One Income Living in a Two Income World
 You're the American dream couple -- fast-track careers, dual incomes, and a free-spending lifestyle. When baby makes three, stay-at-home parenting might be appealing, but what if your family can't live on a single income?
Think again.
Adjusting to living on a single income is difficult, but not impossible. Single parents head 33% of American households, and half of the female workforce stays home while their children are young.
How can we afford to live without a second income?
The hidden work costs are often overlooked when valuing a second income. Some costs like Day care services are obvious, they range from $333-$833 monthly. However, there are many more, less visible costs to be considered:
- Transportation (including parking)
- Work lunches -- an inexpensive $5 a day equals $1,200 annually
- Buying and maintaining a work wardrobe
- Higher personal services costs -- such as more frequent hair trims and dependence on outside services (e.g., cleaning) or laundry services
When both partners are employed full-time there are other, harder to isolate, costs that may include:
- Higher costs of eating out or take-in food.
- Rushed and impulse grocery shopping
- Dependence on convenience foods (e.g., frozen foods)
- Guilt money for extra toys or treats for children in day care.
Calculate your bottom line lost income.
If you reduce your household income from $70,000 to $45,000, you haven't actually lost $25,000. You'll save $7,500 in federal taxes and $2,000 in Social Security taxes -- subtract state tax savings and work expenses, and you lose $15,000 or less.
Use these typical salaries and associated work expenses to estimate your expenses. Armed with this information, calculate whether returning to work full-time is financially worthwhile.
What is best for you and your family?
With a lower financial incentive, base your decision of staying at home or returning to work on what's best for you and your family. This doesn't have to be a 'forever' decision -- many parents stay home only until their child attends school full-time.
The transition to full-time parenting can be difficult since there will be a loss of 'meaningful' employment and infrequent adult conversation. Part-time or freelance work can help restore a sense of balance in addition to providing an income supplement and a heightened self-worth. The key is not to isolate yourself from adults. Attend free workshops, seminars, or book-signings, and when possible take a class that will maintain your skills or stimulate you.
Living on a reduced income doesn't mean deprivation, but it does mean a simplified, conservative lifestyle. To be specific:
Change your priorities: Scale back on extravagances. Accept that certain luxuries, such as yearly vacations to Europe, are beyond your current financial situation.
Establish a budget: Learn to live within your means. Budget for all regular monthly expenses, and emergency expenses -- include an entertainment budget as a reward.
Get out of debt: If your installment debt (excluding your mortgage) equals more than 20% of your income, you're in trouble. Eliminating debt is difficult -- consider free financial advice services from organizations such as the Consumer Credit Counseling Service.
Changing insurance needs: The value of the stay-at-home parent is estimated at $35,000 annually for child care and household services. Insure both partners so that the surviving spouse can adequately care for the family.
Support network: Your old friends, living on dual incomes, may not understand your changed financial situation. Establish a new network of friends in similar circumstances.
Learn to live frugally: Taking care of the pennies will save you dollars . . .
- Take control of your cash flow. Budget for everyday expenses, and avoid the ATM machines.
- Find the
little expenses http://csf.colorado.edu/perma/sustnw/frugal-ed/1416.html
that are draining your budget.
Shop using the grocery store flyers and stock up on staples when they're on sale (it's usually cheaper than buying in bulk at shopping clubs).
Plan your menus around sales.
Pastas, grains, and beans are nutritious alternatives to meat.
Shop in thrift shops for items, like snowsuits, that your youngster will outgrow in one season.
Wait for sales and comparison shop before purchasing -- especially on major-ticket items.
Save on entertainment -- institute family game or movie marathon night --and spring for a pizza.
Read tips from the pros: Jonni McCoy of Miserly Moms offers advice on frugal living, while Barbara Whiting homeparenting advises stay-at-home moms and dads.
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