How to Afford to Be a Single Income Family

Personal finance and budgeting are the main worries when one parent looks at the option of staying at home to look after their young kids. Is it possible to afford to have a stay-at-home parent? We did a financial analysis a few years ago and have since been living on a single income without many sacrifices.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• An open mind
• A can-do attitude
• A loving husband / wife
• Wonderful / beautiful kids

1. 
    

   Before you even get to the basics of budgeting and cost cutting, you have to be clear of why you are doing this. This would be the reason(s) you will have to keep reminding yourself when the going gets tough. For us it was a longing that our kids are brought up on our principles and culture and we loved them so much we could not think of leaving them with strangers at a so young age.

2. 
    

   Before you think of the loss of monthly income look at the bright side of what you save if only one spouse works
   1. You may not need a second automobile - about $20000 (+ interest on loans) every 5 years
   2. Savings on gas, car maintenance, public transport etc for one spouse - about $2000 per year.
   3. Savings on childcare expenses - $8000 per year per kid
   4. Savings on Formal wear for one spouse - $ 1000 per year
   5. Savings on Taxes for the second income. Remember if you are filing as married filing jointly then the second spouses income is taxed from the very first dollar
   6. Savings on other expenses like take-outs, restaurants, dry cleaning, coffee breaks - $3000 per year
   7. Savings on household chores like lawn mowing, house cleaning, grocery shopping, minor house repairs - $1000 per year

3. 
    

   So if you look at the total savings for a family with 2 kids in the 25% tax bracket where the second spouse is giving up a salary of $50,000 = 4500 (for 1.)+2000 (for 2.)+ $16000 (for 3.) + $500 (for 4.) + $12,500 (for 5.)+ 3000 (for 6.) + 1000 (for 7.)
   So a conservative savings of around $40,000. Did you see this coming?

4. 
    

   Now for the increased expenses or loss of savings
   1. Tax breaks for child care expenses
   2. Increased heating/ cooling bill by not being able to adjust thermostat during the day
   3. Away from the stressful environment of being around kids the whole day (just kidding)
   
   Actually I cannot think of any other expense for staying at home and not working.

5. I read other articles which talks of cost cutting to reduce debt, coupon clipping, shopping frugally etc now become easier since you have one spouse at home who has time to plan ahead.
   Also since you have only one income, you will be less of a risk taker and tend to save more. Most two income families have little or no savings.
   But the advantage of watching your kids early formative years being influenced by you, your culture, your language etc - Priceless.

Tips & Warnings

• If you are not good at math, bankrate has a calculator which shows you the calculations based on some assumptions. look at link below
• Form your own community of like minded people so you can have play dates and share stories and tips.
• You have an advantage in today's world because you have so many luxuries you can say no to.
• Do not compare yourselves to other two-income families. Otherwise you may spend more to live up to their expectations
• Do not jump into it all at once. Transition into it slowly. Plan for at least six months

Resources

• Spouse Income calculator