Both times when I was pregnant with my boys, I used to visit internet forums where I could chat with other moms and moms-to-be. While we discussed many parenting (and many non-parenting) topics, one topic that dominated was whether or not to stay home after their babies were born.
Now, I’m not saying that all women should stay home and be stay-at-home moms. Some love their jobs and want to get back, some don’t want to lose their momentum in their careers and some just know they can’t afford not to. But all moms will want to take some time off after birth and many want to know how long that period can be – be it a month, a year or several years.
While in Canada we are entitled to a year of maternity leave and many can claim employment insurance benefits, it isn’t a given that everyone can afford to take this time off or if they should from a financial point of view.
So, if you are considering becoming a stay-at-home mom or already know this is something you want, this post is for you.
Step 1 – Update your budget as if you were a stay-at-home mom.
Like with all things financial, its all about the math. So the first thing you should do is delete or adjust the income of the parent that will be staying home from your budget (while I do refer to stay-at-home-MOM, I really mean “parent” since this also applies to dads who want to stay at home as well).
Step 2 – Analyze your budget
Next have a look at what this does to your housing and essential fixed cost allocation (so your rent/mortgage/property taxes/insurance). If this amount is now greater than 40%, you CANNOT afford to stay at home – at least not in the current home you are in – whether or not the amount you save on daycare is more than the income you were bringing in (I’ll do a post on this later – because unless you TRULY make a significant amount less than a reasonable daycare costs, this is very short-term thinking).
However, before you call your real estate agent, there are some things you should consider. Even if you are able to find a cheaper home, you need to factor in other costs associated with moving. And I don’t mean the moving truck and pizza and beer for the friends who help you move. But all the ongoing costs that you will incur because of living in a different location, (and not to mention the non-financial factors like amenities and quality of local schools etc).
For example, say your current rent is $1,500/month. You find a place thats $1,200/month and that amount puts you under the 40% threshold. However, you now need to get a second car because the new place doesn’t have public transit close by. Say that it will cost you $300 for a car payment and insurance. So essentially you are in the same financial position because your new car payment and insurance become essential costs.
If you are still under the 40% threshold when you delete your income, great. Now lets consider your other budgets. You have to be realistic. You can’t cut your grocery budget from $800/month to $500/month and expect to stick to it unless you drastically change the way and what you eat. Similarly with utilities – if someone is at home all day, heat, electrical and water will all go up.
Same goes for your “Life” budget. If you have barely any money left over for life, this isn’t reasonable. I constantly hear from moms who think that they can live for free (The library has free activities! The park is free!) but forget that their children will still need clothes and WILL persist in growing out of them, that they will want to play soccer and go to the movies. That birthdays, Christmas will still require presents, washing machines will break, and pets will need to go to the vet . Make sure that you have at least 15-20% of your after tax income available to you for Life.
Next, are you still able to save for the future? I recommend that 20% of your budget goes towards debt repayment and savings. And I feel like once you have children, it becomes THAT much more important to have a good safety net in place.
However, if you are just planning on taking a couple months off for maternity leave (or even the full year) and not making an RRSP contribution for a few months is what will help you pay the bills, I don’t think its a big deal. But if you plan to be a stay-at-home mom permanently, skimping on savings or debt repayment is completely irresponsible.
Step 3 – Make sure your partner is on board
Losing an income and reducing your budget, even if manageable, will require a change in lifestyle. You need to sit down with your partner and make sure that they are on board. You may think that cutting the gym membership, canceling cable and not taking any more vacations is a small price to pay for being able to stay home with your kids, but your partner may not, or at least may not in the long run. Make sure that this is a decision you are making TOGETHER and its not something that YOU want and THEY are giving you. You don’t want them to resent being in a tighter financial situation or the burden of being the single income earner because this will eat away at your relationship. And you don’t want to be in a position where they can hold it over your head with “I make the money, so I get the final say” on every decision going forward.
Step 4 – Start planning – and saving – now
If you run the numbers and it really looks like you won’t be able to afford to be a stay-at-home mom, don’t despair. This is still a possibility, it just may not be one right away. But the sooner you start planning (and saving) to take time off, the better.
Start brainstorming ideas to still contribute financially – perhaps you can work part-time, get a direct sales job or do some free-lance work if you are able.
Also, look into seeing where you can cut costs. Can you reduce your insurance premiums? Lower your cell phone plan? Stop getting your hair highlighted? If it is important to you to stay home there are some easy sacrifices that you can make that won’t impact your life as much but can be the difference in making becoming a stay-at-home parent a reality.
If you are pregnant, try living on just one income plus what you expect to get while on maternity leave and bank the rest or use it to get the essentials for baby. Is it doable? Easier than you thought or downright impossible? If you have already had your baby or your child is older, do a trial run. See if you can live off one income.
Step 5 – Be flexible and be aware
Spending time with your children is a precious and really, a priceless thing. But the end of the day it is good to be aware of what a major life decision like becoming a stay-at-home mom really means. Some people are ok with going into debt in order to take the whole year of maternity leave. To be honest, I judge this less than someone who goes into debt to buy a luxury car, renovate their kitchen or go on an all-inclusive vacation. Just know what you are getting into and make a plan as to how you will manage it.
But also be open to some compromise. Maybe you can’t afford to be a stay-at-home mom until your kids are in school but maybe you can for their first two years of life. Maybe you can’t take the full year of maternity leave with your first child but perhaps if you plan accordingly, you can with your second.
Lastly, and this is something that I know from experience, whether you end up staying at home or not, remember its the quality of time and not the quantity of time that you spend with your children that really counts.