Living on One Income

Credit: David Castillo Dominici, Freedigitalphotos.net

Credit: David Castillo Dominici, Freedigitalphotos.net


Last Friday was my wife’s last day of work before taking a well deserved break before the baby arrives. My wife is a preschool teacher and running around with little kids is tough. It is even tougher when you’re almost 9 months pregnant. We reviewed our budget before the decision to become a one income family and determined that it was doable. Of course deciding whether to become a one-income family is a very personal decision and not a pure financial one. In our case, we wanted a parent to stay home with our baby. Plus, we felt that the income she would make would not be worth the sacrifice as she would be away from home most of the day. We’re not sure if she will go back to work at some point in the future, or maybe work on getting a stay at home job.

We have been trying to live on just one income for the last few months to make sure that we could do it. Many people automatically assume that living on one-income and having one parent stay home with the child is impossible. Here are a few things to consider when deciding whether having one parent stay at home makes financial sense.

Day Care
Day care costs are very expensive. A month’s payment for day care can rival the amount of one’s paycheck. A friend of mine paid $1500 a month for day care in Manhattan. This was for a child who was potty trained, because it would cost more otherwise. Prices are lower in the outer boroughs, but costs are still in the $1000 range. The cost of day care is probably the biggest financial reason why families decide to have one parent stay at home. Staying home would definitely be more cost effective if there were two kids involved.

Transportation Costs
Commuting to and from work costs a lot of money even if you follow the tips outlined in an earlier post. Not having to drive or take public transportation to work can be a huge savings.

The Two-Income Tax Trap
People focus more on how much they make rather than how much they actually take home. For those filing their taxes as Married Filing Jointly, the tax rate for 2012 is 15% for income from $17,401 to $70,700 and 25% from $70,701 to $142,700. We are in the 25% tax bracket so whatever income my wife makes would be taxed at 25%. This isn’t even taking into consideration Social Security, Medicare, and state and local taxes. So when you take into account the tax implications, having two incomes is not always as great financially as it may seem initially.

Food
While we already cook at home for dinner and bring our lunches from home, sometimes due to lack of energy or time we will eat out or buy lunch at work. I’m sure with a baby at home there won’t be much time for doing housework, but it frees up more time than if we both worked. Eating out for dinner and lunch definitely adds up. There will also be a little bit more time to shop the circulars when buying grocery.

Clothes
My wife works with kids so she doesn’t have to buy business outfits. She does have to do laundry more often though as the little ones tend to be messy. Many working folks have to buy work clothes or pay for dry cleaning which can also get expensive.

Pick Me Up
My wife usually brings coffee from home or drinks coffee from work. However, sometimes she will treat herself to a little snack or something from Starbucks. Some people buy something from the vending machine at work or buy something else as a treat for working hard. Others may also need other outlets to de-stress from work.

Guilt This may not be true for every parent, but I think some parents tend to make purchases for their child to compensate for being away from them.

Transitioning from a two-income family to a one-income family will not be easy. It will take some sacrifices and we’ll have to go through our budget with a fine-tooth comb to cut out things that we don’t need. I think it’ll be worth it in the end.

Are there other savings that come from having one parent at home? And are there other expenses that can be cut when transitioning to a one-income family?

54 thoughts on “Living on One Income

  1. Laurie @thefrugalfarmer

    Funny – I just did a guest post on Three Thrifty Guys about ways to save money as a stay-at-home mom. :-) . Seriously, though, I’m so excited for you guys. We made the decision that I would stay at home after our second child was born and I was laid off due to a decline in business. We haven’t looked back. It has been the best decision for our family. Each and every year since, I’ve learned more and more about how to cut expenses and manage our money well. It’s been really good, at least for us, to have one person home, me in our case, to manage the home, menu plan (which saves us a ton on grocery costs), care for the kids, etc. Parenting is one of the very best jobs in the world. So happy for you guys that you are joining the ranks – congrats!
    Laurie @thefrugalfarmer recently posted…Ooh, ooh, Pick Me!My Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks Laurie! I’ll definitely have to check out your guest post…we will be needing some tips on saving money with a stay-at-home mom! Glad that you feel that it was a great decision, it makes me feel more confident that we are doing the right thing.

