Families with only one income have different challenges than families with two incomes. That is not to say that one is necessarily better or easier than the other – instead, it is more instructive to think of them as two different scenarios. What works for a family with two people working away from home may not work for families with one parent staying at home. In this article, we’re looking at some of the best money tips for staying at home parents.
Make a plan asap
The most important thing you can do is come up with a plan asap. Even if you’re not sure whether a parent should stay home, make a plan of what it might look like as soon as you see it possible. This can be the case if you are expecting your first child, if you are expecting another child, or if your life or work situation changes drastically.
One of the keys to a successful marriage or relationship is open communication. You may find that both spouses have very different expectations of what this lifestyle change might look like. Make sure you are on the same page for questions like the following:
- Who takes care of the children?
- Who is responsible for housework such as cooking or cleaning?
- What is the overall plan?
There is no one right answer to these questions – instead, the answers vary dramatically depending on your own specific and unique situation. But it is very important to make sure that everyone has the same expectations.
Set up budget
One of the most important parts of creating a plan is drawing up a budget for what it might be like if you have a parent who stays at home. This is especially true if you’re migrating from a situation where two people are working outside the home to one where only one person is making money from a job.
The simplest way to look at an updated budget is to simply subtract the salary of the lower paying job and see if you can only live on the salary of the higher paying job. However, the reality is a little more complicated. Not only do you not pay tax on the income from the second job that you no longer have, but you are also likely to be in a lower tax bracket overall and owe less tax on the remaining income as well.
If you’re currently paying for childcare, you can likely save those costs with a stay-at-home parent as well. And on top of that, there are additional savings opportunities when a person is not working outside the home. Having more time at home can potentially reduce your grocery budget by spending more time saving money shopping and preparing more meals at home. The best thing to do is draw up a budget and see what the numbers look like in your situation.
Use sideline activities
While the home parent may not be making money outside of the home, they can still make money through one Second job. Side-hustling is much more common and accepted these days and can be an attractive option for a stay-at-home parent. While most people won’t be able to Turn your part-time job into a full-time job, it can be nice to bring in a little extra cash if your situation allows.
Make sure you are properly insured and protected
One important thing to keep in mind when you find yourself in a situation where you are dependent on someone’s income is to make sure you have the right insurance. Make sure the spouse who is working away from home has adequate life insurance so that if they suddenly die, there is no financial disaster.
If the home spouse is caring for young children, it is also important to make sure they have adequate life insurance. After all, if they passed away unexpectedly, it would still be a huge financial burden. It can sometimes be difficult to get life insurance for a stay-at-home spouse, so it can be a good idea to get it before leaving your full-time job.
How to plan retirement
One of the best things you can do for your retirement is to set one up Individual retirement account (IRA) as soon as you can. An IRA allows you to set aside money for retirement and grow it tax-free or tax-deductible (depending on whether it’s a traditional or Roth IRA).
You must have earned income to contribute to an IRA, but if you file a joint tax return and your spouse has earned income, you are also eligible to contribute to a spouse’s IRA. In this way, both of you can contribute to your retirement savings even though only one of you has an income. You may not be able to contribute to a 401 (k) without an employer, but a stay-at-home parent may SEP IRA if they are self-employed, like from a sideline.
Dan Miller (77 posts)
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a website that helps families travel for free / cheaply. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 children.