7 money moves to become a stay-at-home parent

8:30 AM become, money, moves, parent, stayathome No Comments

| By Gary Foreman, U.S. News & World Report

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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Benefits of a stay-at-home parent

2:00 PM benefits, parent, stayathome No Comments

| By Daniel Bortz, U.S. News & World Report

Losing a source of income stings, but it may not hurt your finances as much as you think.

Before Lance Somerfeld's son was born in July 2008, he was working as a sixth-grade teacher at a high-need public school in the Bronx, earning a salary of roughly $45,000. He left his career to be a stay-at-home dad, wanting to be involved in his boy's early milestones -- milestones Somerfeld's own father missed while he worked a full-time job throughout Somerfeld's childhood.

The decision to become a stay-at-home dad also made sense financially. "For a quality day care or a nanny, it would have cost us about my take-home salary," Somerfeld says. "Why would I pay someone else to take care of my child when I can do it for the same cost?" His wife's job as a corporate actuary also served as a financial cushion.

Somerfeld is among a growing number of men who leave the workforce to raise their children while their spouses continue working -- a group that more than doubled from 2000 to 2010, to 176,000, according to U.S. census data. While stay-at-home dads are becoming more common, women are still the archetype, with about 5 million American moms staying home to take care of the kids.

As it was with the Somerfelds, the decision for a spouse to become a stay-at-home parent largely reflects today's steep costs of childcare. According to a census report released in April, in families where children are younger than 15 and the mother is employed, average childcare costs have increased by 70% since 1985 -- jumping from $84 to $143 per week. In fact, in 36 states, the average annual cost of having a kid in daycare exceeds in-state college tuition, according to Child Care Aware of America, an information resource for parents and childcare providers.

Melissa Stanton, author of "The Stay-at-Home Survival Guide: Field-Tested Strategies for Staying Smart, Sane, and Connected While Caring for Your Kids," says many people underestimate the financial contribution of a stay-at-home parent. "Earning an income and taking care of the kids are of closer value than people think," says Stanton. "Even though the stay-at-home parent isn't bringing money home, there is still financial value to what a stay-at-home parent does."

Converting to a single-income family -- despite the loss of earnings -- can put a household in a lower tax bracket. For example, married couples who will file their 2013 taxes jointly and have a household income of $17,851 to $72,500 will be in the 15% tax bracket, while those with a household income anywhere from $72,501 to $146,400 will fall into the 25% tax bracket.

Dianna Scofield of Meridian, Idaho, was always a savvy consumer, but becoming a stay-at-home parent for her first son in 2006 gave her more time to practice frugal living habits. She started cooking almost all of the family's meals. She also began making foods that take longer to prepare but are less-expensive than purchasing at a grocery store, such as cooking with dried beans instead of canned beans. She even bakes their bread; it doesn't take long, she says, but points out one needs to watch dough as it rises. Preparing more at-home meals reduced the family's food budget, which is the third-largest expense for the average American household, according to a 2011 estimate by the Bureau of Labor Statistics.

The tendency among stay-at-home parents to eat out less can also save money. Seth Leibowitz, a stay-at-home parent in Westchester, N.Y., says he socks away an extra $50 that he used to spend on lunch while working.

Staying home to take care of the kids can also put money formerly spent on work clothes or dry cleaning to better use. When Somerfeld was working, he would spend $8.50 on suits and $4 on pants at the dry cleaner. Now, he says his typical "stay-at-home dad outfit" is a shirt and a pair of jeans.

He also saves the $5 he used to spend on the subway for his commute to work. A $5 commute may seem paltry to many consumers, as the average American's journey to work takes 25.5 minutes each way, according to a recent report by the Census Bureau. But commuters in San Francisco, New York City and Washington, D.C. -- the metro areas with the highest mean travel time -- especially feel the pinch. Factor in today's high gas prices (AAA estimates the national average is $3.51 per gallon), and the journey to the office doesn't have a number of workers excited to start their day.

Stanton says a number of stay-at-home parents feel many in the working class belittle what they do. "I call all moms 'working moms' because both employed moms and stay-at-home moms work," she says.

According to Stanton, a former stay-at-home mom herself, her husband was able to advance in his career because she stayed home to care for their kids, which gave him more job flexibility in terms of his hours and the ability to take business trips. "His 401k is as much mine as it is his," she says, adding she lost eight years of earnings by leaving the workforce.

The decision for a spouse to become a stay-at-home parent has significant financial consequences. In many cases, losing a source of income is too much for a household to bear. However, for some families, the monetary benefits and the extra time spent with their children outweigh the costs.

For a rough estimate to see if your family can afford to have a spouse leave his or her job to take care of the children, see Parents.com's stay-at-home calculator.

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