When you have a baby, there will be plenty of changes to cope with...lack of sleep, a completely new body, emotions, lack of sleep, figuring out how to change a diaper...lack of sleep. Not to mention that you’ll be responsible for raising a human being! The last thing you want to worry about is finances, so planning now will help that to be less of a concern when the time comes.
Every family will need to decide whether they are going to have one parent stay home, or whether they will need to afford childcare. Either way, caring for your new baby is going to be a large financial hit. I always knew that I wanted to stay home with my kids, but even if you aren’t sure yet, planning now will allow you the freedom of choice when you finally become a mom. Here are 5 things you can do, starting today, to prepare financially for full-time motherhood:
1. Start Living on One Salary (As Soon as Possible)
My husband and I began living exclusively on his salary from Day One of our marriage. Having talked about our goals for me to stay home when we had kids, we knew right away that this strategy was going to ease the pain of transition when that change came. And it’s certainly a huge financial change! You will go from being a 2-income-0-kids household to being a 1-income-1-kid household overnight when you decide to stay home. It is best to get used to living on that one income now so it won’t be painful after baby comes.
If you haven’t yet begun to live on one salary, make the transition as soon as possible. Take a hard look at your budget and see what discretionary expenses can be cut. Make the lifestyle changes that are necessary and make a plan if you can’t start immediately. Again, even if you aren’t sure that you want to stay home with your baby, you’ll simply be allowing yourself the freedom to choose to do so, if and when the time comes.
2. Bank Your Salary While You Have It
Now that you’ve figured out how to live and cover your expenses on one salary, begin saving the other spouse’s salary in the bank (assuming your debts are paid off first. Most financial experts will probably advise you to start there, but consult your financial planner if you have a lot of debt to address).
You’ll be amazed at how quickly it will accumulate, and believe me, you’re going to need it! This will become your all-important emergency fund, so that when your furnace goes out or another unforeseen expense arises, you can stick to the plan. If you’re able to save enough of a cushion, it can also be the account you draw from for an occasional splurge, like Disney World or a new minivan. (I know, I know, you’ll never drive a minivan. That’s what we all said.)
If you’re committed to staying home for the long haul, it could easily be 10 years or more before you are ready to re-enter the workforce. Your youngest child won’t be in school full time for 5 or 6 years, so having a savings account with a large enough cushion to last that much time will be ideal. It could only take 1-2 years to save a very large chunk if you’re banking your entire salary.
3. Keep Some Money Just for You
When you decide to give up your job, it is interesting how you’ll feel like the balance of power has shifted. No matter how much both spouses are on board or how supportive they are of each other, it really feels bad not to have “your own” money. I was surprised how affected I was by the loss of my income. I felt like I wasn’t contributing, even though as a stay-at-home mom we definitely carry our share of the load. I also felt like I shouldn’t buy things for myself, like new jeans or a pair of Spring flats. So, I think it’s important to have a small amount of fun-money set aside, within your savings account, that is all yours. Maybe it’s only $2,000, and maybe your husband can have his own slush fund as well to keep things fair. But the rule is that it’s for you to do what you want with. Trust me, it’ll feel good to have that.
4. Keep Retirement in Mind
I’m certainly not a financial expert, so please consult one on this point. But one of the things we made sure to do when I left the workforce was to keep my retirement account active and receiving contributions. Don’t let your spouse’s be the only IRA to keep accumulating, because 10 years is a long time to be losing compound interest. Again, ask the expert, but I’ll caution you to not neglect your own retirement.
5. Choose a Mortgage Carefully
When couples are ready to begin a family, they often start by buying a bigger house. Be careful that you stick to the one-salary rule when you make this choice! Only purchase a house that you can comfortably afford on one salary. There is nothing worse than being forced to go back to work when all you want to do is stay home and hold your baby. This is one of the most critical decisions that you’ll make to allow yourself the freedom to choose to stay home. So don’t get caught up in what is bigger and prettier. Choose a good house for your family, but be practical and don’t say yes if you can’t afford it on one salary.
I hope these tips will be helpful as you consider how to set yourself up financially to be a stay-at-home mom. I know that not everyone plans to make that choice, but the idea is to give yourself a choice in the first place. Good financial planning will give you that freedom.