YNAB BLOG

Can this young family afford to have dad stay home with the baby while mom works and finishes her graduate degree?

magnifying glassHaley and Ron are wondering if Ron can quit his job. As you’ll see in their budget, almost half his income is eaten up by job-related expenses (that’s one expensive job). The bottom line is this: if Ron quits his job, it costs them about $1,000 per month in take-home pay, but saves them $460 in gas and child care.

Their health insurance comes directly out of Haley’s paycheck, as does her retirement savings. Between her 401k contribution and employer matching, she’s currently saving around 12.5% of her gross income. Not bad for a person in her mid-twenties, but not a number that’s going to allow for early retirement.

Let’s dig into the numbers and see how they can stay within their means while giving up around 1/3 of their income.

Income Take-Home Pay Notes
Hers $2,216.40 Just got a ~5% raise, but more raises not likely.
His $1,000 Considering quitting to stay home with child.
Income Total $3,216.40
Category Budgeted Notes
Needs Needs and Wants are terms Haley used in her emails to me.
Rent $264 Renting from parents, living with two housemates.
Utilities $180 Natural gas, water, electric.
Phone and Internet $159.84 Phone plan shared with her family, subsidizing college-aged siblings.
Miscellaneous $250 This is a black box; she has planned dig in and find out the category specifics.
Gas and Tolls $240 Majority of this cost is due to husband’s job.
Childcare $300 Family member watches child while he and she work.
Grad School Tuition & Expenses $431 Pursuing Master’s Degree that qualifies her for the job she already has.
Insurance $130 Renter’s and auto policies.
Needs Total $1,954.84 $460 stems directly from husband’s $1,000/mo job (child care and transportation expenses).
Wants
His Spending $60 Their Goal: $30
Her Spending $88 Their Goal: $30
Babysitter $40
Entertainment $17.30
Restaurants $265 Their Goal: $150
Outings $50
Coffee $75
Beer $128 Their Goal: $60
Wants Total $723.30 Their Goal: $452.30 (37% decrease, $271 in monthly savings)
Gifts and Giving
Gifts $133 Birthdays and holidays for family and close friends.
Sponsor a Child $35
Gifts and Giving Total $168
Budget Total $2,846.14 If husband quit job and they spent goal amount in Wants, Budget total would be $2,846.14 – $271 – $460 = $2,115.14
Vulnerabilities
Emergency Fund Current balance is ~$400.
Car maintenance/replacement Empty, and not being funded.
Life Insurance None that I’m aware of.
Rent She tells me rent would be roughly 3x as much if they decided to get a similar place without housemates.
Student Loan They’re paying cash for her Master’s program, but Haley has around $190 in deferred student loan payments from her undergrad program. When she finishes the grad degree, they’ll have to start making payments again. $190 is a big percentage of their current budget.
Rule 4 Maybe not a vulnerability, but living on last month’s income makes for easier budgeting and increased peace of mind.

My Take

I told Haley in an email that I’m nervous about each of those vulnerabilities. Any medium-sized emergency would have Haley and Ron on credit cards (or more student loans) in no time flat.

Because their earnings are stable, and because so many of their expenses are discretionary, I’d maintain the second income for the next year while attacking discretionary expenses. Fight the “Wants” down to the goal amounts, and also open your minds to saving some money on the cell phone bill, coffee, gifts, and restaurants (taking it even lower than your “goal” amount), and a year from now you could have a $3,000 to $4,000 emergency fund.

At that point Ron could leave his job, improving the family’s quality of life without increasing financial risk. In any case, this is a young family headed in the right direction.

26 Responses to “Can this young family afford to have dad stay home with the baby while mom works and finishes her graduate degree?”

  1. Mandy

    There’s a lot of discretionary that could be cut. I’d keep both jobs, cut discretionary until you’ve reached your goal, and then reconsider. But – curious – what is her job? If she is working towards a Master’s to qualify her for the job she already has – a job that brings home only $2200 a month – I’m not sure this is a cost/debt that is justified… It seems to me that an expensive Master’s degree should be earning significantly more money! I think they could both be watching for better jobs.

    Reply
    • "Haley"

      Mandy, thanks for your comments!

      I am a librarian, and I *absolutely love* it. In this particular job I have practically no commute (rare in this area!), lots of opportunities to come up with and execute exciting projects, and wonderful coworkers. However, the location in which I work does not pay as well as it probably should, something which is in the hands of our parent organization. Nevertheless, after seeing recent stats on library graduates who so often don’t have jobs in their field, I feel very lucky to have this job!

      My “take home” is definitely low. That figure is also after $400/mo insurance and my retirement contribution, though. In any case, the experience I’m gaining in this position should benefit me if/when I decide to look for a higher-paying position elsewhere.

      Finally, the Master’s is at a public university. We’re now paying cash for it, which I am so happy about. Combined, these two things make me feel like it’s not really expensive. When I finish the degree (I’m over half done), all that money can go straight to paying student loans off (early, even!) and/or building up savings!

      Reply
    • Tracy

      I second Mandy on all points!

      What about Ron finding a job closer to home, to cut down on tolls & gas? And at least doing something part time, to bring in some income while Haley is not at work? Might help both transportation costs and daycare costs.

      I wasn’t sure what the “subsidizing college siblings” meant with regard to cell phone cost. Does it mean they are paying more because others on their family plan are not paying? There are a lot of $10-20 a month options out there now, might be worth checking into.

      Reply
      • mark

        Hm…she didn’t give a number for groceries, and I didn’t notice! Good catch. I’ll shoot her an email.

        Reply
      • "Haley"

        Thanks for your suggestions!

        Yes, subsidizing college siblings means paying more than our “fair share” in order to help my parents out as they pay for everyone still in college. It makes it $20 or so higher than it would be otherwise.

        Reply
    • "Haley"

      I can’t believe I forgot groceries! Mark did email me, but I’ll mention it here as well — add $350 for groceries (and household expenses), to the “need” and overall totals. We’re hoping to bring that down!

      Reply
  2. stacigh

    What about going with Ting for your phone provider? Seems like you could cut that phone bill down significantly. Also $60 a month is still quite a lot in beer. That’s $720 per year in beer or ~$14 per week. That’s about 2 six packs. Coffee seems high too. Are you making it yourself? It would also be interesting to see what’s in that miscellaneous category. Your restaurant category is also very high. Your desired $150 a month will be challenging. (This is an area I struggle with as well.) Also, do you have a grocery budget?

    We did the same thing that you’re thinking about doing. My husband left his job when our kids were born. It’s been pretty stressful for me because I’m now responsible for income while he’s at home with the kids. I’ve discovered that the days where the kitchen is neglected (many) are days that I’m tempted to go to restaurants so I don’t have to clean the kitchen, cook then clean the kitchen again. If your husband doesn’t really enjoy cleaning, just know that you will have the added stress of having to clean the house on top of working and school. If you have family watching your kids, I recommend sticking with that plan and maybe determining ways that you can continue to wrangle in your budget.

    As for that tolls and gas category, are their carpools in your area? What about public transit? Has he considered finding a job closer to home? Also, do you have a fireplace in your home? You might be able to find free firewood on Craigslist and cut down the cost of heating your home.

    Reply
    • "Haley"

      The coffee and beer categories are both used for purchases made at the respective drink places, not at home or the grocery store. As I mentioned above, we have a grocery budget, I just skipped over it in my emails..gah!

      Our plan if my husband decides to stay home is that he will also cook and do most of the housework, at least while I’m in grad school. I don’t know if this will actually happen. Then again, he has worked as a janitor and a cook, so I know he’s capable!

      No carpools are available, our city doesn’t have public transportation, and we don’t have a fireplace. Our gas heating is significantly cheaper than electric heating, but the AC still skews that category average high. I’m hoping he can find a job closer to home, though!

      Reply
    • Minda

      The eating out may go down with one parent at home. If he cooks they won’t feel the need to go out so much.

      Reply
    • rjzii

      “That’s $720 per year in beer or ~$14 per week. That’s about 2 six packs.”

      Remember that beer prices are highly dependent upon what you are actually drinking so thinking about it in terms of “six packs” doesn’t really work. A single bottle of beer can range anywhere from about $1.00 to $15.00 on the higher end of the micro brews.

      Reply
  3. Rachel Ruhlen

    If he stays home, maybe they can downsize by a car and reduce their auto insurance a bit. I don’t see “car payment” so it appears their cars are paid for– good job! Selling a car could give them a little more to offset an emergency.

    Reply
    • "Haley"

      We proudly drive old, beat-up, used several times cars. :) I love mine, because it works so well even though it’s loud and rattly!

      Reply
  4. Tom

    If Dad is willing to cook in addition to taking care of their kid, then they’ll come out ahead. The $265 restaurants category can disappear or drop to a once-a-month pizza. Then they would actually have ~$150 extra in their budget and eat better too.

