(First published in the April 12, 2018 issue of City Pages)
Many families face the same difficult question
Young happy couple
Should one of you stay at home while the other works? It’s not a question to take lightly. The decision can have emotional and financial consequences—even a long-term impact on the stay-at-home parent’s career opportunities. It’s also a question that doesn’t have a single correct answer.
Your upbringing, personality, career and the family’s financial situation can all play into the decision. Your opinion could also differ from your partner’s and may change over time. Perhaps you both worked after having your first child and now that there will be two or more children it makes more sense for one of you to stay at home.
Whatever your impetus, the decision and actual process to switch from two incomes to one will undoubtedly be challenging. Purposefully approaching and planning for the change could help you succeed.
Get a general sense of the numbers. You’re likely juggling a lot of priorities at the moment. However, now more than ever, having a clear picture of your family’s finances can be important. Thinking about both short-term and long-term scenarios will help you understand the effect of moving to one income and give you numbers to back up your assumptions.
You don’t need to track every single dollar you make and spend (although detailed tracking helps manage your finances and budgeting software can make it relatively easy). Try to get an approximate sense of your household’s cash flow and non-essential expenses you could cut if need be.
The good news is that saving on daycare(around $10,000 per child in Wisconsin, on average) and work-related expenses such as transportation and meals, can help offset the lost income.
However, you’ll also need to budget for new child-related expenses. Some families downsize their home, sell a vehicle or eat out less often to make their one-income vision a reality.
Take baby steps first. For those who are thinking about having children, or planning a stay-at-home arrangement for your family, acting as if you have only one income while both of you continue to work can help give you a leg up.
For example, the second income could go towards an emergency fund that can help you weather a setback after making the transition. You can also use the money to pay down high-interest debt, which can free up cash flow by lowering your interest payments.
Discuss your new family roles. Having a stay-at-home parent can be as much of an emotional decision as it is a financial one. If you haven’t already, set aside time to discuss how you view each other’s roles in the family. There may be new expectations for responsibilities inside and outside the home.
Bringing finances back into the picture, discuss how you’ll divide the family budget. Will every purchase be a mutual decision? Or perhaps you’ll both have a personal allowance that you can spend how you please and there’ll be a household account for shared expenses.
Plan for the future. Now may also be a good time to discuss your expectations for the future. When and if a stay-at-home parent plans to return to the workplace for example. And if it makes sense for them to work or go back to school part-time while also taking care of the home.
Much like the big decision, there isn’t a single correct answer to questions about family roles or the future and no one can answer these questions for you. Talk over the options together and realize that you need to try out several ideas before you find the arrangement that works best for your relationship and growing family.
Bottom line: Take a deep breath and embrace the upcoming changes. Switching to a single income can be challenging, but so is having two incomes and a newborn. Planning ahead and working together towards a common goal and vision for your family can help ensure a successful transition.
This article is part of Practical Money Skills, Visa’s award-winning financial literacy program. For more, see practicalmoneyskills.com, and follow on Twitter at PracticalMoney.