Two years ago, I worked full time and loved it. I couldn't imagine staying home.Then I had my now 2-year-old son, Isaac, and now I am at home with him full time. Once a little one comes along, a seismic shift happens: Someone else becomes more important in your life than you, and priorities suddenly change.
When considering whether you or your partner should stay at home, there are three major areas to consider:
- Can I mentally handle staying at home all day?
- How will I feel about not bringing much (if any) money into the relationship? Do I derive my sense of self from my career?
- Is my partner prepared to be the sole breadwinner in the family?
- Would I be responsible for most of the chores in the home? Am I OK with that?
- Am I OK with putting my career on hold for a few years and with the possible consequences of that?
- Is mine a career that can be picked back up after a break?
- Have I accomplished all that I wanted to in my current job?
- Can we afford to lose a second income?
- Are we prepared to make sacrifices in our personal lives?
- Would we need to dip in to our savings if I quit my job?
- Do we have debts that we won't be able to pay or savings goals that we won't be able to meet without a second income?
First off, you'll lose an entire salary if one partner decides to stay at home--a huge hit to anyone's finances. It might not be as bad as you think. One of you likely earns less than the other, or perhaps one of you is doing work that you could potentially continue on a freelance or part-time basis from home.
You hear parents talk about working just to pay for child care, and that is sometimes true. When you factor in all the added costs that accompany a full-time job, you might find that you have aren't losing as much money as you thought you were.
Whatever your decision, run the numbers before you give notice and make sure you can pay all of your current expenses (minus childcare) on one person's salary. (Tip: Don't factor in any potential freelance/contract work because that income is variable.)
This may actually be more important than salary to some. If you are thinking about quitting your job and healthcare for your family--or perhaps just for you--is paid by your employer, you will definitely be losing hundreds of dollars a month in benefits. With children around, you need health insurance.
The average annual premium for individual health insurance--not through an employer--is more than $6,300 for a family plan, according to a 2009 study by America's Health Insurance Plans. This is probably a lot more than what you are paying your employer per month for health insurance coverage, and these individual plans typically have much higher deductibles and do not cover nearly as much as employer-provided plans. The solution might be as easy as joining your partner's plan, but research the feasibility and cost of doing so. Going from a single to a family insurance plan can cost up to three times as much.
This is a minor loss, but it is something to consider. Your home previously sat vacant for roughly a third of the week--now with you and the kids at home, the toilet is flushing, the TV is on, and the vacuum, dishwasher and dryer are running. If you use a programmable thermostat, your air conditioning and heat usage goes down when you were at work all day. All of this will change if you're now staying home. You can expect your utility bill to increase between 10% and 20% and perhaps even more in summer months.
Retirement and pension plans:
Does your job offer a retirement plan or a pension plan? Will you be able to roll over retirement plans and hold on to your pension? Will you forfeit any matching funds if you leave your job? The details are different with every person and at every company. Speak to your company's human-resources department for more information on what money you might lose and what you get to keep.
How much of your current combined incomes are you putting toward savings? At what age would you like to retire? Do you plan (and are you able) to save for your children's college funds? Do you have an emergency fund? Sign up for SparkSavings to see how much money you'll need if you want to retire by a certain age and still have money for little Susie to attend a university.
Debt and Bills:
Do you have large student loans? Car loans? Credit-card debt? Mortgages or second mortgages? When deciding whether to stay home, examine your income-to-debt ratio. Will you be able to cover your bills and pay down debt if one of you stops working?
This is probably the largest area of savings when you decide to stay home. The average cost of full-time child care at a daycare center ranged from $4,560 to $15,895 annually in 2009, depending on location, according to the National Association of Childcare Resource and Referral Agencies. That is just for one child! Where I live in the Washington, D.C., region, the average cost is $13,967 annually, and I know many people who pay more than $2,000 a month for childcare, especially if they have a nanny come to their house. As you grow your family, the cost of childcare could double with every child.
Depending on how close you live to work, this expense will vary. According to AAA's "Your Driving Costs" calculations for 2008, the average cost of driving just one mile is 54.1 cents. I spent $5.70 a day on Metro fare to and from my work, totaling almost $1,500 a year. If I had driven the same 13 miles to work and paid for parking, it would have cost me about $3,200 per year. Now that I'm at home with my son, we're obviously not housebound, but I drive a lot less than I did. Until your kids are older and the carpools begin, staying at home means a lot less wear and tear on a car than the average daily 45-minute round-trip commute, according to the U.S. Census Bureau. Some families even opt to get rid of their second vehicle when one parent stays home, a sacrifice that, while inconvenient in some ways, can save you hundreds or thousands of dollars per year.
