One of the biggest worries people have when they decide to be a stay-at-home parent is how it will impact their finances. “Everyone knows” you need two incomes just to scrape by these days, right?
Not necessarily.
Depending on your income, number of children and what you spend related to working, you might actually be losing money or doing only a little better than breaking even by having a second income. That second income puts you in a higher tax bracket as well.
It is important to be realistic about which expenses will really go down if you become a stay-at-home parent. You’ll probably eat out less often. You won’t spend so much on dry cleaning. You’ll drive less. Will these items go to zero? Probably not.
However, calculating how much money you are actually bringing home to cover expenses not related to work is not always easy. You have to figure out what you would have paid in taxes if you weren’t a dual-income home. You also need to think about the expenses of being at home.
Here’s a simple list of typical expenses related to work:
- State, Local, and Federal taxes
- Childcare
- Commuting (fuel, maintenance, etc.)
- Car insurance
- Clothing
- Eating out
- Grooming
- Housekeeping help (if used)
- Incidentals
Add these up as they relate to your job. You can estimate the tax difference just by looking at your withholding, but remember that working is increasing your tax rate, so the difference there may be more than you expect, which is always a good thing.
Remember that just because you aren’t working outside the home you aren’t going to stop driving, buying clothes, eating out or taking care of yourself. These costs will decrease, but when you’re looking at whether or not you can really afford to stay at home you want to include these things in your budget or be in for a nasty surprise when the bills come due.
It is not uncommon to find that you get less than half or even less than a quarter of your income to help towards non-work expenses by the time you figure it all out. Childcare in particular can be very expensive, as can taxes. Some people find that they are actually losing money by living on two incomes!
Now is the time to figure out your budget. This is not a popular activity for most people, but if you want to find a way to be a stay-at-home parent, you need a solid look at your expenses. Here’s a list:
- Housing (mortgage, rent, property taxes, HOA fees, insurance)
- Electricity
- Gas
- Phone (regular and cell, if relevant)
- Cable or satellite television
- Internet connection
- Water/Sewer
- Upkeep
- Medical and Dental insurance, other insurance
- Car (payments, fuel, maintenance, insurance, registration)
- Credit card payments
- Clothing
- Groceries
- Eating out
- Family Activities
- Personal grooming
- Gifts
- Emergencies
- Savings
- Other
Try your best to account for all your expenses. Estimate as necessary, and remember many expenses will vary by the time of year. Think about heating bills in winter, for example, as well as birthday and holiday gifts.
If these can’t be covered by a single income, it’s not time to give up on being a stay-at-home parent yet! First, you need to see what can be cut. Do you really need so many channels of television to watch? Cell phone? How often do you really need to eat out? Can you cut back on convenience foods at the grocery store?
Still not enough? You might need to find a way to earn money from home. This is really not as difficult as you might think. Legitimate work-at-home jobs are few and far between for many people, but certainly not impossible to find. Work-at-home business opportunities are all over the place, such as starting a business all on your own. It all depends on your skills, interests, and willingness to take a chance.
