Posted by Gail | Filed under Money & Family
Historically, women’s movement in and out of the workforce over the course of their careers has ebbed and flowed. Nothing brings the issue more to the front of a woman’s mind than the imminent arrival of a new baby. Pregnancy brings all sorts of questions to mind: Who will take parental leave? How long can I afford to stay home with my new baby? Is working worth it when I have one, two, or three kids in daycare?
While the arrival of a baby may be the biggest blessing in your life, baby often comes with baggage. I’ve worked with dozens of people who were doing just fine until their Mini-Me came along. Through bad planning, or no planning at all, mommy and daddy find themselves lost as to how to cope financially, particularly in light of their significantly reduced income.
Here’s the typical scenario: You discover you’re pregnant. You may have been trying really hard, or it may come as a complete surprise, but you’re in the family way. You’re excited. You’re a little scared. You’re full of hope.
You go shopping. There are cribs and strollers to buy. The clothes are soooo cute. OMG! Can you believe how small baby’s shoes and socks are? You deal with the morning sickness, the people who want to touch your belly, the well wishers. You decide to take that last “singles” vacation while you still can. And you start looking at mini-vans.
Geeze having a baby can be expensive. Yah! And you haven’t seen the half of it yet. The one thing you probably never think about is how you are going to live on less when baby gets here. Live on less? Yup. In all likelihood your income will drop during mat leave, and if mommy or daddy decide that staying home with baby is the way to go, you’ll be a one-income family. According to the Stats Man, about 33% of women with kids under six don’t work outside the home. That’s a lot of people living on a lot less money.
The decision to be a stay-at-home-mom or -dad is a big one, both emotionally and financially, and certainly not one to take lightly. If you don’t think about the financial implications you could create hellovalotta debt and huge problems.
So how do you know whether you can afford to stay home or not?
The first thing you will need to do is find out how much you’ll be getting for mat leave or parental leave and create a working budget for life with baby. If you plan to stay home full-time after baby has arrive, then practice living on one income while you’re pregnant to get into the swing of things and save some money.
Since working comes with it’s own expenses, list the costs you’ll be able to avoid if one parent stays home. Everything from childcare to clothes for work, travel and lunches out. Do you both have a car and can you give up one to cut back on costs? How about the gym membership, the golf fees, the hockey teams… what are you prepared to forgo so you can stay home with Junior?
If the budget still doesn’t balance, are there ways of earning an income from home that will help eliminate the short-fall. From bookkeeping to tutoring, from piano lessons to in-home care for other children, there are lots of ways to make an extra buck or two.
If one of the reasons your budget won’t balance is because you’re spending money on debt repayment, it’s time to get out of hock for good. Cutting back to one income shouldn’t be a consideration at all if you’ve got consumer debt. Once you’re out of debt, you have far more options for how you can live your life. Consider a second job to pay off your debt. Consider selling stuff you no longer need (or may never have even used) to come up with the money to pay down your debt. Do whatever it takes to get out of debt!
Being a one-income family has it’s own challenges. An emergency fund is more important than ever since you’re completely reliant on one income. And if you want to continue saving for the future, you’re going to have to make room in your budget for retirement and educational savings too.
If you’re really determined to stay home with little Molly McGoo, you’ll find a way. But be sensible about it. Going into a single-income lifestyle takes some adjustments. You should prepare and you should practice. You can have anything you want, if you want it badly enough and are determined enough. So, how determined are you?