Giving up an income can be a frightening proposition, but it may be possible for some families. When parents sit down and evaluate their income and expenses, they are often surprised to see areas where they can significantly scale back, making the idea of one parent staying home a real possibility. For couples who want one parent to stay home, with a little planning and preparation, it could happen sooner than they thought.
Assess Your Expenses- There are many online debt calculators to help with this task, but you can also just sit down with a pencil and piece of paper and crunch the numbers. Write down all of your fixed expenses, like your mortgage, utilities, insurance and car payments. Include any saving plans you contribute to, like retirement or college funds. Now, create another list of items that are optional expenses that you have every month, such as cable, a gym membership, pedicures and others. You’ll also need to add in any amount that goes into savings for emergencies. It’s recommended that you have the equivalent of 6 months’ worth of expenses saved.
Make a list- Keep a list of everything you spend money on for 2 to 3 months. That means that you need to list every latte, lunch and vending machine purchase, in addition to your fixed costs. This task is not just for you; your spouse needs to keep a list too. You may be surprised to see where your money goes.
Subtract what you’ll save- If you stay home you won’t be spending money in the same way. You won’t be eating lunch out every day, buying coffee on the way to the office, buying work clothes, filling the gas tank every week, having your clothes dry cleaned, or having childcare. There may be other things that you can do without, such as having a cleaning service. By adding up all of these things it becomes clear that there is a price for working away from home. Figure up how much you’ll save if you stay home.
Do the math- Now that you’ve made your lists, you need to do the math. Look at how much your spouse brings in and subtract out all of your expenses from it. You will need to create a budget for things like groceries, gas, haircuts, birthdays, and the occasional date night. If after you do all that, you still have money to spare, then it may be possible for you to stay home. If the numbers are way off, however, you may have to delay staying at home until you can reduce your expenses. On the other hand, if the numbers are close you may find ways to cut corners on your existing expenses.
Cutting corners- Start using coupons for everything, not just at the grocery store. Get rid of your home phone if you and your spouse already have mobile phones. Cancel or reduce your cable bill by cutting some of your options. Get rid of the lease on your car and pay cash for an older car to get rid of a car payment. Do without a second car altogether if possible. Lower your homeowners insurance by installing a security system, as this can save as much as 5% with some companies. Shop around for less expensive car insurance and homeowners insurance. Bundle your car and homeowners insurance to get a reduction. It’s a good idea to do this every few years anyway to make sure you aren’t paying too much.
Add money- To bring in additional money to the house for extras like vacations or other luxuries you can sell items that you no longer need on eBay. If you are crafty you can sell homemade trinkets online in an Etsy shop at Etsy.com. Pick up some dog sitting jobs for your neighbors. Work part-time from home by doing data entry or freelance writing. Check out online opportunities at allyou.com/online-jobs.
The bottom line is that it may be more possible than you previously thought to live on one income. However, it’s important that you consider all of the pros and cons carefully before making the decision. Keep in mind long-term effects such as reduced future earnings if you go back into the work force 5 to 10 years from now. You will also be contributing less to your retirement fund and social security. Make adjustments for these things if you can and you will be in better financial shape in the future.