      Reply
      1. Karena

        Are you debt free? My husband and I don’t have any kids yet, but we are working Dave Ramsey’s plan to become completely debt fee by 2015 (I know I am commenting on this late!). Getting rid of those monthly payments was one of the only ways we could see going down to one income. I think, generally, not having payments of any sort (credit card, cars, etc,.) would make the transition easier.

        Reply
        1. livingrichcheaply@gmail.com Post author

          We do have debt, but it is VERY low interest student loan debt. Interest rates are less than 4% and some as low as 2%. It would definitely make the transition easier if you don’t have debt, especially credit card debt as those interest rates are exorbitant. Good luck with the debt repayment plan…2015 is right around the corner, good job!

          Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks Michelle. That’s great you’ve already made the switch to self-employment, you’re ahead of the game!

      Reply
  2. Done by Forty

    We have some vague notions of one of us staying at home when we have children (my wife first, then me…maybe) but we’re kind of shooting from the hip now, as the kids don’t yet exist. Your point about the two income tax trap is insightful: the tax code almost pushes people to aim for a high-earner/stay-at-home-parent combo. The rub is when both parents earn roughly the same amount…

    Thanks for your post…there’s lots for us to think about!
    Done by Forty recently posted…June Net Worth UpdateMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      You’re right, the tax code does seem to benefit that combo. Fortunately for us, the decision was easy because my job is more stable, has better benefits and I am the higher-earner. It’s true that having both parents earn around the same amount with make it more difficult to cut out one income.

      Reply
  3. Matt Becker

    Sounds like you guys are making a sound decision. We did the trial run too and that was really helpful. I think that having one parent home is great if you can afford it and if one of the parents actually wants to stay home. My wife stays home, though she also works part-time on Saturdays, and she loves it. And I love that our son gets to spend so much time with her. Good luck with all the final prep work!
    Matt Becker recently posted…Questions to Consider When Choosing a Health Plan for Your FamilyMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks Matt. Good to hear that it’s working out for you guys! I think my wife will probably pick up part-time work or work from home, but it’s great that she will be able to spend more time with the baby. At her current job, she would be gone most of the day.

      Reply
  4. Joe Morgan

    A trial run is an excellent idea.

    My wife just went back to work, after being a stay at home mom (SAHM) for 10 years!

    It was difficult, but we both felt it was worth the sacrifice. It’s time that you can never get back. Once the kids are in school, they don’t need you…until summer. ;-)

    So, speaking from 10 years of experience – living on a single income is very much possible, but not always easy. I think the biggest single financial factor is debt. Any couple attempting to live on a single income with a significant amount of debt is set to fail.

    But the problem is that so few people plan to live on a single income, and so their standard of living is far too high when they make the switch.
    Joe Morgan recently posted…Capital One 360 Savings Bonus Promo (no code needed)!My Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      10 years of experience…you’re a pro at it! We only have student loan debt which is low interest so it’s not too bad. I definitely agree that it is hard for people to transition from 2 incomes to one because their standard of living is too high with lifestyle inflation…and it is much tougher to cut out one income. We were living pretty frugally already so it will hopefully be a smoother transition. I’m sure there might be some bumps on the road but probably not something we can’t overcome.

      Reply
  5. Holly@ClubThrifty

    I feel lucky that daycare isn’t expensive in our area. One month of full-time care for my two kids is only $600-$700 (depends on how many days are in the month). Anyway, it makes the choice to send them to daycare easier since I make enough money to justify it.
    Holly@ClubThrifty recently posted…June Budget Recap and UpdatesMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      $600-$700 for both kids? That is very affordable. Daycare is not as expensive in Queens, outside of Manhattan…it’s around $750 to $800 for a toddler. I think it’s good for kids to socialize with other kids and learn to share. They also have free universal Pre-K here which is a few hours so that would be something we’d look into at some point.