Try as you might to brown bag it, dining out is an unavoidable part of office life. Couple in the occasional--or perhaps daily--afternoon trip to the coffee shop, and you're easily spending $20 a week--up to $1,040 a year. Even if you and your kids eat out once a month, you'll still spend less than you did when you worked. With a coffee maker and refrigerator full of food close by, you'll be less tempted to run to a deli for lunch. (Plus, corralling kids, car seats and strollers makes you second-guess the necessity of any trip.)
At the office, chances are you have at least an unofficial dress code. Whether you wear suits and heels or jeans and a nice blouse depends on your job, but you have to look professional and presentable no matter where you work. Working at home means you can wear whatever you want: pajamas, workout clothes, jeans and T-shirt, a ball gown? you won't be interacting with the public as much, so your wardrobe needn't be as expansive. While you're not going to live in the same outfit every day, more casual at-home attire is cheaper than business clothes. (Three pairs of pantyhose a week can cost almost $500 a year!) Depending on how much you shop, what you have to wear to work, and which brands you prefer, you can save hundreds of dollars a year on clothing, not to mention dry cleaning (up to $1,500 a year).
Now that I am staying at home, I buy far fewer clothes and shoes for myself. I am no longer tempted by the fancy stores that I would walk by every day, and I am not nearly as worried about having a polished appearance for a 2-year-old.
Chipping in $20 for a retirement gift for Sue in accounting. Donating $5 for a co-worker's son's fundraiser. Shelling out $40 for dues to a professional organization. Spending $10 on a happy-hour martini. All those expenses add up. While those non-essential work events are part of what makes work fun, they can also be expensive. Depending on the office, you can save hundreds of dollars a year.
Now that you have all the components of your equation, it's time to do the math. Add up all the income lost and subtract it from the expenses gained. This is the amount of income you will be losing to stay at home.
Now it's up to you to decide whether the value of this actual dollar amount is greater or less than the value of you raising your child(ren) full time. It's a difficult decision to make, but at least the numbers can help make a few things clear.
If you still really want to stay home, but the numbers just don't add up, don't give up. Talk to the human-resources department at your company or your supervisor. Find out whether your company can give you a flexible work schedule, job share opportunities, or part-time employment. Companies are becoming more responsive to families' needs, so don't be afraid to ask, even if it's not outlined in your company handbook.
Once you do stay home, how do you manage that smaller budget? (Check out these tips for starting and sticking to a budget.) When I decided to stay at home, these are some ways my husband and I cut back:
My husband and I try to have a "date night" once a week, thanks to some very generous grandparents who live close by. Before Isaac, date night meant going to a nice restaurant where the bill would be close to $100 or more. Now we still have date nights but either stay home and cook or go out to much cheaper options like the local deli or Chinese takeout.
Entertaining a child can get expensive. To find cost effective play options nearby, I joined a local website for moms and learned to never underestimate the power of a playgroup. I found a weekly playgroup in my neighborhood, and some moms from my church have also started a playgroup. I also found free entertainment in some unusual places: My son loves to go to Home Depot and sort through all the nuts and bolts bins.
Baby and toddler supplies:
So many people are willing to donate (or sell for cheap!) gently used children's clothing, toys and various other items. Check on Craigslist.org, freecycle.org or a local parenting website. Once families decide they are done having kids, they often want to get rid of all baby gear--and quickly--so try to be on the receiving end!
Now that you are essentially a full-time childcare provider, you can offer your services to your friends. I have traded childcare for sewing services and a free dinner, and the options are really endless. You and your other stay-at-home-parent friends have plenty of skills from your former careers, so start using them. Accountants, interior decorators, editors--you can all trade services in exchange for child care, kids clothes and equipment, or whatever else you can work out.
My husband and I decided to put any large-scale vacations on hold for a few years. That doesn't mean we plan to do away with summertime fun altogether. Instead, we plan to take some day trips to nearby state parks and visit the free museums in Washington, D.C. Whenever my husband and I do find time for a weekend alone, we plan to use our credit card points to pay for a hotel.
Many parents who choose to put a career on hold in order to stay home with their children feel that the benefits of being with their kids far outweigh the financial losses that come with leaving their jobs. You may not be able to put a real dollar value on the days you get to spend with your kids, but examining your finances is one of the first steps to making this very important decision. Whether you end up staying home or staying in the workforce, know that you are making a decision based on what is best for your family--not what works for someone else.