For some families, the decision to have a stay at home mom or dad just happens. It’s not always planned. There’s just the sudden realization that having mom or dad stay home is going to make the most sense. Maybe there’s a layoff while she’s pregnant or the kids are young, or the sudden realization that childcare costs more than one parent’s job brings in. If you aren’t prepared, going from two incomes to one can be quite a shock.
Others know from early on that they’re going to be a stay at home mom or dad. The income may not even be a part of the decision as such; it can be based more on the desire to have one parent at home. Still if the family doesn’t prepare financially for the changes, things can get difficult.
This is why it’s so important to plan before your family goes to a single income due to one parent staying at home if at all possible. You can avoid some nasty financial surprises if you know how these things may go.
1. Practice living on one income first.
If the decision to have one parent stay home with the kids is a deliberate one, not one caused by circumstance, try living as though your family only has a single income for a time while both parents continue to work. Not only will this show you how things are going to be, it allows you to save up the money from the second income. A little financial padding is always a good thing to have.
2. Review your finances.
You can do this even if staying at home wasn’t planned in advance. Calculate all your living expenses – rent, food, utilities, vehicles, taxes, insurance and so forth. Make sure the income of the parent who continues to work will be enough to pay all your regular expenses… ideally with some left over for savings.
3. Cut down on monthly bills.
Rethink your monthly bills where possible. Are you on the right plan for your cable TV/internet? Do you really need it? Can you cut down on your cell phone plans (consider what early cancellation fees will do)? What other monthly expenses can you cut down?
The great thing about cutting back on monthly bills is that once you’ve decreased a bill, it stays down unless your service provider increases the basic cost. You don’t have to change it every month – just review your needs occasionally and make sure it’s still right for you.
4. Plan for emergencies.
Life never keeps things simple for long. Cars break down. Kids get sick. Parents get sick. Something in the house needs to be repaired or replaced.
If you don’t plan ahead for emergencies, they can ruin all your financial planning. Have some money set aside for those times when things need to be repaired. Have insurance to help out with the things insurance can help with.
5. Avoid credit card debt.
Credit can be a very tempting way to pay for things you can’t afford at the moment. I still have credit card debt to pay off, although things are steadily improving these days. If it weren’t for the debt (taken on for reasons that were generally good at the time, not so much frivolously), we’d easily be living within our income and have money left over to save.
6. Pay off debt.
Beyond credit card debts, there are other debts that can make having a stay at home parent more difficult. Pay off or pay down those student loans, car loans and pay down the mortgage if you have them. The lower you can make those bills, the more flexibility you will have financially.
7. Pick your sacrifices.
Most single income families have to make sacrifices to keep mom or dad at home. Talk as a family about the things you’re willing to sacrifice, and which things you’d prefer to keep.
8. Look at taxes withheld.
Take a look at the taxes being withheld from your spouse’s paycheck once your family is down to a single income. The fact that your family is now living on one income means you can probably adjust the withholding so that you get more money now rather than a big tax refund. Big refunds feel like a windfall, but what they really mean is that you didn’t have that money earlier.
9. Talk about money.
Have a talk about your attitudes toward money, especially that only one person will be bringing it in for the family. A lot of tension can come from the bread winning parent feeling as though that money is his or hers, not both of yours. It’s just as important for the stay at home mom or dad to have spending money as it is for the working parent. Don’t let the “I earned it, it’s all mine” attitude ruin things.
10. Consider or increase life insurance.
The expense of life insurance may seem like an unnecessary extra, but if your family is unfortunate enough to need it, you won’t regret the expense. Should one parent die, whether that’s the working parent or the stay at home one, the money from life insurance can help keep the family going.
11. Discuss how long you’ll stay at home.
What is your plan for being a stay at home parent? Is it just while the kids are babies? Until they go to kindergarten? Until they’re adults? Forever?
What you decide at the start may not be what you want forever. Some find that staying at home isn’t right for them. Some think they’ll only stay home for a while, but find it so good that they want to stick with it always. Some realize that while they love it, the financial aspects aren’t working out, and that it’s necessary to go back to work. However things seem to be going, talk about the stay at home decision occasionally to be sure everyone still considers it to be a good thing and to deal with problems as they come up.
12. Consider your financial future.
One major problem many long term stay at home parents don’t always take sufficiently into consideration is retirement. Not working for years will impact what you could get from Social Security. If you aren’t saving for your retirement even when you don’t have an income, it could become a problem in later years.
13. Consider part time work or work at home.
Not every family will be able to get by on a single income. My husband and I don’t. I earn pretty good money working at home – enough that it isn’t worthwhile for me to look for an outside the home job even when all the kids go to school.
For others, a part time job when your spouse can be home is the best way to handle things. A part time job can also be nice for getting time with other adults. If a single income isn’t enough, make sure you find a way to bring in enough extra money so that your family doesn’t have trouble with debt.
14. Consider furthering your education.
Furthering your education can be very important when you’re a stay at home parent looking to return to work someday – or just because you want to learn more about something. If you take online classes, look carefully into the school to make sure it’s a good quality program – there are a lot of low quality schools out there.
An improved education may help you land a better job when you go back to work outside the home. It’s not a guarantee, even from a good school, as there’s still a gap in your paid work history, but it should help.
15. Keep up professional credentials.
Even if you don’t plan to go back to work soon, keep up any professional credentials you may have. If you need to go back to work, even part time, this can be a huge help in getting a better paying position.
16. Keep up professional contacts.
If you left a professional position to stay at home, keeping in contact with old coworkers and other professional contacts can be a huge help if you decide to go back to work. It’s not just about working outside the home – you may be able to use these contacts for freelance or work at home positions if you don’t want a regular position. Keeping your foot in the door can be a huge help if you need to increase your family’s income for any reason.
17. Learn to find bargains.
Knowing how to find bargains on the things you need can be a good help when you’re a single income family. Seek out ways to save money on the things your family needs, but make sure you don’t buy things you don’t need just because the price was good.
Clip coupons, go to thrift stores, pay attention to sales in local stores, buy in bulk when appropriate, find out what’s cheaper from programs such as Amazon’s Subscribe and Save. There are many ways to save money that won’t take up more time than you’re willing to give it.
18. Cook more.
Eating home cooked meals is generally far more budget friendly than eating out. If this isn’t already a habit, make it one.
19. Learn to do basic home maintenance.
The more repairs you can handle around your home, the less you’ll have to spend on professionals. Painting is relatively easy, a project many people are comfortable with taking on, but you may find that you are capable of handling more than you think.
That said, when professional help is called for, get it. A poorly done repair may cost more than the original problem would have if it had been fixed correctly the first time.
20. Don’t be too hard on yourself up over mistakes.
It’s easy to be hard on yourself when you make financial mistakes when you stay at home. Maybe you overspend and have to take on some credit card debt. Maybe you didn’t prepare enough for unexpected bills, and ended up having a car repair ruin all your plans.
Whatever happens, take it as a lesson, and don’t be too hard on yourself. We all make mistakes, especially when we’re learning.
21. Adjust your plans.
Review your finances regularly. Make changes where things aren’t working or where they could work better. Not every money saving tip will work for every stay at home parent. There may still be times where convenience trumps money saved. On the other hand, you should also be able to find more ways to save money over time that will suit your lifestyle. Just because one thing isn’t working out doesn’t mean something different won’t work either.