      Reply
  6. John S @ Frugal Rules

    It sounds like you’re making a really solid decision. I agree that it is a personal decision, though I am thankful that we’re both home and running our business. There are many costs involved and it’s easy to overlook many of them. I think doing a trial run while your wife is on maternity leave is a great way to see if it’s for you or not. Congrats on the upcoming little one. :)
    John S @ Frugal Rules recently posted…What Makes a Company Worth Investing InMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks John! I’m sure that I might be overlooking many costs but I think we’ll still be able to manage. That’s great that your kids have both their parents at home.

      Reply
  7. Brad @ RichmondSavers.com

    Great summary and good luck to you both! Being a stay at home mom is probably the most rewarding and the single most difficult job that exists. I don’t know how my wife does it to be honest…

    We made the decision before we bought our home (3 years prior to our oldest daughter being born) that my wife would stay home with the kids, so the planning commenced then.

    We figured that housing would be one of our biggest expenses and while we could have then “afforded” one of those 5,000 sf McMansions in a ritzy neighborhood here in Richmond, we knew it would be nearly impossible on one salary. So we bought a much smaller house in the best school district in the area and we plan on staying here for the next few decades.

    I know you said in a prior post that you work in Islip. Have you considered buying in West Islip? That’s one of the most relatively (haha) affordable areas that also has absolute top-notch Long Island schools. We have at least five sets of friends who bought there and it’s a great area.

    I think you’ll also be surprised at how low your Federal income tax liability (and effective tax rate on your income) wil be on one salary, especially if you do go ahead and purchase some type of property. Child credits, personal exemptions, mortgage interest, property taxes, etc. all get deducted from your single salary. We almost feel badly about how little Federal tax we pay, but those are the rules, so there’s not much we can do about it I guess.

    While this isn’t monetary, you’ll be amazed at how much quality family time you’ll have with a stay at home parent! Most couples we know who both work with kids are constantly running around on weekends doing all the chores, shopping, etc. they needed to do during the week but didn’t have time for.

    We’re able to kick back and relax all weekend since my wife loves to take the girls out for errands to break up the day during the week. It works out great!
    Brad @ RichmondSavers.com recently posted…Net Worth Tracking – 2nd Quarter 2013My Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      I have thought about moving to Long Island but maybe not that far out. Thanks for mentioning all the different tax credits and deductions that you get from having a child and owning real estate. I might have to change my withholding. I definitely agree that quality family time is important which is why we took this step. Glad that it has worked out for your family!

      Reply
  8. Thomas | Your Daily Finance

    Hey Andrew I am so happy for the two of you! I think it is wonderful to have someone able to stay home with the kids. They grow up so fast and you cant get the time back. You can certainly save a lot by having someone stay at home and daycare is one of them. I am not sure though with the work from home jobs. I work from home and I don’t think I could manage doing everything and watching our newborn. Daycare here is about 1100-1500 depending on the school you choose and not buying food at work will and does save some funds. Family first and hey when you are making some money from side hustles and blogging maybe you can work from home as well and be able to see your child more. This is way I choose to start my own firm so that I can see my kids grow up.
    Thomas | Your Daily Finance recently posted…Paying For College with Federal Student LoansMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks Thomas! You’re probably right that working from home would be tough with a newborn, but maybe in the future. I definitely have to ramp up the side hustles and monetize the blog if I want to be able to work from home too!

      Reply
        1. livingrichcheaply@gmail.com Post author

          That’s great that you are so involved with the kids. My wife would love that! Every time we see little kids when their mom leaves, they start crying and calling for mom…even though DAD is right there! haha! My wife says that’s what happens when the baby is with mommy all the time.

          Reply
  9. Anthony @ Thrifty Dad

    I agree that the decision to stay home is just as much a personal one. When we decided we were starting a family, my wife decided to leave her job years ago to start a home business, so when we did have kids, she would be able to watch them. Since having our first one, her business has slowed down considerably because of the little time she’s been able to dedicate to it. But every little bit helps. I am now contemplating taking a little extra time off myself when our new baby comes. It’ll be tight, especially because I’ll be on half of my average income, when the gov benefits kick in. But we’ve saved up and I think we can make it work. Good luck to the both of you!
    Anthony @ Thrifty Dad recently posted…Stretching your grocery budget (by another week)My Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks Anthony! I’ll probably take a little bit of time off too. I think other countries, including Canada have better maternity and paternity leave benefits than in the U.S. There are gov benefits when taking paternity in Canada? I don’t have any paid paternity leave, but luckily I do have a lot of annual and sick leave that I can take.

