Staying at Home or Returning to Work: Financial Factors to Consider
September 09, 2015
Preparing for a baby is one of the most exciting and stressful experiences for new parents. There’s so much to do before baby comes, and only nine months to do it! That seems like a lot of time, but it passes by more quickly than you realize. One decision that sticks out for many is deciding whether one parent will stay home with the baby
For some, it is simple. Some people know their personality and beliefs and are concrete in their decision to either stay home or return to work. For others, like me, the decision was not as easy.
The determining factor on whether a parent will stay home or return to work is often determined by a family’s financial situation. For us, it was a very close decision and one that has required some sacrifice. Since my spouse is in the military, I was the one to stay home. On one income, our budget is tight each month, but we can take care of our obligations. Our deciding factor was the cost of me returning to work. Between having to update my wardrobe and the cost of childcare in our area, it would cost us money each month if I had opted to return to work. Even though I would like to go back to work, and I am missing out on some professional development opportunities, I have found other hobbies to keep me involved in the professional world. Moreover, staying home with our daughter and, very soon, our son, to me is priceless.
In making our decision, there were several financial factors that we considered:
Child care costs – Child care, whether you use a nanny or day care center, will typically cost you a significant portion of your paycheck. Parents joke that one parent works just to pay for child care, but in every joke there is a great deal of truth. Ask other friends with children for child care recommendations. They can save you time by advising whom to call and will often tell you how much they pay. Other child care costs to consider are extra supplies (change of clothes, diapers, bottles) and extra meals (some daycares provide meals while others do not).
Work related expenses – Working often costs us money too. There’s the cost of gas to get to and from work, an appropriate wardrobe, lunch costs, and those quick take-out dinners for when you have to stay late at work.
Benefits – Does your employer provide benefits for health insurance, vision, dental, and 401k? Are they extra costs that you must pay out of pocket? If you did not work, does your spouse have significant coverage for the family and is it affordable on one salary?
The cost of staying home –Staying home does not erase expenses; it simply reduces them. There’s still a need for the family to have to clothe, eat, and pay for the occasional child care so the stay at home parent can go to appointments or take a deserving break. There’s also expenses related to Parent & Tot activity classes to consider.
Professional goals – Professional goals may not have an immediate impact on the family’s financial situation, but at some point they will. When a parent leaves the workforce, opportunities can be missed that can cost in the long run. This might include skill development, maintaining professional contacts, and other advancement opportunities that may have occurred which would raise your employable value.
What can you do to help decide if you or your spouse can afford to stay home with your new bundle of joy? Simply put - some simple adding and subtracting. However, first you need the numbers:
Keep track of spending – For a week or up to a month, keep track of every penny spent. You may be surprised as to where money vanishes! Perhaps you eat out more than you realized, or maybe you are doing better on spending than you initially thought. But, you won’t know until you track it.
Make a budget – Using your spending log, create a spreadsheet or grab some pen and paper and make a monthly financial map. It should include your income after taxes, your fixed expenses (monthly bills), savings, and variable expenses (food, clothing, entertainment). Be sure to include a buffer for unexpected expenses that always seem to pop up when we least expect them.
Cut back – There are many places in a budget that can be tweaked to give more financial flexibility; it’s a matter of determining our real wants and needs.
It may seem overwhelming at first, but following these simple steps will help you determine if one parent staying home is possible or practical for your family.
Guest Contributor: Kara Schulte, AFC®