If you're planning on staying at home with the kid and becoming a one-income family, here are some pointers to clear up your financial picture.
So you want to be a stay-at-home mom or dad, but you're afraid that you won't be able to swing the finances?
If that's you, follow these seven steps for altering your budget and making your new job as a stay-at-home parent a financial success.
1. Make sure both parents are on board. Becoming a stay-at-home parent isn't something you can do without your partner's support. It's a major decision for any family. So make sure that you're in agreement. Discuss the advantages and disadvantages of having a parent stay home with your kids, and consider the financial and emotional issues, since both partner's roles and responsibilities will change.
One big challenge you'll face is the trap of thinking your job is harder than your partner's. When finances are tight and tempers are short it's easy to forget each of you has a job that's equally important. Now is the time to talk about how you'll handle those feelings.
2. Review your spending. It's important to know where your paycheck goes each month. No one likes to budget, but you won't be successful unless you know how much you spend and where you spend it. Between your credit card, debit card and bank statements, you should have a pretty good idea. You don't need to track down every penny, but your miscellaneous category shouldn't be more than 10 percent of your expenses.
3. Adjust your spending habits. Any worthwhile goal requires some sacrifice. The same is true of being a stay-at-home parent. You'll need to adjust your spending, and you don't need to wait until you quit your job to start.
Begin with luxury items and conveniences. Now is the time to find out whether you're willing to live without premium TV channels and daily trips to Starbucks. Don't be afraid to make cuts that seem a little painful.
Set aside any money you save, and put it in a savings account. You'll find it handy when you face an unexpected bill after you quit your job.
4. Put together a stay-at-home budget. You're probably well aware of how much income you'll lose. Take the figures from your expenses and form a hypothetical budget.
Look for areas where staying at home can save you money. For instance, your grocery budget should come down when you do more food prep and cooking at home. The cost of commuting, business lunches and clothing will also all be reduced or eliminated. Your taxes will be lower, too. Talk with your accountant or HR representative to see if you should change the number of dependents you claim.
Don't expect your estimates to be right on the money.You'll probably be a little high on some areas and low on others. But make every effort not to tilt the numbers in one direction to get the answer you want. That won't help you if you decide to stay at home – you'll just become frustrated when your budget proves unrealistic.
The stay-at-home budget should give you an idea of how close you are to your financial goal. You may find that you need to squeeze expenses more than you thought or even take a part-time job to bring in a little income.
5. Test your budget. As much as you can, see how close to your stay-at-home numbers you can get while you're still working. For some items, like commuting, you won't be able to make any changes before you stay home. But for others, you can see how realistic your budget estimates are.
6. Make the decision and switch. After a few months, review your budget performance with your spouse. You should have a good idea of whether your finances will support a stay-at-home lifestyle.
When it's time to become a stay-at-home parent, your change should be less stressful. You've eliminated most financial uncertainty, and you know what's required of both of you to make staying at home successful.
7. Adjust your plan. Some parts of your plan will work exactly as expected. But others won't. Be prepared to make adjustments both in terms of how you spend your time and your money.
Becoming a family with a stay-at-home parent isn't easy. But if you decide that's what you want to do, taking an organized, thoughtful approach will increase your chances of success.
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