This is a guest article by Mike Collins, creator of Wealthyturtle.com. He shares with us how he and his wife decided to become a single-income family, and he offers some useful advice for those struggling with the same decision.
Most new parents will at least consider the idea of living on a single income so one parent can stay home with the kids. But is this a realistic idea or just a pipe dream?
It’s a question my wife and I dealt with when we first started to build our family and it wasn’t an easy decision. In the end we decided that my wife would quit her job and we would find a way to make it work.
I’m not going to lie to you. It involved a lot of sacrifices and there have been times when we questioned whether or not we made the right decision. But ultimately I’m glad we did things the way we did.
How it happened
First, let me tell you a little about our situation and how we made our decision. Then, I’ll give you some tips about making the right choice for you and your family.
Way back in 2004, my wife and I were expecting our first child. Initially we figured both of us would continue to work. The plan was for my mother-in-law to watch the baby a few times a week and then we would find a babysitter to fill in the rest of the time. But my mother-in-law started having health issues and we realized that she wouldn’t be able to take care of a baby even for a few days a week.
We considered hiring a babysitter for the entire week, but the cost was just too much. When we ran the numbers and compared child care costs with my wife’s salary, we realized she’d only be bringing home a few hundred dollars a month. Most of the time she’d be working to pay a babysitter and that didn’t make a lot of sense to us.
Financial impact led to sacrifice
Meanwhile, I could tell my wife really wanted to stay home, and I leaned that way, too. My main concern was the financial impact of living on only one income. At the time she was earning almost as much as I was so losing her salary would effectively cut our income in half. Further complicating matters was the fact that we had just bought our first house. The monthly payment that we made comfortably on two salaries would become a heavy burden on one income.
Despite our financial concerns, we decided that my wife would quit her job. The years that followed involved a lot of sacrifices (skipping vacations, me driving a beat up old car with no air conditioning, falling into debt, constant stress about money), but we pulled through it together.
Of course, just because it worked out for us doesn’t mean that you should follow our example. If you’re thinking about becoming a single-income family to stay home with your kids, there are a few steps you need to take before deciding if it is doable.
Calculate Your Expenses
The first step in determining whether or not you can realistically afford to stay home with your kids is to add up all of your expenses to see exactly how much you’ll need to live on. Start by listing fixed expenses such as your mortgage or rent payment, utilities, car payments, student loans, and insurance.
It’s a good idea to leave a decent cushion to cover miscellaneous and unexpected expenses that can and will pop up. And don’t forget that a new baby comes home with all sorts of new expenses of his own. Hospital bills can be shocking, and even the cost of diapers often surprises new parents who underestimated the cost of raising kids.
While you’re calculating your expenses, you should take a good, hard look at your spending habits. We all have money leaks that slowly drain our budget, and now is a good time to seal them up. Prioritize what matters most to you because choices are inevitable if you want to live on one income. You may have to settle for dining out less or downsizing your vacations for a few years.
Figure Out What You’ll Save By Not Working
Many people forget this side of the equation, but you might be surprised at how much money you can save by not going to work. No more gas and tolls to get back and forth from work. Less wear and tear on the car means it will last longer, too. And you won’t need to spend as much on clothes, dry cleaning, lunches, or your morning coffee for the ride to the office.
And then there are child care costs. If you have a family member who lives nearby and is willing to watch your little one, consider yourself lucky. If not, you’d have to pay a babysitter or nanny to watch your kids while you worked. Obviously rates vary from one region to another, but in my area the going rate for an experienced babysitter is $12 to $15 an hour. For a nine-hour day (don’t forget to add in commuting time) a babysitter could cost you between $500 and $700 a week.
Don’t Forget the Long-Term Costs
In addition to the affect on your family’s monthly balance sheet, the decision to become a stay-at-home parent will also have long-term consequences. You’ll have less money to throw into savings and investments. You’ll miss out on employer 401(k) contributions and your Social Security benefits may be reduced since you’ll have contributed less to your account.
When the time comes when you’re ready to re-enter the work force, you may have a hard time. Your skills will likely be a bit rusty and you may find yourself at a disadvantage. And since you’ve been out of work and obviously not receiving annual salary increases, you’ll probably end up earning less than you would if you had continued working.
It’s Not Just About Money
In the end, after all your calculations are complete and you’ve gone over all the numbers again and again…it’s not all about the money. While some women can’t wait to get back to the work routine after having a baby, others just can’t resist the maternal pull and feel an intense need to stay home. And knowing that your kids are being raised at home by a loving parent can give the income-provider a certain peace of mind as well.
What if you are committed to being a stay-at-home parent, but you’ve run the numbers and you don’t think you can afford to do it? It’s time to get creative and find a way to make it work!
My wife and I knew that we couldn’t afford to pay all of our bills on my salary alone, so we looked for other ways to supplement our income. My wife did some babysitting to earn extra money and also tried direct sales through Party Lite Candles. When that didn’t work out, she got her real estate agent’s license. Of course just as she got her license the real estate bubble burst, but she did have one successful deal.
Meanwhile, I got a part-time job at Babies’R’Us for a while to make extra money (and take advantage of the company discount). I also started building websites and blogs on the side.
Do It, Too: How to Start Your Own Online Business or Blog
Flash forward a few years and we’re a lot more stable than we were back then, though there were certainly some sacrifices along the way. It can be frustrating at times to watch your friends traveling and doing things that you can’t afford, but in the end I do feel we made the right decision for our family.
Have you and your spouse thought about keeping one parent at home, or even taken the plunge? How do you feel that decision impacted your family and finances?
Updated January 26, 2017 and originally published January 25, 2017.