Often I’ve heard people saying that they would like to have one spouse stay home, but they just can’t afford it. I’ve also heard others say that they have had to sacrifice because one spouse stayed at home. The assumption is normally that two incomes is better financially than one income.
While at first it may seem that a household earning more money will grow wealth more quickly than a one-earner household, the truth is that unless both spouses have very high incomes (greater than $100,000 per year), most families will do better with one spouse at home than with both spouses working, particularly if there are children who need daycare. The reason is that having both spouses working results in a lot of additional expenses that aren’t there if only one spouse works. Some of these expenses are:
Childcare ($500-$2000/month): The largest and most obvious cost incurred if both individuals are working is childcare. Infants are enormously expensive to put into daycare, and it is very difficult to make any money if you have to pay for childcare for a couple of children. Even after they get older and are spending some of the day in school, there is still afterschool care and childcare for the time that school is out. Also, there is a reason that most animals have one partner that stays and takes care of the nest (for penguins, it’s the male) – if both parents are out hunting, you need to find someone you trust to take care of the children. Is this something you really want to trust to someone making minimum wage?
Clothing ($100-$300 per month): Working means buying business clothing or uniforms. Many of these threads are expensive, and while it may not seem like much each month, it adds up over the course of the year.
Gasoline ($100-$400 per month): Depending on the length of your commute, rising gas prices can really put a strain on your wallet. In addition, there is extra car maintenance and insurance and can be tolls and parking. Add another $200-$400 per month for these items.
Meals Out ($300-$2000 per month): Because no one has time to shop and no one has time to cook, a lot of two-worker families eat most meals out. Even at $20 per meal at fast food, this can quickly add up for a family of four. Don’t forget about those lunches out as well.
Taxes ($300-$2000 per month): An additional paycheck will mean additional social security and medicare taxes will be taken out. In addition, the additional income earned will be taxed in the higher tax bracket. Remember that each dollar saved because an expense is avoided by a spouse not working is multiplied because it also results in tax savings. You need to make $1.20 or so for each $1 in childcare you are paying.
Add everything together and for most families it will actually make more sense monetarily for one person to stay home, particularly while the children are very young and payment for childcare would be required. And speaking of sacrifice, much of what is sacrificed is clothing and cars that will be destroyed through trips to the office and meals out that become mundane quickly. By working time with the kids and home cooked meals are sacrificed.
So, while not everyone can take on the extremely challenging role of raising children, for those who wish they could but think that they both need to be working to make ends meet, perhaps you should reevaluate what you are really netting after all of the additional expenses. Whether the mother or father stays home, there are also intangibles such as having a bigger influence on your children’s lives and morals. There are also only a few jobs that are more important, because who will remember that presentation or report a month from now?
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.