When you have your first child or even your second, you may be wondering you can afford to stay at home with your child. There are a lot of different reasons that parents consider doing this, but ultimately it is your choice. One thing that may be standing in your way is the financial implications of staying home and giving up your job. You should ask yourself these five questions before you make a final decision.
1. How Much Will Daycare Cost, If I Don't Stay at Home?
If you can't stay at home, you need to determine the amount of daycare costs, whether you go with a daycare, a family or in-home daycare, a nanny or an au pair, you should know about how much daycare will cost in your area. This is one figure that varies wildly from location to location. Usually it is more expensive in the areas where cost of living is hire. Then you need to subtract that amount from your paycheck. (Do this from the paycheck of the person who would be quitting his/her job. Many couples are having the dads stay home now because they wife earns more money.)
2. How Much Does It Cost Me to Work?
This number will likely surprise you. You should add together the cost of gas, the cost of eating out, your monthly contribution to office parties, the amount you spend on work clothing, and professional memberships that you keep up. You can also factor in the cost of eating out at the end of a long day, since you can begin to eat more meals at home since you will have more time to prepare them. Once you add these numbers together subtract that amount from your paycheck. Then look at how much you have left. This is how much you are actually contributing after working. You may find that you can't afford to work outside of the home, and choosing to stay home is a better option for your family.
3. Do We Need That Extra Money?
If you find that you are only making a few hundred dollars or even a thousand a month, you may be able to cut your budget in order to stay home. Look at your budget and cut back where you can. When you do this you need to add in the extra expenses that the baby will bring, such as diapers, baby food, college savings or 529 plan. It is also important that you do not stop contributing to your retirement fund. Think of the categories that will be reduced if you stay at home—eating out will be reduced, your gasoline bill should be less, your clothing budget should be less, and groceries can be reduced. However, if you have a child with special needs, you will need to continue to contribute to your financial plan to care for him in the future. This step will prevent you from making costly money mistakes because you did not plan properly.
4. How Long Will I Stay at Home?
You may plan on staying home for only a year or two, or you may be planning on staying home until your child moves out of the house. Depending on your answer, you may be able to make some short-term sacrifices for two or three years that you shouldn’t make for eighteen years. For example, the amount you save each month may be reduced temporarily, but it shouldn’t be reduced for eighteen years. You should also consider planning for retirement as a stay at home parent. There are options that allow you to still save for your own retirement.
5. Can I Make Up Any Differences While I Stay at Home?
You may be surprised at the ways that you can make up any differences in the shortfall of your income. Be creative as possible. You may also find that going part time or telecommuting are viable options. You may also consider moving to a place with a lower mortgage or rent payment. Consider every possibility before you make your final decision. If you do decide that you will need to work from home to make up the difference, you will still need to save up money to cover expenses during your maternity leave.