I put together a comprehensive list of all the financial considerations [1] to help determine what the impact would be if I stay home from work. Readers added the things I overlooked [2]. It’s not a decision I’m making lightly. My husband and I have been discussing it at great lengths, sometimes in circles.
Thanks for all the emails and thoughts; especially those of you that shared your personal decisions. It’s one of those topics that really doesn’t have a right answer. You make the best decision with the information that you have right now. Â
The Results
I ran the numbers using both my full time salary and my 4 day workweek salary. Wow! It was very eye opening to see that we effectively only get to use about a third of my salary. Of course, a lot of it has to do with some very large expenses we have, paying for an in-home nanny and Uncle Sam! We pay our nanny over $20,000 per year. In addition, the tax bite on a second income is huge.
What I really want to do is stay home. However, even with my “new” lower salary, we’ve determined it doesn’t make sense financially for me to stay home. Although we haven’t ruled it out for the long run, it’s the decision that makes sense for us right now. Here were some of our considerations:
- As I stated yesterday, I have the larger salary in our family. It’s one thing to scale back to one income, it’s another thing to take away the higher of the two.
- We’re planning more children and I have an option for a leave of absence in the future that may be worth using.
- I’m currently planning to go back to work 4 days a week for seven months. It was a schedule that I was very happy with 2 years ago and I maintained a good work/life balance.
- I scaled our retirement contributions back to 23% last year and to 15% this year. It makes virtually no change to our long term plan. If I were to stay home, I would reduce it to 11%, also having no real effect.
- We want to do some more planning for the new business before having to rely on it.
What This Means
While I ultimately want to stay home, I do feel that I owe my family a level of financial security that my job currently provides. My children are in wonderful hands with our nanny and I’ll only be going back part time for now, which is the best of both worlds.
However, I do feel some “mommy guilt” for going back. I guess I wouldn’t be human if I didn’t. I come across pretty cut and dry when I start talking about the bottom line, but my family always comes first. They always will. I wouldn’t be going back to my job if it wasn’t a flexible, family-friendly working environment. I don’t travel much and for the most part I can take off when my kids are sick, have an appointment or a function I want to attend. I still want to stay home and I’ll be working towards that for the future.
The Future
I’ve come up with a plan to make some changes over the next two years. What I’d like to do is financially set ourselves up so that when we have another child in the next 2-3 years that it wouldn’t make any difference financially which decision I make.
I’m setting a goal to make a $2800 per month difference in our finances. I’ve already started brainstorming some possibilities to make this happen:
- Remove $1170 from our budget. I’ve identified $812 that I can easily eliminate over the next two years. Paying off our car or selling it [3] and paying off the motorcycle. Both were financed because the interest rates were lower than savings rates. However, with the recent cuts [4], that’s not so much the case.
- I could drop our retirement savings by $800 month, but I’m not ready to do that right now. I would be able to do that in 2 years without much change to our overall plan.
- That leaves roughly $830 a month that I would need to earn per month to cover the difference. We’ve launched the first part (My Dollar Plan) of our small business. We have plans to add 3 additional components, but we’ll likely need the next two years to get them completely up and running before we would feel comfortable depending on any of the income. Â
Action Plan
With this decision made and the creation of 3 additional long-term goals to supplement our dollar plan, I’m finally ready to put together our 2008 goals. Look for it soon!
In addition, I’ll be working hard to make the choice for me to stay home in the future easier by doing the following:
- Remove $1170 per month from our budget.
- Replace $800 per month in retirement savings.Â
- Earn $830 per month from our new side business.