    Reply
      • Minda

        I always loved breakfast food for dinner. =) My dad actually cooked better than my mom because he “experimented” less with recipes than my mom.

        Reply
  5. Janet

    If this is something they both want, I think they could cut their wants categories down even more to include some savings. For example, maybe trade babysitting, reduce gifts. . . Maybe he could watch an additional child or two or take on a part time job in the evening when she is home that is close to home. If he is willing to cook at home, they can also cut out most of the restaurants category. When I first became a SAHM, our restaurants category was $10 and that was usually dollar menu items when traveling. We have 8 kids, and our restaurant category is currently $50 month and $30 for date nights. The $50 is used for special times one-on-one with the kids, usually somewhere cheap like Subway where we split a $5 sub or for Little Ceasers on date night. Many of our date nights include things like 1/2 price shakes at Sonic and then going for a walk in the park. The every few months, we go out to eat, but even then, it’s usually somewhere under $40 with tip. Staying at home with your children is priceless. If the desire is simply to save money, it’s probably not a good choice, but if it is to build that relationship and support the family at home, it is worth the sacrifices. And in my opinion, the at home parent should do the majority of the cleaning and cooking. That, and caring for/ homeschooling the kids, are my “job” and my husband benefits with free time in the evenings and on weekends too.

    Reply
    • Ali

      “Staying at home with your children is priceless.”

      Yes. This.

      If he wants to stay home with the baby, the question should be “How can we make this work?” not “Does this make financial sense?” They have room in their expenses to cut back, and as others have said, he can still earn some income while staying home with the kid, or go back to work later at a job that earns more than $1000/month. The belief that both parents “have to work” is a huge myth in our culture and I will forever be grateful that someone clued me in to that before my first child was born.

      These baby years will never come around again. Make the leap, Haley and Ron. It will be worth it.

      Reply
      • beanland

        +1.

        Many budget categories look reasonable on paper but compared to the privilege of caring for your own baby… they may start to look less worthwhile. Children need their parents and childhood is so fleeting.

        I agree with the above comment that you have to decide what your most important priority is and work from there. Looking at this budget, I think it’s absolutely doable financially to have your husband stay at home but it will obviously require some lifestyle changes. It looks like you have already made some sacrifices (living with housemates, working while in school, driving reasonable cars etc.) to put yourself in a good position to live on a single income.

        Something that has helped me to align my spending with my goals is to think about where I’d like to be in 10 years and whether a given choice will matter much then. For example, I have a hard time imagining I’ll wish I spent more money on _____ (pick any category mentioned, e.g. beer, coffee, gifts, etc.) but I know with certainty I’d mourn my child’s early years if I missed them. Priceless for sure.

        Reply
      • LeiraHoward

        I agree totally with your statement: “If he wants to stay home with the baby, the question should be “How can we make this work?” not “Does this make financial sense?” ”

        This is the key, no matter whether it is the man or the woman who wants to stay home. And in this case, where the financial loss of the job is almost as much as the gain, it makes financial sense to cut back and have him stay home anyway. However, this might entail some sacrificing of things that make their life comfortable (for the short-term).

        There are a few major categories that could be cut in order to make this happen. Obviously this is based on their own priorities, but I would personally cut the beer, coffee, and restaurant categories and make them a special once-or-twice a month l treat rather than a normal expense, (and when you do eat out, if you order water to drink, the meals are MUCH cheaper). That would make up a huge chunk of the difference. If they limited eating out to $50 (approx twice at fast food or once at a nicer restaurant), coffee to $10 or so (depending on the drink, once or twice a month), and beer to about $12 (depending on the beer, a six pack or two), that would give them about an extra $400 in the budget. This wouldn’t have to be done forever, but would help QUICKLY build up that emergency fund. You could also just take the appropriate amount for the drinks (coffee and beer) and put those in the His/Her money categories, so that each person could choose to either have them or save/use the money for other things.

        I would also seriously look at the details of the cell phone plan. As has been mentioned in other posts, there are lots of great pre-paid options. However, since they are dealing with family, that is more tricky. They may need to see if they can get everyone on board with switching to different (individual) plans in order to save money.

        In a smaller category, they may be able to find free “Outings” in order to reduce spending there. Depending on the area, there are often free state parks to take walks in, free museums, and cheap or free special events that take place. Doing one of those instead of a paid outing, at least some of the time, could free up funds for other things.

