This is another guest post from Joe Plemon from Plemon Financial Coaching. Joe is the Money Columnist for The Southern Illinoisan.
Q: We are expecting our first child in six months and are wondering if we can afford for my wife to quit work and be a stay at home mom. Can you help us think through this decision?
A: You are wise to be considering the financial ramifications of this change. Failure to do so could create huge debt and huge problems for you. Here’s what you need to do:
More from GFC, Below
1. Prepare a Working Budget
The first thing you will need to do is prepare a working budget with life as it is today. Then, subtract her salary to see if you can continue your current lifestyle on your salary alone. If you are like most couples, you won’t be able to. However, don’t despair. Once you know how much your negative shortfall is, you will also know exactly what you need to do to make it on one salary. Here are some tips:
2. Make A List of Expenses
List expenses you be able to avoid if she stays home. Some possibilities are child care, clothing for work, travel to work, lunches out, and car payment. You also need to list additional expenses you may incur if she stops working, such as company provided health insurance.
3. Revise the Budget
If your proposed single income budget is close, try living on the new budget for a few months before the baby comes so you can prove to yourselves that you can do it.
4. Other Possibilities
If the numbers still don’t add up, consider some work she could do from home. What is she passionate about? Crafts? Accounting? Tutoring? Piano or art lessons? Try the home business, but make sure it is profitable before she quits her full time job.
5. It Isn’t Over Yet
If the deficit is still too great, don’t give up. Could you afford this change if you had little or no debt? You could take on a second job (temporarily) and use all the additional income toward debt reduction.
Set goals, stay focused and you can achieve your dreams. I wish you well.
Other good reads: