Thursday, December 23, 2010

Being a Stay at Home Mama: Making it Work Financially

Over the last year or so I've received more than a few inquiries on how I've been able to be a stay at home mama on a single income. I've always responded individually, but I think it's a very valid question and so I figured I'd write a post about it.

First of all, it's not easy. We're not independently wealthy, nor does my husband make so much money that going from a double income to single income family was an easy decision. It was actually very difficult for our hearts and our brains to meet up on the final decision for me to resign from my job and stay home with our baby. Both my husband and I instantly felt like it was the best thing for our family - but would our dollars stretch enough to cover all our expenses? Mortgage payments, car payments, utilities, groceries, and unexpected expenses? As soon as I found out I was pregnant the first time around, we looked at our budget and figured out where we could cut back. Then, we basically lived off Daniel's salary and put mine in our savings account (or as much of it as we could) each month.

After my last official paycheck came in February of 2010, it was definitely a shock to us financially. We had planned for it, but seeing our monthly income cut in half was a real eye-opener. We're going on a year of single-income living, and to be 100% honest, we take it a few months at a time and then reevaluate financially. We pull from our savings for unexpected expenses (i.e. medical, house stuff) and we stretch our other dollars as much as we can. Here are a few ways I found to cut back... my motto is "Every Little Bit Helps..." And if you are determined to stay home, there is always a way to make it work.

1. Refinancing our Mortgage: This may not be an option for everyone, but we were able to refinance from a 6.5% to 5.25% mortgage last year. We didn't have to bring any money to the table, and were able to reduce our monthly payment by around $300. Not a HUGE amount, but enough for groceries each month!

2. Cut out Cable Extras: Daniel and I LOVE our TV shows... especially HBO. It's our time to relax and spend time together once Paige goes to bed. But at an extra $30-$40 per month for the "movie channels", we couldn't justify the cost vs. the two or three shows/movies we watched each month. So I called and had those cut from our plan. Now we get the shows we missed from Netflix, or catch up on our favorite shows when they do "Free Preview Weeks" on the movie channels.

3. Buy in Bulk: Now, I'm not talking Costco kind of bulk (we personally don't have the room to store 500 cans of green beans), but I grocery shop every two weeks instead of every few days. I buy what's on sale and that's what we eat for the next two weeks. Spaghetti, chicken, rice, homemade pizzas - you'd be surprised how creative you can get when you are on a budget! I need to get better about coupons - I use them all the time for Paige's necessities (formula and diapers) but always forget to look for them before doing my regular shopping.

4. Look at What You Can Sell: For us, it was our cars. After some research, we realized our Jeeps were worth a lot more than we owed on them, and we were able to sell them for a significant profit. We then downsized to 4-door sedans vs. gas-guzzling SUVs to save on gas. Our payments were also cut in half. Do I miss my SUV sometimes? YES! But I'm very happy with my car and the fact that selling the Jeeps gave us enough wiggle room for me to stay home for a while longer.

5. Remember Tax Time!: If you're income is cut in half, most likely you will drop to a lower tax bracket... which means a bigger tax return (in most cases)! Also, if you own a home, you'll get a large tax return based on that alone - so stash that away in a savings account for those unforeseen expenses that may come up. Or, to transfer over a few hundred each month to help supplement your husband's paycheck.

6. Get a Side Hustle: My friend once told me that, "You always need a side hustle..." What exactly is a "side hustle" you ask? Something to create a little bit of cash flow when times get tight or to bring in a little extra money each month. I have two "side hustles" - this blog and my make-up business. Neither is creating a gold mine for me, but each brings in a little money each month without a ton of overhead expense. Beyond finances, a side hustle lets you retain some part of your former self and have adult conversation (or vent to other adults, in my case with this blog). : )

So, you can see I'm definitely not an expert on this topic. But since people asked, I figured I would pass along tips on how I've managed to make it work over the last year. The first step is to layout ALL your monthly expenses - mortgage payment, average grocery bill, car payments, utilities, entertainment - and compare the total to the income of the parent who plans to continue working. Is it enough to cover the necessities without going into foreclosure on your home or defaulting on loans? If not, what is the difference? Can you save that much x 12 to cover you for a year of staying home before the baby is born? Is there a "side hustle" you can manage to maintain on a part time basis? Do you have a family friend or grandparent who can watch the baby one or two days a week so you can work part time? Sometimes the answer is flat out "No." And in that case I think it's better that both parents stay working than to put your family's financial future in jeopardy. But if you can manage to swing it, it definitely is a rewarding experience.

And in the meantime, we can all keep hoping for a lottery win one of these days, right? : )