How to Afford Being a Stay at Home Mom

Tom Gilmour is a senior director of Planning Experience Integration for Northwestern Mutual.

Staying home with your kids might look attractive for several reasons. Perhaps you’re tired of watching almost your entire paycheck go toward child care. Maybe holding down a demanding full-time job in addition to the full-time job of being a parent is too much. Or, maybe you miss the time with your kids and want to see them as much as you can while they’re little.

You may be ready to stop work and stay home with your kids, but you’re probably also asking yourself, “Can I afford to be a stay-at-home mom?”

Though it may seem unrealistic to cut an income out of your family budget, with a plan, anything is possible. Here are some tips for how to afford being a stay-at-home mom.

Assess your family financials

As you start and add to your family, you’ll likely see a shift in where your money goes. You’ll have new expenses, like the cost of having a baby and day care, and you’ll probably see a dip in other expenses, like going out to restaurants with friends. It’s important to understand what your new financial picture will look like, even if you’re not quite there yet. Do some research into how much it costs to raise a child and get a sense of the costs you’ll be up against in the next few years.

As you think about dropping down to one income, you’ll also want to think about:

• Changes to your tax bill. With only one income, you may drop down to a lower tax bracket, which means your spouse may not have to withhold as much in payroll taxes and bring home a slightly bigger paycheck to work with*.

• Your benefits. If you were the spouse carrying benefits, understand how switching to a family plan through your spouse’s employer will change your monthly premiums and coverage.

Make a budget

Now that you understand the expenses coming your way, it’s time to sit down and make a budget. If you’re going to significantly reduce your household income, you’ll have to make some sacrifices. But—you'll be surprised at how far you can get with some planning. Here are some simple steps to create a budget on one income:

1. Total your household monthly take-home pay.

Include your spouse’s income and any other passive income you have hitting your bank account each month so you know what you have to work with.

2. Add up your fixed expenses.

These are bills and expenses you pay for on a regular basis, like your mortgage, car payments and utilities. Unless you make some major changes, you probably won’t be able to adjust these expenses too much.

3. Account for non-monthly costs.

These include expenses that you don’t pay every month, but that you do pay regularly, like quarterly taxes and annual insurance premiums. To budget for them, take the total and divide it by 12 so you’re putting a little away each month to cover them. Like fixed expenses, these are probably going to be a little bit harder to change.

4. Stay on track with your financial goals.

Here you’ll set aside money for your savings goals like saving for retirement, saving for college or paying down debt. Planning is about setting priorities. This is where it’s critical to ask hard questions about what’s really important to you. If staying at home is more important than paying for college, maybe it’s ok to cut back on college savings a bit. But you also need to make sure that you’re not forgetting about these goals, because you will likely need to retire someday.

5. Do the math.

Subtract your fixed expenses and goal funding from your take-home pay. What’s left is money available for discretionary spending. This number may be a lot smaller than it once was, but discretionary spending is the area of your budget where you can find the most savings.

Discretionary spending includes all the extra expenses on things like going out to dinner, vacations and non-essential expenses. Look for efficiencies and ways to save like meal planning, coupon clipping or running in the neighborhood vs. joining a gym. As a stay-at-home mom on a budget, it can also help to connect with other stay-at-home moms and share tips on how to cut costs.

6. Track your spending.

Regularly checking in on your spending and adjusting your budget will be important to make sure you’re on track—especially when you are getting used to the change. If you find yourself overspending, revisit your discretionary spending and see what else you can adjust. Having this discussion regularly with your spouse is a great way to make sure everyone’s on the same page.

Consider alternate means of income

A traditional 9-to-5 job is not the only way you can make income these days. If you find your monthly budget on one income is not going to be enough to cover your needs, there are other ways you could make money while staying home with your kids. Here are a few ideas:

Find a remote job

Working from home is a lot more widely accepted now than it was even five years ago. Remote work can offer a lot more flexibility, which may satisfy some of the needs you have. You might look for a full-time remote work opportunity in your field or find another flexible part-time opportunity that can work around your kids’ sleeping schedules.

Look into passive income ideas

With passive income, you could earn income without logging hours at a job. After a little more work upfront to get things going, you should be able to bring in a stream of income with less work. Some of this work could even be done with the kids around or when your spouse is home. Opportunities like real estate rentals or selling merchandise online could give your family a little extra income and still free up your time to spend with the kids every day.

Get the kids involved

There are also work opportunities that may not require you to get child care for your kids. Nannying other children, for example, would allow you to stay home with your kids while also earning money for something you’re already doing. House sitting or dog walking are other options that can include the kids. Even though these opportunities may not pay as much as a traditional job, every little bit of income helps—and you still get to be with your kids.

Work with a financial advisor

If you’re thinking about taking a step back from work, your financial advisor can be a great resource to work through how to afford being a stay-at-home mom. Your advisor can also help you keep your eye on the long game, making sure that you don’t sacrifice future goals to stay home.

Together, you and your advisor can look at all parts of your financial plan and find ways to achieve all you want to—now and down the road.

*This publication is not intended as legal or tax advice. Financial Representatives do not render tax advice. Consult with a tax professional for tax advice that is specific to your situation.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER^®, and CFP^® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.