      Reply
  10. Alexandra @ Real Simple Finances

    Best of luck to you both with the new baby! It sounds as though you’ve making a very strong decision for your family, both financially and by doing what you feel is right for your baby.

    A friend of mine recently made the same decision; she worked at a day care, and while she would have received free child care for her son, she decided that she felt more comfortable being home with him. She began watching three other boys around her son’s age to bring in extra money at home, and it’s working out wonderfully for her!
    Alexandra @ Real Simple Finances recently posted…The Cost of Good Deeds: Fostering DogsMy Profile

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks Alexandra! The day care that my wife worked at didn’t provide child care to infants under 2 years old so that wouldn’t have worked. Plus I do think that she’d be more comfortable at home. My wife has thought about watching other kids to bring some extra income. We’ll see if we can work that out.

      Reply
      1. Alice

        Just wanted to mention I wanted to do this but it is much more difficult than I imagined. If your own child is under 1, they are going to want your full attention. Having two cruisers in one house is an unimaginable situation. At some point you have to make the decision between your baby or theirs if both cry at the same time. For ethical reasons, I had to give that up.

        Reply
  11. Pingback: Wishing You a Late Happy America! - Mom and Dad Money

  12. Pingback: A Walk Around the Blogs- Visiting Old Friends

    1. livingrichcheaply@gmail.com Post author

      Absolutely! Daycare is very expensive…I really think there are some instances where it doesn’t make sense to work and pay for daycare.

      Reply
    1. livingrichcheaply@gmail.com Post author

      Haha, I used to be domestically challenged but I’ve improved. Single-income living is not for everybody…we’re not even sure it’s for us, but we’ll try it out and see how it goes.

      Reply
  13. JW_Umbrella Treasury

    Day care costs are crazy. The amount they’ve risen is so far out of line from the increase in salaries over the same period. This is honestly one of the reasons why my husband and I are waiting to have kids. If we were to have one person stay at home, it makes more financial sense for it to be him. However, we’re worried about how that could impact his future earnings potential since not all employers would understand the decision to be a stay at home dad. We haven’t quite decided what we’ll do when the time comes

    All that to say, good luck with your transition to being a single income family. I think it’s fantastic that your wife will be staying home. My mom did this, and I think it was a huge benefit to us kids!

    Reply
    1. livingrichcheaply@gmail.com Post author

      Thanks! It’s true what you said about the impact on future earnings potential when taking a few years off from work. In my situation, my wife is a teacher and an early childhood teacher at that so she won’t have that problem.

      Reply
    1. livingrichcheaply@gmail.com Post author

      You’re right, it definitely will cost more for utilities. For the winter months, it won’t be a dramatic increase because we live in an apartment and the landlord pays for hot water and heat.

      Reply
  14. Pingback: Dealing with Financial Envy | Living Rich Cheaply

  15. Pingback: Financial Envy Part II (Others envying you) | Living Rich Cheaply

  16. KK @ Student Debt Survivor

    Congrats to you both! When the bf and I get married and have kids, staying at home is something that’s really important to me. I can barely stand leaving my dog at home all day, so leaving my kids would be pretty much impossible. We’ve talked about ways I’d still be able to work (part-time, evenings, per-diem) if we needed extra money. But like you said, the cost of daycare or a nanny is incredibly expensive (and a little scary to me because I wouldn’t be there to watch what’s going on all the time-I’m neurotic like that).

    Reply
  17. julia @ howmuchcost.org

    I like the breakdown. My husband and I just switched to a one-salary-income family. I’m the one who isn’t working at a 9-to-5 job right now. However I’m going to school and working on the building the home businesses. But I totally support your decision of having your wife be a stay at home Mom. Mom’s are shapers of our future generation and normally the more time and attention they gave give the kids the better they turn out. When we have kids we are going to do the same. So your breakdown was helpful! And I totally support your decision! We need more mom’s back at home properly raising the kids.
    julia @ howmuchcost.org recently posted…How Much Does eBay Charge To Sell?My Profile

    Reply
  18. Alice

    I honestly feel as though I may be the only stay at home Mom who constantly questions her decision. From an emotional vantage point, being with my son was possibly the only option since I took a vacation at 5 months, and he would watch me go out the door; I was largely working to pay off the last of our debts, but, I simply did not want to return to work after that. Plus we plan on having two more children in the upcoming three years.

