paying for someone else to care for children.
- An outdated assumption that “mothers’ earnings are pin money, just extra.” In our minds, childcare becomes one of those extras since if mother was caring for children, it wouldn’t be needed.
- An outdated income tax policy that was designed just after WWII to discourage women from employment and places a higher tax burden on the spouse who earns less. This makes it hard to make enough to pay for childcare.
Families can escape this trap by explicitly talking about childcare as a shared family expense and asking instead, “Does it make financial sense for us to pay for childcare or for one of us to care for the kids? In the short-term? In the long-term?” For more on this see my post Tax Day Question: Can I Make Enough to Pay for Childcare?
3. Not Asking for More Money
Women are less likely to negotiate for higher pay and more likely to say they feel uncomfortable negotiating. There’s a good reason many women shy away from negotiations about pay. Women tend to get penalized for initiating negotiations while men don’t. Why? Because stereotypes about women call for women to be nice, modest, caring, and often penalize them for being competitive or self-promoting.
So what’s a woman to do—ask and maybe get more money but face negative perceptions or don’t ask and get less money but be perceived more positively? Neither are great options. My experience has led me to conclude that the best approach is to ask—after analyzing the specific situation and people involved, considering how automatic stereotypes might impact the results, and having shored up your negotiating skills.
Check out Harvard’s Program on Negotiation, which has videos, links, free downloads, and books—including the bestseller Getting to Yes.
4. Letting “Lucky” Cloud the Ability to See “Fair”
When I was pregnant, I got an offer for a part-time job. The catch was that the new company was a hundred times smaller and less stable than my previous employer. My offer was half-time at half-pay but no paid vacation or sick time, no health benefits, no retirement, no stock options—all of which I’d had for years. Still, I felt like I’d won the lottery. I’d be able to work a reduced schedule in an executive position close to home. I felt so “lucky” it didn’t even occur to me to ask for half of all the benefits, too.
Why was I so blind? Because I held an invisible assumption that nearly everyone else has, too. An assumption that real jobs are fifty hours, fifty weeks, and fifty years, and anything other than this schedule is a favor—one that shouldn’t be questioned too much lest it slip away. So I didn’t even ask for what was fair.
For decades, jobs have been designed around what Joan Williams labeled the “ideal worker,” who by definition was a man with a wife to care for the family. Reality has changed, but we’re still stuck thinking “fair” equals everyone has to work the same way that a man with a wife at home did fifty years ago.
So don’t let feeling “lucky” keep you from asking for what is truly fair—proportional pay and benefits for proportional work.
5. Holding on to the “He Who Earns It, Owns It” Belief
A mother once told me one of her biggest shocks about becoming a mother was, “How much I hate being economically dependent upon my husband … My husband knows that I hate being dependent upon him, and I can’t ever make him feel like the money he brings in is ‘our’ money and not ‘his’ money.”
Our society operates with a deep “he who earns it, owns it” belief and this impacts our marriages and women’s decisions. For example, one told me she couldn’t justify spending money on childcare to take a course to help her career because she doesn’t make enough herself to pay for the childcare. Her assumption was that her husband’s income was “his” and she didn’t have the right to spend it on her career.
Joan Williams, author of Unbending Gender and head of the WorkLife Law Center, once gave a keynote address challenging this outdated belief. She said, “He works full-time; today, he’s often working lots of overtime. If he’s a parent, who makes it possible for him to do that? … Who makes the play dates, takes the kids to soccer, makes the dinner, perhaps gives parties that help his career? Who takes his mother to the doctor’s if she gets ill? The answer is obvious: his wife. Her work is the only reason he can continue to perform as an ideal worker, and at the same time have a family life that lives up to our sense that children need and deserve time with their parents. The only reason he can continue to perform as an ideal worker is because he is supported by a flow of family work by his wife. What we call ‘his’ wage is really a family wage. It reflects not only his paid work but her unpaid work.”
Williams was offering us a new way of thinking about our marriages and our money. “An asset produced by two people should be jointly owned by them.” Watch out for times you might be making decisions based on the “he who earns it, owns it” belief and flip a switch to the “joint family assets” belief and see if that helps you see additional options. Be sure to fully share the responsibility for your family’s financial well-being and financial decisions.
6. Not Taking Full Responsibility for Your Own Financial Well-Being
The good news is that women live longer than men do. The bad news is that as a result most women can expect to spend a third of their lives on their own financially. Plus, while we don’t like to think about it, divorce happens. There’s no avoiding the need to take full responsibility for your own lifetime financial well-being.
Motherhood is still financially riskier than fatherhood. Elizabeth Warren and Amelia Warren Tyagi conclude from their research in The Two-Income Trap that “[h]aving a child is now the single best predictor that a woman will end up in financial collapse.” In The Price of Motherhood, Ann Crittenden concludes, “Motherhood is the single biggest risk factor for poverty in old age.”
Mothers are better off being honest with themselves about the reality and magnitude of that risk. If you don’t already have it, get the knowledge you need to be an equal partner in budgeting, monitoring income and expenses, and investment planning. Resolve to take one simple step to increase your financial literacy. Apply for your own credit card. Open your own bank account. Make a savings goal for your own retirement. Invest some money on your own. Take full responsibility for your own lifetime financial health.
For more resources on this mistake and all the others, visit my Remodeling Tools. Have you ever made one of these mistakes? Share your story. Have additional advice and resources to share? Please do!