by Scott W. Danger, CPA
The decision to be a stay-at-home mom is one of the most difficult many new or prospective parents face. The main reason many parents feel it is not a possibility is because of their financial situation. How can a couple with two wage earners get by on one salary while adding another member to the family? It’s certainly not easy. Every family is different but they all have one thing in common: Nobody takes home their entire salary. That is where the “Cost of Work” comes in.
Let’s use an example. Joe and Julie are married and expecting their first child in three months. They live in a modest house in the suburbs. Joe is an Electrician with good benefits including family health insurance and Julie is an Office Manager downtown. Joe and Julie both would like her to stay home with the new baby, but they don’t see how they can make it work. How could they ever get by without her $25,000 salary? Let’s look at how much of that $25,000 salary they would actually see:
|Taxes (7,500)||15% Federal, 7% State and 8% FICA and Medicare|
|Commuting (2,500)||$.25/mile x 40 mile round-trip x 5 days x 50 weeks|
|Daycare (6,250)||$2.50 per x 10 hours per day x 5 days x 50 weeks|
|Work clothes (1,200)||$100 per month|
|Meals out (1,000)||Twice a week at $10 each time x 50 weeks|
|Other (500)||Office gifts, professional fees, convenience items|
Of Julie’s $25,000 salary, they would only see $6,050. Based on a 40-hour work week, this is only $2.91 per hour. The difference of $18,950 is Julie’s cost of work. Julie may be able to find work at home to make up the $6,050 gap in their earnings.
While this example is specific to Joe and Julie, it is typical of many couples. For them, it may make sense to have her stay home. For you, the answer may be the same. The decision to stay home is one of the most difficult decisions families face. Only you can decide if it is right for your family. Just remember that you need to look at the cost of work just as closely as your salary when making this decision.
Scott Danger is a C.P.A. with ten years’ accounting experience. He is a husband and father to 11-month-old Sydney. His column, Moneywise, can be seen on http://www.mommysavers.com.