    However, I could never say with great assurance “sure, the 80K I was making – 102 with benefits – no sweat, I’ll never miss that!” And before you say “oh, you just need to downgrade your lifestyle” – we never upgraded to begin with – we live in a 2 bed, 2 bath apartment, and housing is absolutely ridiculous in our area so we’re basically forced out of a better “investment” at this point. I’ve got two dogs jumping their guard and pissing in the living room, and ferrets who poop like it’s their job.

    I do have my sweet baby though (now 10 months). I have a lot of satisfaction knowing I am giving him the maximum love and care I possibly can.

    But financially? That’s tough. I don’t think we can sustain this for more than 8 years and still have any kind of retirement, and one solid hit to our medical insurance could leave us mostly broke (or, in debt). And yes, we did save substantially, but most of that will have to go to a downpayment on outrageously priced homes (and by that I mean 150K for ancient clunkers with severe structural issues). We already shop mostly at goodwill – and, while it’s true we eat all organic food – I don’t think we’re living the high life by any means.

    Anyway, so that’s my rant. I’m really struggling to find ANY work from home jobs (low-paid entrepreneurial gigs aside). Right now I’m painstakingly trying to teach myself JAVA after mind-numbing HTML tutorials in the 2 hours baby sleeps in the morning. It’s dreadful! And good luck finding a 10-20 hour a week telecommuting job! You have to pay 45 dollars just to sign up on flex jobs. And people call me every day offering me hugely lucrative in-person jobs, and I have to turn them all down.

    But don’t get me wrong – I love my son, I want to do what’s best for him. I guess I am just ranting that this society needs to change in that there should be more evening and weekend and work from home jobs.

    Even with living on one income before hand, the transition was definitely not easy. So many things you can’t plan for.

    Reply
    1. livingrichcheaply@gmail.com Post author

      Hey Alice, I can definitely understand it being a very tough decision. At the time when my wife and I were deciding, it was a lot easier. My wife did not make close to what you were making and had no benefits. It really didn’t make sense for her to go back to work. Unexpectedly, circumstances changed 2 months after our baby was born and a better job opportunity arose. It was hard to turn it down as the pay and benefits were better and my wife thought it was wise to at least see if it’ll work. I think if we were to only have one income, it would definitely be tough financially. No doubt about that. But I think we could have managed…we probably wouldn’t be saving much and here in NYC, the housing prices are also outrageous. And as you mentioned, things unexpectedly occur that you can’t plan for. I took some time off to watch the baby during the transition of my wife going back to work. And yes I see how little babies need a lot of your attention. It would be very difficult to get any work day while caring for him. Good luck with everything and thanks for sharing your personal experience.

      Reply
  19. Anastasiya

    Let’s see… I think you just about got them all! But I have more for you: medical bills! Apparently the $7500 we paid on top of our insurance for labor and delivery is an “insane amount” as quoted by our low income friends who “only had to pay $200 for the whole thing.” REALLY?! HOW?! Subtract the tax bracket when filing jointly, gas money (I work 30 minutes from home), pick-me-up money, daycare cost, and for my full-time employment I net about $12500 a year, or a whopping $6.00 an hour. And I’m a salaried director. So if you work for a daycare or something else that doesn’t bring in a substantial amount, you are probably in the negative for it when you add it all up.

    Reply
    1. livingrichcheaply@gmail.com Post author

      Oh yes, medical bills can be pretty expensive. Fortunately, my insurance covered pretty much everything. You’re right, when you add up all the costs, it sometimes doesn’t make sense to work. And unfortunately, daycare workers are paid pretty poorly.

      Reply
  20. Pingback: What Are You Investing In? | Living Rich Cheaply

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

CommentLuv badge