While many mothers may dream about being home with their babies all day, there’s definitely one factor holding them back: stay at home mom financial stress.
After all, money might not be everything, but it is a big deal.
Before deciding to leave the workforce, you’ll need to carefully consider your financial situation. After all, living on one salary can take understanding, discipline, and sacrifice.
Many moms will say the joy of being around their children is priceless. But those warm, fuzzy feelings aren’t going to pay the bills or your retirement.
Together, Jo (a working mom) and Rachel (a stay at home mom) are going to go into some of the factors that cause stay at home mom financial stress and address possible solutions.
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Stay at Home Mom Financial Stress and How it Affects Daily Life
Jo: There are a lot of financial differences and areas of consideration regarding your everyday life when weighing one vs. two incomes.
Less money generally means you’ll have to cut back on other areas of your life. Things like eating out at restaurants, fewer vacations, less clothes, and alternate weekend activities.
When you do spend money, you may even have guilt and feel like you need your partner’s permission.
Rachel: I won’t lie, it is rarely easy to drop an income and takes serious and careful consideration.
Start with a budget. Budgeting is not just tracking your spending, but also planning it. This is absolutely essential to making sure you can afford to live on one income and keeps both partners on the same page about all expenses.
Unless your partner’s salary is more than enough for all of your necessities, savings, and even splurges, you’ll likely have to make some adjustments.
Keep in mind that there are lots of ways to save. First start with the obvious savings, childcare costs can be extremely high. Then identify areas where you could cut back relatively easily, like eating out or that gym membership you never use.
If you see that you need to cut more, it comes down to what you’re willing to sacrifice: Manicures? Cable? Vacations?
Perhaps you could get by with one car, which would save on a car payment and insurance. Also, meal planning and couponing can help lower a grocery bill.
If you have to make major long term adjustments to your lifestyle, it’s crucial that both partners are fully on board to avoid overspending or resentment.
It may be helpful to practice living on one income while you’re still working to see if your budget will fit your family. This way you can test if your planned spending is realistic, while saving or paying off debt with the second income.
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Jo: Before we even talk about possible effects on your career, I think it’s important to acknowledge your hard work and accomplishments required to achieve your current job status.
For some that means years of schooling, college, and maybe even post-grad work. It could also mean years of field experience, countless interviews, networking and built relationships, or all of the above. Leaving your career may feel like giving up on all of your hard work.
Another significant concern is to consider not only the loss of your current salary, but also the loss of any bonuses or promotions of subsequent years of service.
And finally, if you ever wish to rejoin the workforce, you may be worried that by missing time you’ll be unable to enter your career at the same position (or salary) as when you left.
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Rachel: There’s really no way around the fact that leaving the workforce is going to be a step back from your career.
To minimize the impact on your long term career goals, many moms try to keep their foot in the door. Some are able to do this through part time work, freelance jobs, or working from home. Obviously, this is not an option for everyone and your options depend on your job field, nor is continuing to work in a different capacity something that appeals to all stay at home moms.
If you were not thrilled with your previous employment or simply want a change when returning to work, look for ways to gain experience or skills during your time at home. Consider taking classes or volunteering in areas that could add to your resume or help you switch career paths.
Ultimately, it is hard to argue that staying home is ever the best career move, but you can try to mitigate how much it impacts your future prospects.
Jo: There are other perks from working you might need to figure out before you make the decision to leave, the biggest one being health insurance.
Some women are able to jump onto their partner’s plan, but before doing so cost has to be considered. Often spouses and children have higher premiums than the employee.
Another insurance consideration is life insurance. It’s imperative that both the working and stay at home parent have adequate life insurance coverage.
Even though the home parent isn’t bringing in an income, if something should happen the surviving parent would have additional expenses, such as childcare.
Rachel: Stay at home moms should definitely account for any lost work benefits.
Make sure you and your family will be covered under the working spouse’s health insurance. It’s important to find out how much their premiums will change as well as how medical care is covered so you can budget accordingly. It’s vital to make sure you know what you will pay out of pocket, especially if you or a family member have any health issues that are treated regularly or prescription medications. Plans vary widely and you need to know the specifics of yours.
Though you may be tempted to skip life insurance for the stay at home parent, it isn’t a good idea. Their family contribution is not without value.
Anything the stay at home parent does to save money for the family would need to be accounted for and the most obvious, and likely largest, expense is childcare. Also, would the working parent be able to maintain the home like cooking and cleaning without help? Also, if they were depending on that parent returning to work later, how does that loss of future income impact the family?
Term life insurance is generally less expensive and may be a good option on a tight budget. You should work with a financial advisor to determine how much life insurance you need.
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Jo: With the ever-increasing cost of tuition prices, it’s hard not to be worried about saving for your child’s education expenses.
Are you able to fully (or even partially) fund your child’s college savings account on one salary?
If not, another concern may be on the impact student loans can have on your child’s future. Student debt is a crisis in our country. Adults who have student loan payments are much more likely to push off things like marriage, kids, buying a house, and changing jobs.
Rachel: Given rising education costs and the burden of loans, I don’t want to minimize the importance of saving for college. For many, even dual income families saving enough to pay for their children’s education is a struggle.
Though fully funding college is not in the cards for lots of parents, putting away whatever you can for your children’s future will still be helpful. Two common accounts for parents to save for college are a Education Savings Account (ESA) and 529. A professional can help you figure out which option fits your specific situation best.
Also, some stay at home parents choose to return to work when their children are older specifically to help pay for their college expenses.
While loans are certainly not ideal, they are a viable option for many students. Both my husband and I had student loans that we paid off (before I left my job). For my own children , I will encourage borrowing as little as necessary and minimize loans by considering community college, in-state schools, scholarships, military, and part-time jobs.
Jo: Saving for retirement is something a lot of people ignore early in life because they see it as so far away. A problem for the future.
Even though you’ll be on a tighter budget with only one salary, it’s imperative to find and set aside money for retirement. The earlier you start saving for retirement the better, because then the money has more time to grow through investments and compounded interest.
Rachel: Though being a stay at home mom doesn’t typically offer a 401(k), that doesn’t mean you have no options to consider to save for retirement.
If you take a few years out of working to be home, you may want to adjust your expectations about when you plan to retire to make up that time. However, some parents never return to full time employment and that doesn’t have to mean that they are doomed when it comes to retiring.
Keep in mind that I am not a financial planner and it’s best to be advised by someone who understands your specific circumstances and needs.
As a general rule, we should be saving about 15% of our total income for retirement. This can be achieved by having the working spouse save this amount in their retirement accounts.
Alternatively, in certain situations, a working spouse can contribute to a nonworking spouses Individual Retirement Account (IRA). So a stay at home parent can have either a traditional (pre-tax) or Roth (after-tax) IRA if they qualify based on income and contribution limits and the spouses file their taxes jointly.
Being a stay at home mom does not mean you can’t still be prepared for retirement. Figuring the best way to allocate your retirement savings can be confusing, so you should talk to an expert who is familiar with your specific financial situation.