Wednesday, March 5, 2008

Net worth and the woman at home

The basic formula for figuring out one’s net worth is to write down how much you have in the bank and other savings or investments instruments and then subtract how much you owe on debts and what remains is your net worth. There are fancy programs and spreadsheets that will do this in any number of report styles but they aren’t essential and plain vanilla arithmetic will do just as well. (A simple calculator for net worth is at Wachovia, just remember you are looking for your personal non-community net worth in this exercise.)

For women, especially women who have been primarily stay at home wives and mothers, finding out your personal net worth – as opposed to the household net worth – can be eye-opening at the very least. If you are a woman and have never done this before you need to do it now, regardless of your age or status, because what you don’t know will hurt you; or at least it will come back to bite you at some point in the future.

Finding out this critical bit of information will take some patience and some sleuthing because in the financial world things are not always what they appear to be. For example your joint checking and savings account are probably not weighted for you but rather for your husband. The same goes for the house. It may also apply to IRAs depending on how they are set up.

So take some time during your spring cleaning frenzy to check out and list those things you find where you are listed as the primary owner, like the car you drive that is registered in your name (if it is paid off). While you are at it check for debts that you are the primary owner of. Once you have these two lists, add them up separately and then subtract the debts from the assets. This will give you roughly your personal net worth.

Of course while it is true in most states that married women hold a community property share in their legal household common goods that is meaningless if the primary property owner is still living. That means that if she does not have a separate paycheck, as well as checking and savings accounts, she is not likely to get credit for a car purchase or even a credit card in her own name based on her community share of joint property. Having a great credit score will not have much influence on a reputable creditor if the paycheck, checking and savings are not in place.

Why does a woman’s net worth matter if she is in a long term relationship and the household net worth is amply on the positive end of the spectrum? Because, there is no way to predict the future. However stable their relationship, their health and their employment prospects, things happen that overnight upset the status quo and even who is in charge or responsible for getting things done.

Just as all women need to know how much household income there is and who gets paid how much, when and why; women should know what their personal net worth is and establish their own credit before they need it. Husbands are not invincible; they get in accidents, they get sick, they can die or become disabled, or any number of other issues that would lead to them no longer support their wives and households.

So this week’s challenge is for women to find out what is their personal net worth. Feel free to leave a comment but no personal details please.

Disclaimer: I am not a financial expert; the information above is offered as points for thought, discussion, and personal consideration. Questions and decisions about how to determine your personal financial status and responsible credit activities should be directed to a trusted expert in financial matters.


Rositta said...

Really good advice...there should also be a power of attorney in place...ciao

chelle said...

Awesome advice, I know I am guilty of taking things for granted. We have some safety nets in place but maybe not as many as we should.