Becoming a stay-at-home parent is a big move. Many parents that have made the switch agree that it is their biggest life achievement and one of the most rewarding experiences they’ve chosen. The benefits can’t be denied – but there are financial and emotional decisions to be made before you put your career on hold.
One of the biggest concerns parents have is working out the finances.
Couples that are used to surviving on two pay checks will almost always struggle to move down to the one. However, with pre-planning being a stay-at-home parent can be financially doable. And better yet, it could be one of the best ‘jobs’ you’ve ever had.
Here are a few considerations before making the switch:
1. Develop a Post-Baby Budget; and Test it
It is important that both parents are on board with the decision. It’s not something you can do without your partner’s support – especially when it comes to family budgeting. One of the biggest challenges with being a stay-at-home parent is developing a realistic budget to work with. Weigh up how much income you will be losing and take your everyday expenses to form a hypothetical budget you and your spouse can work with. Financial planning is an important step so you want as much time as possible to test out the post-baby budget.
Before making the switch, test out your hypothetical budget for at least one month. This will give you time to adjust to the new lifestyle, make adjustments or look for areas that can be improved. It will also ease you and your family into the new spending habits and help determine how realistic your budget estimates are.
2. Weigh Up What Is Most Important in Life
Many people decide to become a stay-at-home parent because they want to be there for the biggest moments in their children’s lives. Even the most career-driven parent can take a step back and appreciate the beauty raising children at home holds.
Ask yourself what the most important things in your life are and use this mantra to help make the required cut backs and sacrifices to make the new ‘job’ work.
You may need reminders along the way about why you chose to stay home, and that’s ok. But by weighing up the biggest things for you in life and what choices you need to make to get there – not just in professional success and the accolades that come with it, but the people in your life – family, too. Knowing that being a stay-at-home parent can enrich your life through the time you are spending with your children can help to create comfort with the financial decision you will need to make.
3. Review Your Spending and Adjust Habits
A trial run of the hypothetical budget will help you to review your spending and adjust habits accordingly. Some parts of the plan will work perfectly; whilst other areas will require more sacrifices and work to make it happen. Be prepared to make continuous amendments both in terms of how you spend your time and money. It is about staying organised – and that can take practice for many new stay-at-home parents.
Regular spending habits may need to be changed too. You don’t need to wait to quit your job to adjust spending habits – this is something you should be testing as early as possible. Begin with luxury items and take the time to find out whether you are prepared to live without the premium TV channels or daily coffee and bagel run. These cuts may seem painful at first, but they will pay off in other areas later.
4. Be Economically Flexible
Just because you’re making budget cuts within the family, doesn’t mean to say you can’t find ways new ways to earn money. Living on one income is may be stressful initially, so if it’s really not doable for your family, it may be worthwhile to consider ways you can stay at home and earn money too.
Be open and flexible to reasonable options and speak with other stay-at-home parents to find out what they do to take the financial pressure off.
Earn by saving or take up a hobby you can do from home with flexible hours. Some example could be starting a basic website blog, doing childcare or admin work you can comfortably do from home whilst still spending adequate time with your children.
5. Budget by the Same Rules
When one parent is on a strict budget and the other is earning their regular pay check and spending money, it can lead to resentment in the family. For a stay-at-home parenting situation to work, both partners need to be on the same page and be budgeting by the same rules (regardless of who is earning and who isn’t).
Both partners should have equal access to the household funds so both partners feel they are working hard – whether it’s in the workforce or being a stay-at-home parent.
You won’t know straight away how much to allocate to both you and your spouse and it may take a while to get your head around the idea. But it will be important to play fair and overestimate to allow for emergencies or shortfalls. Start by working out an equal percentage of your partner’s income you can both agree on that will go into your individual funds. It is then up to you and your spouse whether you want to save this income for a big purchase or spend on a regular basis.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
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