        And the gifts is a high percentage of their income right now as well. This year, our extended family instituted a gift exchange for Christmas so that each person only is buying two approx $20 gifts, rather than the 6 gifts they would otherwise be purchasing. This is not for everyone, but is an option. Also an option is making gifts, shopping harder at sales, or just purchasing slightly cheaper gifts for each person. While giving gifts is extremely important/fun, it probably should be a slightly lower percentage of their income if they are going on one income only. We also stopped purchasing gifts for birthdays and just send cards. Again not for everyone, depending on closeness of family and all, but all of our siblings are grown, many with families of their own, and don’t need things as much.

        For groceries: depending on their area, that number might be high or not. Grocery prices vary a lot. But they may need to be looking at sales, coupons, and the local discount foods store. (Though in MY area, the local big-name grocery store’s store brands are cheaper than the prices for the same type of product at the discount store when they are on sale. So be smart.)

        Reply
  6. "Haley"

    Mark, thanks for your recommendations at the end! The idea of keeping the second income and saving aggressively is an exciting one.

    Reply
  7. Caitlin

    I agree with the above posters about getting those discretionary spending amounts down and also the lack of a grocery budget. If Dad were to leave the workforce albeit temporarily, they would have $540 less per month from which to budget from on top of all the proposed cuts – sounds like a pretty stressful scenario to me! Also, there are a lot of nonmonetary benefits to staying employed rather than leaving all together (lack of ability to gain valuable work experience, lack of opportunity for advancement since you’re not actually working,etc… I know I’ve read articles/ studies on these more pertaining to the lost potential of mothers leaving the workforce but it would also be applicable here). Thanks for having the courage to share your budget!

    Reply
    • Caitlin

      Also, spending on liquids alone (coffee and beer) is $200… Given their income and potential loss of income, they may want to consider drastically reducing this figure.

      Reply
  8. Christian

    There are short-term costs and benefits, and there are long-term costs and benefits, to Ron staying home with the kids.

    The benefits, both short and long term, is spending time with kids. And it appears that short term, there aren’t many costs involved. However, there can be some significant long-term costs to Ron’s career (of course I don’t know his details so most of this post is going to be about generalities).

    I have to applaud for doing as well as you are … when I was 25, fresh out of school, with that level of income which I spent on beer, cars, motorcycles. But now I’m 40 years old with a lot more income and more brains in my skull (and older cars and motorcycles). I’ve got a different perspective on this than Haley and Ron may have.

    One of the reasons women earn less than men is that they are more likely to take a break from their careers to raise children and miss out on opportunities that they never have again. Re-entering the work force after a 2-5 year hiatus leaves them with stale knowledge and no networks competing against entrenched, skilled and experienced co-workers. While this typically applies to women as they more likely to be the caregiver, the role reversal in this case applies equally to Ron.

    If Haley’s future income was likely to grow and provide for the whole family, then I wouldn’t be too concerned about this. But reality bites: $3k/month is not much to purchase a home and raise a family on. Unless Haley is willing is switch careers to earn more, then it will be imperative for Ron to eventually contribute his efforts to help provide financial security going forwards. Being one tooth extraction or car repair away from financial instability is no way to face the world.

    If Ron stays home I’m sure they’ll manage to not starve. However, it would be very beneficial for Ron to consider what he can do to avoid slipping away from his career or finding a different career he would enjoy. This might mean working part-time, online, or furthering his education. It’s not an easy proposition, but if you ignore this aspect it will have bigger consequences down the road than you may be seeing now.

    Reply
    • LeiraHoward

      This is a good point to consider. Is Ron planning on staying home for a LONG period of time (say, to homeschool the kid), or just for a few years until the kid starts school?

      If just for a few years, they definitely need to have a plan for him to increase his earning potential. That might be going back to school/college himself (it wasn’t mentioned what his education level is, but I would guess not high based on the salary). If he does not have a high school diploma, home study (with free books from the library) could allow him to take the GED test for minimal expense. If he does have the high school diploma, free home study from the library could allow him to take some of the AP or CLEP tests (for a minimal charge) and test out of some college courses and work toward a bachelor’s degree in something, taking more actual courses as Haley finishes her degree. If he already has a bachelor’s degree, he REALLY needs to get a better paying job, as there is no reason to be paid so little if he had that kind of education, no matter what it is in.

      Just some options.

      Reply
  9. jeralyn11

    The post doesn’t mention what Ron’s career is, but I have to agree with several of the responses. Ron should consider the long-term hit that his career could take from staying home for several years. The loss of income now is a factor, but it will translate to a lower overall earning potential for years to come…

    Reply

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