stay at home parent

Taking a Work Leave? Here's How to Prepare

Ashley Marcin — Wed, 04 Jan 2017 10:30:33 +0000

You may be looking to take some time off from work to stay home with your children. Or perhaps you have a new business venture you'd like to get after.

Leaving the traditional workforce is something people do for a variety of reasons. I left my 9-to-5 a little over five years ago to stay home with my daughter. It was a big transition, both personally and professionally. I can tell you firsthand, though, that if you're smart about it — it may be one of the best moves of your life.

1. Make a Budget

If you don't already have a budget, make one — today. It's incredibly important before you take a job leave to understand how much money you have, where it's going, and how you'll deal once you don't have a steady paycheck coming in. Making a budget can be an enlightening or frightening process, but you definitely want to look before you leap into the financial unknown.

To start, write out exactly how much money will be coming in after you leave your job. Then write out how much money goes out between fixed expenses (housing, student loans, car payments, etc.) and variable expenses (groceries, entertainment, clothing, travel). Don't forget big items like health care, either. After that, you can look for opportunities to cut your budget for the big change. (See also: Build Your First Budget in Five Easy Steps)

While you're at it, try saving as much as you can and building an emergency fund. My husband and I actually spent a good part of the year before I left my job trying to live within the budget we'd need after the baby. Any money we saved in the meantime went directly into our bank account.

2. Get Introspective and Creative

Leaving your job may mean making some pretty tough sacrifices. Maybe you won't be able to buy new cars or go on vacation. Maybe you'll need to stop eating out or even downsize your home. There will likely be days when you will ask yourself: "Why am I doing this again?"

Having a long, hard talk with yourself (or several) will help you solidify the motivations for your leave. They will become stronger and stronger in your mind. Sure, you may hit some difficult or tricky times, but if you are passionate about the reason, you'll have the perseverance to continue on and figure out solutions.

If you're feeling on the fence about it all, you may want to get creative. Meet with your HR department to explore other opportunities. Maybe you could scale back to working part-time. Maybe your department offers a more flexible schedule. Or maybe there are other jobs in your community that would afford you the time you're looking to gain.

3. Practice, Practice, Practice

After chatting with HR, I discovered that the university where I used to work offered up to eight months of unpaid child care leave. Before I decided to quit my job for good, I let my boss know that I wanted to take the maximum amount of leave. During this time off, our family continued to practice what life would be like — and what our budget would be like — without my paycheck. It wasn't a totally easy transition.

For example, within the first month of my leave, our furnace died. It was the dead of winter, so we had to dip deep into the emergency fund earlier than expected. A few months after that we had a major roof leak. This is where our savings and budgeting really came into play.

In the end, we realized that we would be fine because we had planned for these types of minor disasters. I had moments of doubt, though, and I was thankful to know that I had a job waiting for me if I needed it. Find out what type of temporary leave options are available to you. A trial run is a wonderful opportunity to see if your plans will work out in real life. Think of it as a pair of training wheels.

4. Leave on Good Terms

Even if you hate your job, you don't exactly want to leave burning all your bridges in the process. Of course, you may find yourself with a boss who doesn't completely understand or support your decision. And that's okay. What you can do, though, is to ease the transition for everyone involved as much as possible. That will help you leave on the best of terms.

Give your boss plenty of notice before your leave. You may even want to, as I did, ask if you might return to your workplace in the future. Though my boss wasn't thrilled to be losing a dependable worker, he ultimately understood and respected my reasons for leaving.

I left scrupulous notes for my replacement, organized all my digital and paper files, and even offered to be available for a short while if anyone had questions. On my last day, we shook hands and I felt confident — and still do — that I could apply for future positions.

5. Keep Your Toes Dipped

When I left my job, I wasn't totally sure how long it would work out. On paper, things were looking good. In practice, well, we kept hitting some financial roadblocks. I knew I wanted to stay home with my daughter, but I also knew that bringing in some money would be helpful. Keeping my resume and skills relevant was another important thing to me.

That's when I started looking around for freelance writing work. Some of my friends were working on different gigs, so I reached out to them. Networked. I asked tons of questions and even got some leads on jobs. In the years since, I've worked at home anywhere between five and 30 hours a week. I've had a lot of situations in my life where I've needed to scale back or almost entirely from freelancing. Still, I have these jobs on my resume.

