Planning

Can Your Family Afford Life on One Income? 6 Steps to Figuring It Out

Whether mothers (and increasingly, fathers too) choose to work outside the home, or stay home to raise their children is a personal decision that often sparks a myriad of emotions from both sides. You can weigh the pros and cons all you want, but there is one basic question that needs to be addressed before the debate even begins:

Can you afford it?

For me, this is a question I wish I had asked myself before I even began planning my family. I hadn’t even considered staying at home to raise my children an option, and because I didn’t intend on becoming a Stay-at-Home Mom, it never occurred to me that I might need to plan for it- just in case.

Before I had children I had always imagined that once I made the leap into motherhood I would continue to work. Once my first child was born everything changed. Not only did I have conflicted feelings about returning to work full-time, I was suddenly faced with paying exorbitant child care costs. I never considered the fact that I might not be able to afford to be a working mother. I didn’t have much earning potential at the time of my daughter’s birth and my paycheck was more or less the sum of the cost of daycare.

After trying to juggle working part-time and piecing together childcare, my husband and I made the decision that I would become a full-time stay-at-home mom. There were several factors we didn’t consider before we made the transition to a single-income household, and it took a number of financially rocky years, which included two lay-offs, until we finally found a way to make it work for our budget.

If you are considering starting a family (or even if you have already jumped on the baby bandwagon) and want to weigh the stay-at-home option, here are six steps to figuring out the financials:

1. Track everything

Write down every single penny you spend and track it for two months. Break down your expenses into three categories:

Fixed expenses. This includes life’s necessities like housing (mortgage and rent), food, utilities, insurance, gas, phone service, car payments, loans, clothing, and contributions to savings, college, retirement or other investment accounts.

Secondary expenses. This includes things you can live without such as eating out, entertainment, haircuts, gifts, travel, cable TV, gym memberships, beauty treatments, and dry cleaning.

Emergency expenses. Leave a comfortable cushion for unexpected expenses such as car repairs, medical bills, and home improvement.

2. Evaluate the long-term career costs

Next, think about the long-term costs associated with leaving the workforce. Taking a few years off work means you will take a hit on your salary when you reenter the workplace. You will also lose accrued social security benefits, and matching 401k contributions or a pension, if your company offers them. Keep in mind that the longer you stay out of work, the lower your future income will be. It also may be harder for you to find employment if your job skills get rusty or you fall behind on technology.

3. Figure out how much it costs you to work.

That’s right, it costs money to work! There’s the extra gas money you spend on your commute, or maybe you have to pay for parking or a monthly train pass. Don’t forget the dry cleaning, lunches out, coffee breaks, and office birthday parties too. It all adds up.

You want to know what the biggest expense of working is? Childcare costs. The rates vary from town to town, and it also depends on what kind of care you choose:  live-in nanny, nanny-share, home daycare, corporate daycare. The prices also vary for the age of the child (care for potty-trained kids is less expensive than it is for those still in diapers) and sometimes you can catch a slight break if you have more than one child in a particular program. I have yet to come across a two-for-one deal yet though, so don’t get your hopes too high.

4. Do the math

Take your double income and subtract the figure you calculated in step 3 (the cost of working). Now compare that number to your spouse’s single income. If the numbers are worlds away from each other, you might not be able to make it work. If they are closer together, staying at home to raise your children might be feasible, with some slight lifestyle adjustments.

Decide what you can and can’t live without. For my family, it meant giving up cable TV, regular visits to the hairdresser, dining out, and traveling outside of visiting family. I also avoid Target like the plague, and buy (mostly) second-hand children’s clothing. I have even learned how to give myself a pretty decent manicure and pedicure.

One word of advice? Take it easy on the sacrifices. If you give up too much at once you are likely to feel deprived and run the risk of binging on luxuries. Cut out the extra expenses slowly over time and see what you can live without. If life just isn’t the same without that morning latte, then maybe it’s worth trading the magazine subscription for. We all have our weaknesses.

5. Think outside the box.

While you may have to give up a few luxuries in exchange for more time with your kids, there are also many alternatives to making a little extra cash. Maybe your employer is open to you working part-time or from home, or perhaps you can get hired as a freelancer for on a project basis. Some working mothers have been able to trade longer workdays Monday through Thursday for having Fridays off. And don’t underestimate picking up that old waitressing job that got you through college. It’s a great way to make extra cash without having to bring any work home with you.

I also know mothers who have earned extra income by putting their newfound child-rearing skills to work by offering in-home babysitting and daycare services, and others who have found side work with businesses like Mary Kay Cosmetics, and Stella and Dot jewelry. Both of those options require some initial investment though, so do your homework before you dive right in.

6. Put it all into action- BEFORE YOU NEED TO.

Ideally, you want to live with your new budget before life events force you to. This is the perfect time to give your new budget a test drive before you have made any permanent decisions, like quitting your job.

Live off of a single income for a while and put the second income into savings. Not only will this give you a real-life look at your new budget, but you will build a nice nest egg before your little bundle of joy arrives. You will also have time to make any changes to your plan before you go through the biggest change of your life: parenthood.

Morgan is a freelance writer and blogger living in Southern California with her husband, two daughters, and flock of backyard chickens. You can read more of her at The Little Hen House.