Both of you work outside the home. You are expecting your first child and the wife would like to be able to quit her job and be a stay at home mom with the baby. This is very important to both of you, but can you afford all the new baby expenses?
This is a big decision, both emotionally and financially, and certainly not one to take lightly. Failure to consider the financial ramifications of this change could create huge debt and huge problems for you, but exactly what is the process of knowing whether you can afford it or not?
Prepare the Budget
The first thing you will need to do is prepare a working budget with life as it is today. Then, subtract her salary to see if you can continue your current lifestyle on your salary alone. If you can, then by all means she should stay home with the baby. However, if you are like most couples, you won’t be able to. But don’t despair. Once you know how much your negative shortfall is, you will also know exactly what you need to do to make it on one salary. Here are some tips:
Make a List (and Count it Twice)
List all of the expenses you be able to avoid if she stays home. Some possibilities are child care, clothing for work, travel to work and lunches out. Does she drive an expensive car to work? If so, could she sell it and buy a less expensive one in order to save on car payments?
List all additional expenses you may incur if she stops working, such as company provided health insurance. You should also calculate the additional taxes you could be paying if she has to give up that flexible spending account her employer offers.
If your proposed single income budget is close, and if you have enough time, try living on the new budget for a few months before the baby comes so you can prove to yourselves that you can do it. You may need to cut some things from your normal spending such as cable TV or eating out, but it is good to know now what sacrifices you may need to make in order to accomplish your goal.
Consider Plan B
If the numbers still don’t add up, maybe she could make some money from home. What is she passionate about? Crafts? Accounting? Tutoring? Piano or art lessons? Try the home business, but make sure it is profitable before she quits her full time job.
If the deficit is still too great, don’t give up. Could you afford this change if you had little or no debt? You could take on a second job (temporarily) and use all the additional income toward debt reduction.
I really believe that if you set goals and stay focused, you can achieve those goals and see your dreams fulfilled. I wish you the best.
Also check out A Mother’s Struggle Between Work And Kids at Free From Broke for great story on a new mom and her struggles with this exact situation.