Tran­si­tion­ing To A Sin­gle In­come

Escalon Times - - PERSPECTIVE - NATHANIEL SILLIN Nathaniel Sillin di­rects Visa’s fi­nan­cial ed­u­ca­tion pro­grams. To fol­low Prac­ti­cal Money Skills on Twit­ter: www.twit­­ti­calMoney.

Many par­ents face the same dif­fi­cult ques­tion when rais­ing a child. Should one of you stay at home while the other works? It’s not a ques­tion to take lightly. The de­ci­sion can have emo­tional and fi­nan­cial con­se­quences and may have a longterm im­pact on the stay-at-home par­ent’s ca­reer op­por­tu­ni­ties. It’s also a ques­tion that doesn’t have a sin­gle cor­rect an­swer.

Your up­bring­ing, per­son­al­ity, ca­reer and the fam­ily’s fi­nan­cial sit­u­a­tion can all play into your de­ci­sion. Your opin­ion could also dif­fer from your part­ner’s and may change over time. Per­haps you both worked af­ter hav­ing your first child and now that there will be two or more chil­dren it makes more sense for one of you to stay at home.

What­ever your im­pe­tus, if you de­cide to switch from two in­comes to one it will un­doubt­edly be chal­leng­ing. Pur­pose­fully ap­proach­ing and plan­ning for the change could help you suc­ceed.

Get a gen­eral sense of the num­bers. Un­der­stand­ably, you’re likely jug­gling a lot of pri­or­i­ties at the mo­ment. How­ever, now more than ever, hav­ing a clear pic­ture of your fam­ily’s fi­nances can be im­por­tant. Think­ing about both short-term and long-term sce­nar­ios will help you un­der­stand the ef­fect of mov­ing to one in­come and give you num­bers to back up your as­sump­tions.

For this task, you don’t need to track ev­ery sin­gle penny or dol­lar you make and spend. Try to get an ap­prox­i­mate sense of your house­hold’s cash flow and the non-es­sen­tial ex­penses you could cut if need be.

The good news is that sav­ing on day­care (over $25,000 an­nu­ally in some states ac­cord­ing to Child­care Aware of Amer­ica) and work-re­lated ex­penses, such as trans­porta­tion and meals, can help off­set the lost in­come.

How­ever, you’ll also need to bud­get for new child-re­lated ex­penses. Some fam­i­lies down­size their home, sell a ve­hi­cle or eat out less of­ten to make their one-in­come vi­sion a re­al­ity.

For those who are just think­ing about start­ing a fam­ily or are cur­rently preg­nant, act­ing as if you only have one in­come while both of you con­tinue to work can help give you a leg up.

For ex­am­ple, the sec­ond in­come could go to­wards an emer­gency fund that can help you weather a set­back af­ter mak­ing the tran­si­tion. You can also use the money to pay down high-in­ter­est debt, which can free up some cash flow by low­er­ing your in­ter­est pay­ments.

Hav­ing a stay-at-home par­ent can be as much of an emo­tional de­ci­sion as it is a fi­nan­cial one. If you haven’t al­ready, set aside time to dis­cuss how you view each other’s roles in the fam­ily. There may be new ex­pec­ta­tions for re­spon­si­bil­i­ties in­side and out­side the home.

Bring­ing fi­nances back into the pic­ture, dis­cuss how you’ll di­vide the fam­ily bud­get. Will ev­ery pur­chase be a mu­tual de­ci­sion? Or, per­haps you’ll both have a per­sonal al­lowance that you can spend how you please and there’ll be a house­hold ac­count for shared ex­penses.

Now may also be a good time to dis­cuss your ex­pec­ta­tions for the fu­ture. When and if a stay-at-home par­ent plans to re­turn to the work­place for ex­am­ple. And if it makes sense for them to work or go back to school part-time while also tak­ing care of the home.

Much like the big de­ci­sion, there isn’t a sin­gle cor­rect an­swer to ques­tions about fam­ily roles or the fu­ture and no one can an­swer these ques­tions for you. Talk over the op­tions to­gether and re­al­ize that you need to try out sev­eral ideas be­fore you find the ar­range­ment that works best for your re­la­tion­ship and grow­ing fam­ily.

Bot­tom line: Take a deep breath and em­brace the up­com­ing changes. Switch­ing to a sin­gle in­come can be chal­leng­ing, but so is hav­ing two in­comes and a new­born. Plan­ning ahead and work­ing to­gether to­wards a com­mon goal and vi­sion for your fam­ily can help en­sure a suc­cess­ful tran­si­tion.

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