Oct 13, 2010

Living on One Income (Janssen)

Aleta, one of our lovely readers, asked recently about preparing financially to drop to one income so that I could stay at home with my daughter. Although I didn't make up my mind for certain to stay home until well into my pregnancy, I'd anticipated that it was likely the route I would choose when the time came, so we began preparing for that possibility before the baby was born.

If you are considering dropping down to one income, whether for a baby or for other reasons, here are some things to consider:

1) Look at your expenses and determine if you can pay your bills with just one income. I know. . . not fun. But you need to know if it is really actually feasible to live on just one income. Are you going to end up unable to pay your electricity bill on one income or will it just require a slightly (or substantially) less rich lifestyle?

2) Decide what you're going to do with your second income while you still have it. Last year, we did not use one cent of my income to live on. We paid for our second car in cash, paid off our student loans, and used the last three paychecks to bulk up our emergency fund. Having no debts, no car payments, and a chunk of money if we needed it made going down to one income both easier and less terrifying. It also meant that we knew we could live on one income because we'd already been doing it for a year.

3) Figure out how much of a second paycheck you will actually see after additional expenses. Sometimes you see the cost of keeping a job after having a baby and they put in all these things like "eating out more because you're too tired to cook!" and "professional wardrobe!" and then tell you how you'll actually be PAYING your job to stay. I didn't really buy this because we are committed eaters-at-home (if I don't want to cook, we have cereal or eggs - we don't run out and drop $30 on dinner) and also, I already HAD a professional wardrobe (and I was banking on the fact that I'd be able to fit back into it after the baby was born).

We took my income, deducted the taxes, the required union dues, the required retirement contributes, the cost of childcare (which would be less than in some jobs because my school day was only 7 hours, which included my lunch hour), and the cost of commuting (I worked about 40 miles from our home) and came up with $10,000 of money that I would make over the course of a year. I decided I was not willing to work full-time and leave my child with someone else in exchange for $10,000.

4) Know that there will be sacrifices. You may drive an older car while friends get new cars. You may not be able to go out to eat as often or buy as many new clothes. For us, those sacrifices are absolutely worth me being our daughter's primary caregiver.

I know many of our readers are stay-at-home parents - any secrets to preparing to live on a single income?


Carly said...

Pay tithing and be generous in your fast offering. And then budget and be frugal. And pray really hard that somehow it will all work out.

We, like you, saved a good chunk of my earnings before our first was born. It was (is? It's now almost gone--or will be once baby #2's hospital bills show up in a few months) a life saver. I don't know how we would have had a baby (now two), bought a car, handled ER trips etc. without it. Goodness, I like having savings in the bank.

Jennifer Lee said...

Careful, careful planning. At least in the beginning when (generally) the one income you are living on it not huge. I agree that it is vital to have planned for it in advance and to be very realistic about the things you are and are NOT willing to live without.

TheMoncurs said...

I second doing the math and figuring out much you would actually be taking home if you were to work. I looked at childcare costs in my area and took out taxes and insurance and blah blah and it turned out I'd be making like...$12 a week. For real.

janet said...

Good post, and something I think about A LOT even though I don't have kids yet. I'd think moving from a high-cost area to a lower-cost area has to help a lot.

One thing I worry about most is not the 1, 2, 3, or more years with one income, it's about how much I will "lose" in lost raises and promotions if/when I reenter the workforce. It's hard to give up the professional mobility more than the few years of salary sometimes.

Melissa said...

Right after we got married, my husband and I decided to pay off all the (his) debt. It took two years, we became a one car family, but we saved and saved and all my money was spent paying off bills or saving money. His income went to supporting our family. Three years later when our first baby came we had no debt (aside from our house) a substantial savings account, and we had already been living off his TEACHERS salary. People ask us all the time how we live off one income that is a teachers salary. Careful planning, staying out of debt, coupons, and tithing.

Jenae said...

Thanks for your thoughts. I'm slightly terrified for this step for us. Especially when we are living now on one and a half income and we are cutting back to just half income. Dang student life. Though, aside from the fact I long to raise my own child, the cost of child care is enough for me to say no to working. After all, I think my time is worth more than $2.50 an hour... the figure we estimate I'll make after paying childcare and taxes.


PS next, I want a post about how you and Merrick get sweet diaper deals.

Stephanie T said...

There is also the complimentary side to this topic of what can a Stay at Home Mom can do to boost her husband's earning potential. We have found that to be a major key in being able to afford the lifestyle we have chosen. My husband has always sought my help in finding jobs, interviewing, and in helping him pursue opportunities.
It also helps that before we were married my husband was extremely committed to providing exclusively for our family. That committment has led him to ask for raises (even in a down economy, and get them!), change jobs, or get promotions whenever we have had a child. We have had 4 children and with each child he has gotten at least a 15k jump in pay within months of their birth, with our last he doubled his salary. And he isn't on an executive track or anything he's just a regular, geeky engineer who has a wife at home supporting him and telling him how much he is worth and helping him get it.

Aleta said...

Thanks for the post and for all of the great comments!

Nicole Vickers said...

One of the most basic, though in some cases often overlooked, is planning as much as we can about the future. It would really take some computing here and there, but it's not at all difficult. Another thing is that there's more to budgeting than just dividing the single income into things that are needed. If you're paying the mortgage, the second car, or anything, budgeting the income correctly does wonders.