While 60 years ago, one parent staying home to care for the children was the norm, today, having both parents work is the norm.
According to Pew Research, “Roughly 60% of two-parent households with children under age 18 have two working parents.” Many families have one parent stay home until all the kids are in school, and then both parents resume working.
Keep reading and we’ll show you if a) living on one income is good for you and b) how to go about preparing for it.
Your Guide to Switching to One Income So One Spouse Can Be a Stay-at-Home Parent
The Benefits of Dual Income
There are certainly many benefits of having both parents work. Most important to many people is the money.
Most families with two incomes are able to afford more than a family with only one income earner. Dual income families may have a bigger home, nicer cars, and take better vacations. They often have more money to spend on their kids for everything from lessons to entertainment.
Another important benefit is that each parent gets to stay in their career.
Often, if a parent decides to stay home with the children for any length of time, she can find it difficult to re-enter the work force, especially at the level she was previously working. Some parents would prefer to stay home but instead power through working full-time while their children are small so they don’t fall behind in their careers.
Financial Aspects to Consider When Contemplating Moving to One Income
Are you thinking about moving from a dual income family to a single income family? If so, there are many things to consider.
Can You Comfortably Live On One Income?
Before you make a permanent decision, one of the best things you can do is try out your new lifestyle.
If the wife is thinking of staying home, why not take three months and bank her entire salary during that time. Not only will you have a nice cushion for your emergency fund, but you will also be able to tell how easy or difficult it will be to live on the remaining income.
If you’re used to a certain lifestyle, you may also need three to six months to adjust to living on less money. It’s far better to make this adjustment while you’re both still employed than after one person quits.
My husband and I were used to going out to eat rather frequently, but when I quit my job, we didn’t curb this habit as we should have. That put us into credit card debt for awhile. We’re out of credit card debt now, but that was one of the biggest mistakes we made when we moved to one income.
Another important consideration should be your retirement savings.
If both you and your spouse work for companies where there is a company match on retirement savings, when you quit, you’ll be leaving a lot of money on the table.
For instance, because I had been at my job for more than five years, my company matched my 8% annual contribution. That meant that each year, I was saving 16% of my salary for retirement though I was only paying out 8%. Once we moved to one income, we could not save the equivalent of 16% of my salary for retirement. Undoubtedly, quitting my job to stay home with the children put us behind in retirement savings.
Which partner has the better health insurance? Once one partner quits, you’ll have no choice but to go with the working partner’s health insurance.
Take the time to note how the policies vary.
What will your new deductible be? What percentage of expenses does the insurance cover and what percentage will you need to cover? Will you have a co-pay? If so, what is it for doctor’s appointments and prescriptions? Will you need to pay more for your premium since you’ll be covering the entire family?
When you drop to one income, you may notice that one of the first things you need to cut is entertainment. You may no longer be able to take the types of vacations you’d like or be able to hire a babysitter for date night every week.
Though it’s easy to say that these expenses don’t really matter, how will you feel when you’ve been a stay at home parent for a year and the only date night you and your spouse have had is watching a movie on Netflix and eating Chinese take out after the kids have gone to bed?
Saying no to fun activities can be difficult. Are you ready to do this regularly if your finances will be tight?
You’ll Also Save Money When Living on One Income
Remember, too, that having one parent stay home with the kids can also save a significant amount of money.
If you have kids in elementary or middle school, you likely have to pay for after school care and perhaps before school care. However, that expense is a bargain compared to how much day care can cost.
The primary reason why I decided to quit my full-time job and stay home to care for my kids is that daycare for our then 6 month old and 2 year old would have cost well over $1,500 a month. When I looked at what I would be taking home after taxes, insurance, and paying for both daycare and after school care, working just didn’t make sense.
In addition to the expense, remember, too, that especially with young children, if they don’t go to daycare, they are less likely to get sick frequently, which means less money spent on doctor’s visits and bills.
Don’t forget that since your family will be earning less money, you’ll have fewer taxes to pay. You may be able to adjust the tax withholding for the working partner’s salary. You may also be able to get other tax deductions and credits on your tax return that you previously hadn’t qualified for.
If the spouse who decides to stay home had to dress professionally, he will save a significant amount of money on clothing. Being a stay-at-home parent calls for a casual wardrobe.
Other Benefits of One Spouse Staying Home
A more relaxed lifestyle may be the most important, non-financial benefit of having one parent stay home. According to Pew Research, “Feeling rushed is part of everyday life for today’s mothers and fathers. Among those with children under age 18, 40% of working mothers and 34% of working fathers say they always feel rushed.” Furthermore, “53% of all working parents with children under age 18 say it is difficult for them to balance the responsibilities of their job with the responsibilities of their family” (Pew Research).
My husband often comments on how happy he is that I stay home with the kids. If our children are sick, he doesn’t have to take a sick day; I care for the children. If he has to stay at work an hour or two late, it’s not a problem because I’m there to care for the kids. He can focus fully on his work.
Stay at Home Spouse Can Work from Home
Remember that being a stay-at-home parent doesn’t have to be an all or nothing situation. If he or she would like to, the stay-at-home parent can become a work-at-home parent.
When I quit my job, my goal was to work from home just enough to make the same amount of money I would have made at my job after paying all daycare and other expenses. I reached that goal within the first year.
Now that I’ve been home for three years, I make about 40% of our monthly income, and my husband makes 60%. I wouldn’t have the luxury of staying home if I couldn’t also work from home; we simply couldn’t make it financially on my husband’s current income.
Which Parent Should Stay Home?
If you’ve decided that having one parent stay home to care for the kids is best for your family, you have to look at the tough choice–who will be the one to stay home?
Certainly, looking at income, commute, average weekly work hours, retirement, and insurance should all be important considerations. However, I ask that these not be the only consideration.
A more important question is, “Who wants to be the one to stay home?”
Staying home to care for small children can often be as stressful as facing corporate America. If you don’t really want to stay home, but you decide to because you’re making less money than your spouse, you won’t be happy. Whoever decides to stay home has to really want to do it.
Remember also that sometimes staying home can be socially isolating. You may miss adult conversations. You may tire of playing dress up all day long. Which parent is better suited to the life of a stay at home parent?
Making the decision to move from a dual income to one-income family is not easy. Either way, you and your family must make sacrifices. Ultimately, you must do what is best for you, your spouse, and your children.