While many American households feature two working parents, there are plenty of expectant mothers and fathers who want to stop their traditional jobs to care for children — at least for a time. Whether it is the mother or the father who will be focusing primarily on child care, there are some big financial issues that come with this lifestyle change. Here are some tips on how to prepare your family’s finances for having a stay-at-home parent and (primarily) living off of one income.
1. Discuss
Becoming a stay-at-home parent may seem personal, but it is a major family decision. It’s important to brainstorm the advantages and disadvantages together, think about the emotional and financial repercussions and how both partners’ roles and responsibilities will change. You’ll likely be more successful if you are in agreement as a couple ahead of time. (It’s also possible to find compromise, perhaps freelancing or cutting back to part time to minimize child care costs while allowing you to spend more time with your child.)
2. Crunch the Numbers
Once both parents are on board with the idea, it’s time to figure out if you can actually afford it. Calculate your current expenses, see where you stand with debts, loans and savings and think about the new costs that will arise once the child arrives. If you have good credit, you could refinance some of your debt to lower your monthly costs. (You can check your credit scores for free on Credit.com to see where you stand.)
3. Put Together a New Budget
In addition to taking an honest look at your current financial situation, it’s a good idea to do some research (using the Internet and friends who already have children) so you can form your expenses into a hypothetical new budget.
Using a combination of the old and new budget, you can take a look if this new situation will make sense for you. It’s important to make sure your regular monthly expenses will be met with the new budget, but also that you will be able to continue to work toward your long-term financial goals like preparing for retirement.
4. Adjust Goals
Even if babies were always part of the plan, your expectations and long-term goals may shift when you decide to become a stay-at-home parent. It’s a good idea to re-evaluate your goals to make sure they still align with your wants and needs. For example, you might be willing to delay retirement in exchange for having a parent at home with the children.
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