I'm keeping current. (And I'm enjoying it, too!) Even if you don't want to actually work during your time off, you can volunteer. You can absolutely include volunteer work on your resume. Experience is experience. And the great thing about volunteering is that you can often put it on your own schedule.

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This article is from Ashley Marcin of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Go From Two Incomes to One

Andrea Cannon — Tue, 12 Jan 2016 14:00:02 +0000

Are you planning on taking some time off from work to raise a family — or has your spouse recently lost their job? Living on one income can be challenging, but it doesn't have to spell financial disaster. Consider the following ways to reduce the stress of a household income transition.

1. Plan a Trial Run

If possible, try giving a one-income lifestyle a trial run for at least a couple of months before making any sudden changes to your household. Act like the second income doesn't exist. This will help you determine if a one-income lifestyle is attainable, prepare you for any challenges ahead, and help you build up your savings in the meantime before transitioning to one income.

2. Make a Budget

If you aren't sure of how much you'll need to meet your monthly expenses on one income, then use a stay-at-home calculator for an accurate estimate. Once you understand your monthly needs, work on creating a budget and sticking to it.

Your budget should factor for fixed expenses like rent, car payments, utilities, health and life insurance, credit cards and loan payments, cable and cell phone bills, taxes, and necessities like groceries. But you should also account for variable expenses, like eating out and entertainment, subscriptions, and other expenses that you can more easily limit.

You may need to get aggressive in cutting some of these expenses, like canceling your gym membership or visiting the salon less often. And make sure you aren't living beyond your means when it comes to your rent or mortgage and car payments.

3. Build Up a Savings Cushion

Building a savings cushion becomes doubly important now that your household will be subsisting on a single income. The average family should save a minimum of three to six months' worth of expenses — and ideally up to a year's worth, if possible. While you're at it, create a contingency plan to help manage any further changes in income, unexpected expenses, or other financial emergencies.

4. Pay Off Debt

One-income households are less able to handle debt, so try to reduce what you owe as much as possible before transitioning to once earnings stream. Eliminate credit card debt and pay down as much as possible early on, and by all means, try not to add any further debt to your plate so that you don't increase your monthly expenses.

5. Strive to Save More Every Month

A lower household income means it's even more important to do all you can to save money wherever possible. Some easy tips for cutting monthly expenses include:

Shop sales and use coupons, whenever and wherever possible.
Limit dining out. When you do dine out, look for deals from sites like Ebates and Restaurant.com, so you can save money at all your favorite restaurants.
Take advantage of free activities with your family. Plan free date nights and family outings together.
Host swaps with your friends and family. You can swap food, clothes, books, or toys. You can clear clutter out of your home and receive items that feel like new from your friends and family.
Take advantage of personal finance apps to stay on track and receive alerts when you risk going over budget.

Living on One Income — Even When You Don't Need To

The steps outlined above are wonderful for households downsizing their income, but they work just as well in a two-earner household. In fact, living on a single income and saving the other is an excellent way to strengthen your finances quickly. And if you do find yourself needing to live on one income, you'll be better prepared — financially and psychologically.

What are your tips for going down to one income? Please share your thoughts in the comments!

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This article is from Andrea Cannon of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Things to Consider Before Becoming a Stay-at-Home Parent

Chris Birk — Thu, 08 Sep 2011 09:48:23 +0000

A couple friends have recently cast off the shackles of the working world to embrace the role of stay-at-home parent.

Walking away from any full-time salary in this economy is a tough decision. Scores of parents haven't had the luxury of choice because of layoffs, downsizing, and the overall fiscal turmoil.

So far, the decision is proving a rewarding one for our friends, but they certainly debated the merits and quality-of-life considerations long before taking the plunge. Here's a look at some of the major fiscal, social, and familial factors they took into account. (See also: Why Stay-at-Home Dads Are Good for Families via Parenting Squad)

1. The Single Salary Budget

It's the obvious starting (and possibly ending) point. The most important question surrounding becoming a stay-at-home parent is whether your family can truly afford living on one salary. Before becoming a stay-at-home parent, make sure to adequately plan for the reduction in income. Make sure that your family is able to maintain the same quality of life they are used to while also having adequate income to save for retirement. Honest budgeting and realistic expectations regarding necessities and wants are key.

