How to be a stay-at-home mom without bankrupting your family

A large percentage of US households are two income families. Many families feel they need both incomes to make ends meet. The hard part comes when children enter the picture.  At this point many moms (sometimes dads) find it very difficult to face going back to work and dropping the kids off at a day care. What if your desire is to be a stay-at-home mom or dad, but you need both incomes to get by? How do you go from being a two income family to a one income family without bankrupting your family?

Planning, planning, planning

First, no matter how tempting becoming a stay-at-home mom may be and how much you dread going to work when that new baby comes home, this can’t be a spur of the moment decision. You need to consider your situation. Look at your finances. Plan what adjustments you will need to make. What are you willing to sacrifice?

You also need to have serious discussions with your spouse. This needs to be a decision that both of you make. Living on one income will likely mean you will need to scale back your lifestyle to a degree. You will both need to work together to accomplish your family’s goals on one income. This will be very difficult to do and will inevitably lead to conflict if both spouses aren’t on board with the decision.

So if you both desire having one spouse stay home with the kids how do you get there from here?

Debt

Are you deeply in debt? Do you have large student loans? High car payments? If you have a serious amount of debt, it may be necessary to delay coming home for a time while you get your debt back to a manageable level. Use your desires to really motivate your debt repayment. One of the keys to getting out of debt is very focused intensity. Those who just kind of play half-heartedly at getting out of debt never make it. Use your desire to stay home to really provide the passion to attack your debt. Use the debt snowball method to systematically attack your debt and eliminate it.

Budget

If you haven’t been living on a budget, you need to start. When you are living off one income having a plan will be critical. You are going to need to be very intentional about how that income is spent.

Examine your spending

Take a look at all of the items on your budget. Are there areas you can cut? Unless you are in a situation where the spouse who will continue working brings in a large percentage of the family income, it is very likely you will need to significantly change your family’s lifestyle. That doesn’t mean you need to take a vow of poverty and live in a shack. But you will likely need to be prepared to make some sacrifices along the way. Just remember the reason for the sacrifice. For our family, those sacrifices paled in comparison to having my wife home to take care of our son when he was young.

Evaluate your mortgage

Take a hard look at your mortgage. When you are living on a single income, will you still be able to afford to make your mortgage payments along with your other monthly bills? Generally speaking your mortgage shouldn’t be more than about a fourth of your take home pay. Even better if it is less than that. Will you still be able to comfortably make your mortgage payment on a single income? If  the answer is no, then you may need to consider down sizing your home before taking the plunge. These are difficult decisions but your home is your shelter. You need to make sure that you will be able to comfortably continue those monthly payments.

Emergency fund

When you go from being a two income family to a one income family your emergency fund becomes even more critical, particularly in uncertain economic times like we face today. It is generally recommended that you have 3-6 months of expenses in your emergency fund. If you are a one income family it would probably be wise to make that closer to 6 months or even a little more.  You need to consider what would happen if the remaining income earner were to lose his or her job. What is your local job market like? Are there plenty of job opportunities in your area in his or her profession? Would the stay-at-home spouse be able to find a temporary job quickly to fill in the gap? Make sure you have considered these things as a job loss is much more devastating when you are living on a single income.

Insurance

Make sure you will have adequate health care coverage. If your primary health care currently comes from the spouse that is hoping to quit his or her job, then you will need to look at how to replace that coverage. Having decent health care coverage is a must for a healthy financial plan. Nothing can land you in bankruptcy court  quicker than a major health issue with no insurance.

In addition, you need to make sure you have adequate life insurance to cover both spouses. The working spouse should have a life insurance policy at least approximately 10 times his or her annual income. So if he or she make $40,000, your should have about a $400,000 life insurance policy. This will allow his or her income to be replaced if something unexpected should happen. The stay-at-home spouse should also have some level of life insurance too, as if the worst should happen the working spouse will have day care and other expenses to deal with.

Are you ready to make the plunge?

OK. So you’ve looked at these areas. Both spouses are in agreement that this is best for your family. You have carefully considered your financial situation and you believe you can do this without significantly harming your family. Now what? How do you move forward?

Try a 6 month trial

A really good way to make the transition is for both spouses to continue to work, but for a few months live solely off the one spouse’s income.  All expenses should be paid from the working spouse’s pay except those that will go away after the stay-at-home spouse comes home, like day care expenses for example. This is a great way to determine if you are ready. I recommend doing this for about 6 months. Each month is a little different. Plus 6 months gives time for a couple of those little bumps to occur that life sends our way from time to time.

One option you might consider during this time if you still have some debt or if your emergency fund isn’t quite what it should be is to take all of the extra income from stay-at-home spouse during these month and put it all on your debt or into your emergency fund. That way you can prove you are able to live on one income and improve your financial situation at the same time.

The real key here is this trial period is the time to prove that you really can survive on one income even through the normal bumps of life and visits from Murphy. When you have lived for 6 months with all expenses coming out of that one pay check, you will have the confidence to know you can quit your job and your family will survive with no problems.

Work from home

Another thing to consider at this point is whether you have some skills you could use to work from home and earn a little supplemental income. Do you have an accounting background? Maybe you could start a side business to take care of the books for a couple of small businesses in the area? Love garage sales? Look for bargains that you could possible sell on E-bay? There are a host of sales possibilities like Avon, Mary Kay, Pampered Chef, etc. If your kids are in school, could you possibly find a part-time position with the school system?  There are lots of possibilities. Sometimes just a little supplemental income will help with riding out the times when Murphy comes knocking.

Go part-time

Lastly, if you find that you can’t quite make it on one salary but you desperately want to be home, consider part-time opportunities. Would it be possible to cut back to a couple of days a week? Obviously, this depends on the type of work you do and who you work for. But this can possibly be a compromise to help you bridge the gap.

Being a stay-at-home mom is a worthy goal

I strongly believe in the value of stay-at-home moms. (Or dads in some cases) I think they provide tremendous stability and value to children that are learning and developing into the person God made them to be. It is often hard to make it work in our society today. Sacrifices will likely be necessary. My wife and I made that decision. We made sacrifices to make it happen. There are things we didn’t do or had to forego purchasing to make the budget work. But I believe the value of her being home with our son in his formative years was priceless. No “stuff” that was sacrificed comes close in value.

So if you are looking at making this decision I encourage you to go for it! But be wise. Understand the sacrifice that may be needed. Do it from a position of financial health. Take a few months to try living on one income just to make sure you are ready. If you do these things, then staying at home with those little ones will be a blessing of far more value than any sacrifices you might need to make along the way.

Photo credit: timsamoff

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