Can You Afford To Be A Stay-At-Home Parent?

Can You Afford To Be A Stay-At-Home Parent?

This is one question that all couples will eventually have to face once they choose to start a family.

As most couples today work full time jobs before they decided to start a family, the decision for one parent to stop working is not easy.

Switching from working full time to a stay-at-home parent is a major decision that does not only affect yourself but your entire family.

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Can it work out cheaper for your household finances if one spouse stays at home? Here’s how to find out if you or your spouse can actually afford staying at home.

Step 1: Your current household income

How much do you and your spouse bring home every month? List your net income, the income after EPF and tax deduction.

What would your household income be after one of you quit? Will there be some passive income or part-time income coming in? If you plan to try to make some money while you stay at home with the kids, consider the potential amount you could make.

Determine the before and after income.

Two full-time working parentsOne full-time working parent
Your net monthly income: RM6,000Your net monthly income: RM6,000
Your spouse’s net monthly income: RM4,500Your spouse’s net monthly income: RM2,500

Total annual net household income: RM126,000

Total annual net household income: RM102,000

Step 2: Your expenses

The second step requires a lot of soul-searching and monitoring. You could be spending hundreds on something unnecessary without knowing it. List down all your monthly expenses and also annual expenses. If you are unsure, start noting down your expenses for a month or two.

Your expenses should be split into home, childcare and work expenses. Here are the items that you should include in each category:

Home expenses
Mortgage/Rent
RM1,300/month
Car loan repayments
RM1,500/month
Utilities bills
RM300/month
Insurance premiums
RM480/month
Groceries
RM800/month
Other household bills
RM200/month
Other loan repayments (i.e. personal loan, student loan, etc.)
N/A
Additional retirement contributions (except EPF)
N/A
Contribution to tertiary education fund
RM200/month
Eating out, movies, other entertainment
RM500/month
Contribution to contingency fund
RM200/month
TOTAL ANNUAL EXPENSES
RM65,700/year
Childcare expenses incurred by working
Nanny/Babysitter/Day care, etc.
RM1,000/month
TOTAL ANNUAL EXPENSES
RM12,000/year
Work expenses (for the potential stay-at-home parent)
Transport expenses (i.e. petrol, toll, public transportation fares)
RM500/month
Breakfast/Lunch/Snacks/After-work drinks
RM300/month
Work clothes
RM100/month
Dry cleaning
N/A
TOTAL ANNUAL EXPENSES
RM10,800/year
Other annual costs
Yearly vacations
RM5,000
Holiday and birthday gifts
RM400
Clothes (non-work related)
RM250
Child-related expenses (i.e. school fees, field trips, holiday camps)
RM7,200
Medical expenses not covered by insurance (i.e. vaccinations, visits to general practitioner, etc.)
RM250
Memberships (i.e. Gym)
RM190
Others
RM100
TOTAL ANNUAL EXPENSES
RM15,590/year

Step 3: Your calculations

Now, you need to know how much you need every month, and whether your new income will be sufficient to cover that.

Your Calculations
Your household income now
RM126,000.00
Your household income if you quit work
RM102,000.00
Amount you need if you quit work
RM81,290.00
Amount you're short/ahead
RM20,2710 .00

In the example above, it seems that the family can still manage with the single income arrangement. However, it’s not as easy for everyone. Do bear in mind that some of the work-related and also childcare expenses can be eliminated when you stay at home full-time.

Being able to stay at home full-time with your kids may be a dream come true for many parents — but it can also be difficult to achieve in a world of dual-income expenses. The above example was taken when the family only has one child attending pre-school.

Things will be different when you have more than one child and they start attending schools and need tuition or other enrichment classes. Throw in the fact that the parents may be earning less than the above example, having one parent quit may just stay as a distant dream.

But don’t be disheartened. There are some lifestyle adjustments you can make to make your budget work on a single income.

1. Cut your spending

Be really, REALLY strict on your spending. List down every.single.sen you spend, and at the end of each month, take a long, hard look at it, and cut where necessary.

Look for the biggest changes you can make in your budget. If you spend thousands trying to maintain a big home for just the three of you, you can cut down that spending significantly by downsizing your home. Perhaps a smaller apartment will suffice?

Or you could be spending hundreds to thousands to dine out every night, it’s time to consider cooking your meals at home. This can be reduced when you finally quit and have time to prepare your meals at home for the whole family.

2. Shuffle your priorities

Things like a yearly vacation, changing your car every few years, or high-teas with your besties every weekend may seem like nothing to you now, but these are things that you may need to sacrifice first when one of you says goodbye to your stable monthly pay cheque.

Maybe you don’t have to strike all of them off your list, but you just need to make some trade-offs, such as taking a vacation in the country or region to keep the cost low. Come up with what you are willing to sacrifice, and what are the cheaper alternatives for your priority list.

3. Have a strong contingency fund

Some families make the mistake of not having a big enough contingency fund when they decide to switch to a single income household. This fund becomes even more important when there is only one breadwinner left. Where will the extra cash comes from if an unplanned medical emergency happen, or an unexpected home repair?

If staying at home is in the plan, it’s time to start building a bigger contingency fund, so you won’t affect your daily budget, or worse, build up a huge credit card debt, especially if you don’t have the right credit card for your spending.

4. Always stick to the list

Preparing your family financially for you to stay at home requires tons of discipline. You will probably need to make a list for EVERYTHING. From groceries shopping, to paying bills, and you have to be militant about sticking to it. We all tend to buy the same things over and over, so make a list, copy it, stash a copy in your car, and always use it.

Do not leave your home for a grocery run without a list – even if it’s just for a carton of milk!

5. Overhaul your budget

A budget for a dual income household is completely different from a single one. After listing down your income and your expenses according to the category as shown above, it’s time to adjust the budget based on the new income and also the new list of expenses after you’ve cut where possible.

Remember to also allow yourself and your partner an allowance beyond household expenses. You both need a little bit of money to blow however you want. This freedom will help you stick to your budget.

6. Look for other sources of income

Being a stay-at-home parent doesn’t mean you have zero income. In fact, the new term, work-at-home parent, is coined in this technology-led era. It’s become increasingly easy to work from home, whether through your blog, blog shop, freelance work, or even baking.

Look for creative ways to make up the difference between expenses and income. If you are staying at home looking after your kid, why not take on one or two more kids to earn some additional income?

Also don’t forget that without an income, you won’t be entitled for the available tax reliefs, or making EPF contributions. Retirement planning will have to be done on your own, and make sure this stays on your priority list! Don’t forego things like medical and life insurance for yourself, and especially for the sole breadwinner of the household.

Everyone will have differing opinion about this, but this major decision should be made by you and your spouse – after making all the financial and emotional considerations. If you or your partner decides to quit and care for your child(ren), make sure you are financially prepared for the leap.

This article was first published in 2015 and has been updated for freshness, accuracy, and comprehensiveness.

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