2. Having a Safety Net

If the employed spouse becomes injured, terminated, or laid off, will your family be able to support itself until your spouse finds work again? Unless your family is able to support itself for six months without a salary, becoming a stay-at-home parent may not be a good option. A sudden job loss could leave your family in a tough financial spot.

3. Adequate Communication

While one parent is working and the other is staying at home, it is very easy for resentment to build between spouses. One or both may feel taken advantage of, and it is often common for the stay-at-home spouse to feel neglected. Before you decide to stay-at-home, it's a good idea to thoroughly discuss how you will manage the change and how you plan on keeping the lines of communication open. Also plan to make several changes to accommodate the different schedules and remain flexible.

4. Actual Savings

While you may be saving money on child care and gas by choosing to stay at home with the kids, you may spend more money on utilities, food, and activities. Trying to entertain children at home may also prove to be more expensive as you may have to purchase new toys or plan for daily outside activities. Actually sit down and calculate the current expenses you have at the office and those you can expect to have while staying at home.

5. Social Outlets

Staying at home instead of going to the office can bring about strong feelings of isolation and lacking social connections. Before becoming a stay-at-home parent, make plans for maintaining an adequate social life. Also keep in mind that having to create a social life outside of the office can be more expensive. Instead of being able to have lunches in the meeting room with coworkers to fulfill social needs, you may now have to enroll in enrichment activities or plan to eat out more.

6. Career Prospects

While most parents choose to become stay-at-home parents during their childen's younger years, many desire to return to the working world once their children are older. Being out of the workforce for numerous years can decrease the likelihood of securing a job in the future, and parents who choose to stay home need to consider whether they would be comfortable about being in a lower position or not obtaining one at all in the future.

7. The Effects on Children

While many parents believe that staying at home with their children can be more beneficial for their children, it can actually be detrimental. Day care provides children with a great way to learn to be social and how to function well in group settings. When children are kept at home, they can be deprived of socialization unless a parent sets up frequent social experiences such as play dates or trips to the park.

This article is from Chris Birk of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Retirement for Stay-at-Home Parents

Debbie Dragon — Tue, 13 Jan 2009 15:23:04 +0000

Many families make a sacrifice by having one parent stay at home to raise their children. If the stay-at-home parent remains at home and unemployed for the majority of his or her working years, what happens when the stay-at-home parent reaches retirement age?

Without employment, a stay-at-home parent isn't going to have an employer-sponsored retirement plan to help him or her out during the golden years. To qualify to open an IRA, the IRS requires you earn an income, so that's out, too! Even if you're not generating an income, you need to establish retirement savings, but with the limitations on IRAs, what are your options?

If you're married, you can open a spousal Individual Retirement Account (IRA). The spousal IRA is designed for nonworking spouses to save for retirement with funds from their spouses' income. The 2008 maximum contribution is $5,000 a year in a spousal IRA (or $6,000 per year if you're 50 or older). You can open a spousal IRA as a Roth or Traditional IRA. With a spousal Roth IRA, you could invest $4,000 a year for 20 years and with an average return of 8% per year – end up with almost $200,000 that you won't owe taxes on. Uncle Sam already got his share from the money you invested – which is the primary advantage of Roth IRAs over most other types of retirement accounts which do not tax the original investment but tax your withdrawals. The other benefit of a spousal Roth IRA is that you could withdraw your investment any time, without penalty. The earnings of your contributions must remain in the account for a minimum of five years and until you're at least 59 or else you'll pay big in taxes and penalties, but the amount you contribute can be withdrawn and it won't cost you anything. Ideally, you would leave your money in the IRA for as long as possible, but it's always nice to know you have access to your money in case of an emergency.

If you're not married, or otherwise don't meet the requirements for a spousal IRA, you could always look at other interest-earning deposit accounts for establishing a retirement fund. There are many high interest savings accounts, checking accounts, fixed rate IRAs, certificates of deposit and money market accounts which can be opened for as little as $1 – and are virtually risk free, meaning you aren't gambling with the money you set aside. The earlier you start and the more consistent you are with saving money, the better off you'll be when you reach your retirement years.

This article is from Debbie Dragon of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: