Asal Tutorial : How to Know if You Can Afford to Be a Stay at Home Parent

Staying at home and raising your child is a fulfilling experience that allows you to be present in the child's early stages of development. Unfortunately, for many parents, being able to stay home and care for a child while not having a job is financially impossible. There are, however, ways that you can determine if having one parent at home is a viable choice for your family. By examining your expenses and income and making changes to your spending habits and lifestyle, you can determine if you can afford to stay at home with the kids.

EditSteps

EditCalculating the Costs and Benefits of Staying at Home

Start a spreadsheet of your monthly expenses. Use a software program like Excel to track all of your expenses throughout the month. Doing this for two to three months will give you an accurate snapshot of how much money you spend throughout the year. Name the top row of your spreadsheet "expenses" and use the rows under it to list the name of the expenses that you accrue every month. In the next column list how much the expense costs.^[1]
- Fixed costs include things like the cost of your mortgage, rent, insurance, and college or retirement payments. Examples of other expenses include utilities, car insurance, or a cell phone bill. ^[2]
- If your rent, utilities, and subscription services cost $1000 a month, your insurance costs $400 a month, and you spend $800 a month on food, your fixed monthly expenses are $2,200.
Consider how staying home will affect your career. If you are on a fast track to becoming promoted and growing within the organization you're working at, you need to take a realistic look at how staying at home will impact your job offers if you decide to re-enter the workforce later. It may be harder to get the same quality job or prospects if you take time off, and you will lose money in potential wage growth. If you haven't started your career or finished your education, however, staying at home will have less of an impact on your earnings over time.^[3]
- For an educated woman making $48,500 a year, taking a five-year hiatus from work makes her lose out on $244,811 in wage growth.
Weigh the benefits on your child's development. Staying at home and caring for your child consistently and personally will aid them in their development and reduce their levels of stress and anxiety. Also, you'll get the emotional benefit of seeing your children grow up and you'll be able to witness things like their first words and the first time they stand and walk. Weigh how much this matters to you and determine if it outweighs the monetary or career benefits you'd get with working.^[4]

EditDetermining the Costs and Benefits of Working

Consider the value of your salary or pay. If there are two parents currently working in the household, it's not as easy as halving your combined monthly income. Weigh the value of your salary to the other parent's salary and consider the percentage of income that you bring to the table by working. If you make a lot more than the other parent, then you may have to re-consider staying home.
- For instance, if you make $65,000 a year and your partner only makes $35,000 a year, staying at home will be much more costly for you compared to the other parent.
Consider the value of a 401k, workplace benefits, and pensions. In addition to upfront assets in the form of a salary or paycheck, you also have other assets like a 401k plan for retirement or a pension that you can build up after being employed for a long time. Calculate how much money you'd be losing over the long term and include it in your decision to be a stay at home parent.^[5]
- For instance, if you save $200 a month on health insurance because of your job, that's $2,400 in savings over a year.
Determine how much money you spend when you have a job. Costs like gas for your car, income tax, dry cleaning, and lunch are all expenses that you can accumulate when you have a job. These costs will be reduced because you'll be staying at home. Track how much money you spend in a month going to work, and factor that into your overall budget.^[6]
- For example, if you have to commute to work and spend $300 a month in gas, you can eliminate that expense on your spreadsheet.
Calculate the expense of childcare. Not staying home with your child and going to work could also accrue an additional cost in childcare. Sometimes the cost of childcare can be immense and can exceed the cost of college tuition. The cost of childcare is dictated by where you're located, the quality of childcare, and the age of your child.^[7]
- For babies and toddlers, the average cost of childcare in the U.S. is $11,666 per year.
- For preschoolers, the average yearly cost of childcare in the U.S. is $8,800 per year.^[8]

EditComparing the Results

Subtract expenses from your household income. Adding both of your monthly incomes together then subtracting your expenses will give you an outlook for how much money you are making each month, and how much profit you are netting to your savings account. Now go back and subtract your personal income from the combined household income. This will give you a good idea of how much money you'd have, or how much money you'd have to borrow to live off of one person's income.^[9]
- For example, if you make $27,000 and your partner makes $30,000 that's a combined household income of $57,000. If you decide to stay at home, this number will be reduced to $30,000.
- If your fixed expenses are $2,200 a month, that comes out to $26,400 yearly. If your income is $30,000 a year it leaves your family with $3,600 before subtracting other expenses.
Add unfixed costs and discretionary spending. Costs that tend to change from month to month can be considered discretionary spending and includes things such as gifts, eating out, or buying new clothes. These are items that you purchase occasionally and not at a regular frequency. Create another row on your spreadsheet called "discretionary spending" and make a list of things that you purchased throughout the month. This will give you an estimate of the amount of money that you need each month for discretionary spending.
- For example, if you spend $200 a month on dining out and around $200 a month on gifts and clothes, that comes out to a discretionary spending budget of $4,800.
- If you have $3,600 after your fixed expenses, adding in discretionary spending reduces your money to -$1,200 per year.
Evaluate your results. Now that you have an idea of how much money you'd lose realistically if you stopped working, decide if it's possible for your family to do it. If you've done the calculations and your number is negative, it means your partner may have to find a better paying job or you'll have to make adjustments to your spending habits to accommodate one income. If there is still enough money left over for considerable savings, then you could stay home without it hurting your household.

EditMaking Adjustments to Your Budget

Be more frugal. After you've calculated your expenses and assets, don't refrain from staying at home because the numbers don't add up. Look for sales when you go shopping and take advantage of special offers and promotions. Use coupons and consider buying second-hand goods. This will cut down on your discretionary spending and allow you more freedom to use the funds elsewhere. Once you lower your monthly costs, calculate your expenses and see if it's viable for you to be a stay at home parent. ^[10]
- If you save $30 each week at the grocery store by purchasing generic brands or using coupons, that's a yearly savings of $1,560 per year.
- The point of evaluating your budget and expenses is to determine where you can reduce your spending.
Downgrade or eliminate subscription services. Once you take a look at your fixed monthly costs, locate monthly services that you rarely use. This could include things like a magazine subscription, a website membership, a gym membership, an elaborate cable package, or high-speed internet. Consider your needs and see if you can renegotiate lower prices or downgrade your services to save money every month.^[11]
Cut out unnecessary spending every month. If you have a large discretionary spending budget, it's better to put that towards the bills and fixed expenses that you have to pay. Consider changing your lifestyle and cutting back on buying unnecessary things like expensive clothing, shoes, or jewelry. If you have an expensive habit like buying coffee or a smoothie in the morning, consider buying the ingredients to make it at home for a lower cost.
Work part-time instead of full-time. If you do the math and you still can't afford to be at home regardless of what you cut out, do a calculation and see if you can survive working part-time. Talk to your employer and see if they can reduce your hours so that you can still make money, but have enough time to be at home for your child.^[12]
- You can ask your boss by saying something like, "As you know, Mary was just born and I want to spend more time with her. I love this job and the atmosphere, but I need some extra time at home. Would you consider cutting down my hours so I can spend more time with her?"
Work at home. Go on job boards and look for jobs that allow people to work from remote locations. Search for keywords like "remote" or "work from home." You can also use your online network on platforms like LinkedIn to find opportunities to work from home. Find a job that lets you set your own schedule so that you can work it around your child.^[13]
- Some of the most popular work at home jobs include writers, consultants, customer service representatives, and engineers.^[14]