A huge hurdle for us, and probably many parents who would like to stay home full time or reduce their hours, is the numbers. We all have base obligations that must be met. In deciding whether I could make some changes to my work status in the future, we had spend a lot of time crunching the numbers, discussing what we were willing to give up and what we were not willing to part with, and what areas of our current budget we could reduce or eliminate if I were not working full time. I’m sure there are many good ways–some probably better than our approach at tackling the questions of finances, but I’m going to share our method.
1. Examine your current budget. If you don’t have a budget, make one! First, we got a copy of our current budget. We make about the same salary, and while Mr. Blue’s salary will have a marginal increase where ever he ends up, the bottom line is that if I were staying home full time our guaranteed take home would be almost half of what we make now. We knew we needed to eliminate at least half of our costs, which frankly seemed completely out of reach.
2. Factor in tax consequences. Initially, I thought there was simply no way Mr. Blue’s potential income could cover our monthly expenses. Then, I realized I was considering our current tax bracket. My income places us in a higher tax bracket, so not having that income makes a difference in Mr. Blue’s take home pay. Also, though we didn’t expressly figure this in, we are not eligible for certain credits and deductions because of our total combined income, but without my salary, we might be able to reduce our tax liability even more.
3. Note any line items that will be completely removed from your budget if you were to stay home. For us, the obvious one was childcare. That alone would cut thousands of dollars from our annual budget. Another area that would be cut entirely was what we tithe to our church on my salary.