Financially, Can You Afford To Be A Stay At Home Parent?
George Boelcke CCP
April 04, 2007
In families were both partners work, the thought of one parent staying home to raise the kids is often a goal and a dream. It might not be for everyone, but those who want to do it, often feel they can’t afford it, financially, and the dream dies right there.
Yes, almost all couples who have decided to have one partner stay at home, and to make raising their kids a priority, will tell you it was very hard. But note that it WAS hard – in the past tense.
For sure, the most challenging steps are mainly in the initial adjustment pains. Can it be done? Yes. Is it worth it? You decide. But just make sure the decision of what you want is more about your values, priorities, family and kids than it is about finances. After all, your credit card companies and mortgage lender shouldn’t be setting your priorities for you. But your debts and monthly payments do that, don’t they? In a huge number of areas in our life right now, if the truth were known.
But money is almost always where it starts. The most common feedback is: “We’d love to be able to, but our family can’t possibly make it work without my partner’s income”. Often, however this “what’s the use” mindset isn’t true, because gross income doesn’t count. If your partner makes $2,000 a month, you need to deduct the taxes, social security, staff fund and all those other deductions which come off the top, and chances are, the real take-home is more likely to be around $1,500 tops.
Now subtract the bills which are mostly as a result of earning this second income. For the average family, that starts with a second vehicle just to be able to get to work. Are there $300 or $400 car payments? That alone adds another $200 or so for insurance, gas and maintenance. What else? Perhaps there are current (or future) daycare expenses of another $400 or more, and probably at least another $100 for lunch at work, clothes, etc.
Without these “work bills”, the real net income in this example is $400 a month at best, not even considering the working partner may now also move into a lower tax bracket. That’s less than twenty bucks a day! Sure, each situation is different, but an hour of looking at your finances from a different perspective can have a big impact. It’s the old saying: You have to spend money to make money. But in this decision, it totally works against you and makes things worse and not better.
Oh, and one more question: What’s the value of your car? OK – how does that compare to the value of your kids’ 529 education savings plan? Or what’s the monthly payment on your vehicle? Is that the same amount you’re contributing each month towards your kids’ education? Aren’t those fair questions about your choices and priorities? But how often do our actions speak louder than our words?
If your desire is to have one partner stay at home, can you really afford not to do it? Yes, it’s a one-time adjustment, but it can also create opportunities, bonds and memories that money just can’t buy. So here are a few questions to get you started thinking about the “how to,” instead of the “can’t be done:”
What’s the real net pay you’re dealing with?
How much money are you paying out of pocket each month directly related to the job?
What monthly bills or payments (such as car payments, etc.) would you be able to drop?
How much (if any) would your partner’s tax drop by with only one of you working?
What bills can you consolidate into a lower payment (or pay off with current savings) to increase your cash-flow?
Can you get rid of your current car payments by paying off the vehicle, terminating the lease, or trading down to a less expensive vehicle you’re able to pay cash for?
Yes, almost all couples who have decided to have one partner stay at home, and to make raising their kids a priority, will tell you it was very hard. But note that it WAS hard – in the past tense.
For sure, the most challenging steps are mainly in the initial adjustment pains. Can it be done? Yes. Is it worth it? You decide. But just make sure the decision of what you want is more about your values, priorities, family and kids than it is about finances. After all, your credit card companies and mortgage lender shouldn’t be setting your priorities for you. But your debts and monthly payments do that, don’t they? In a huge number of areas in our life right now, if the truth were known.
But money is almost always where it starts. The most common feedback is: “We’d love to be able to, but our family can’t possibly make it work without my partner’s income”. Often, however this “what’s the use” mindset isn’t true, because gross income doesn’t count. If your partner makes $2,000 a month, you need to deduct the taxes, social security, staff fund and all those other deductions which come off the top, and chances are, the real take-home is more likely to be around $1,500 tops.
Now subtract the bills which are mostly as a result of earning this second income. For the average family, that starts with a second vehicle just to be able to get to work. Are there $300 or $400 car payments? That alone adds another $200 or so for insurance, gas and maintenance. What else? Perhaps there are current (or future) daycare expenses of another $400 or more, and probably at least another $100 for lunch at work, clothes, etc.
Without these “work bills”, the real net income in this example is $400 a month at best, not even considering the working partner may now also move into a lower tax bracket. That’s less than twenty bucks a day! Sure, each situation is different, but an hour of looking at your finances from a different perspective can have a big impact. It’s the old saying: You have to spend money to make money. But in this decision, it totally works against you and makes things worse and not better.
Oh, and one more question: What’s the value of your car? OK – how does that compare to the value of your kids’ 529 education savings plan? Or what’s the monthly payment on your vehicle? Is that the same amount you’re contributing each month towards your kids’ education? Aren’t those fair questions about your choices and priorities? But how often do our actions speak louder than our words?
If your desire is to have one partner stay at home, can you really afford not to do it? Yes, it’s a one-time adjustment, but it can also create opportunities, bonds and memories that money just can’t buy. So here are a few questions to get you started thinking about the “how to,” instead of the “can’t be done:”
What’s the real net pay you’re dealing with?
How much money are you paying out of pocket each month directly related to the job?
What monthly bills or payments (such as car payments, etc.) would you be able to drop?
How much (if any) would your partner’s tax drop by with only one of you working?
What bills can you consolidate into a lower payment (or pay off with current savings) to increase your cash-flow?
Can you get rid of your current car payments by paying off the vehicle, terminating the lease, or trading down to a less expensive vehicle you’re able to pay cash for?
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