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Archive for Monday, October 29, 2001

How to make ends meet when two incomes become one

October 29, 2001

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How does a family live on one paycheck when two don't seem to stretch far enough, especially during these tough economic times?

I found myself asking that question while contemplating a Census Bureau report noting that a growing number of women are leaving the work force to stay home to care for their infants. The Census Bureau, which has been tracking working mothers every year since 1976, said the number had peaked in 1998 at 59 percent. In 2000, the number registered its first significant drop to 55 percent.

"You really have to sit down and figure out where the money is going," said Denise Topolnicki, author of "How to Raise A Family on Less Than Two Incomes."

Topolnicki, who quit her job as an editor and writer at Money magazine to stay at home with her daughters, said it took a lot of financial planning and a determination to get rid of expenses that she and her husband once considered necessities.

Overall, most mothers do return to work before their baby is a year old. Those who don't are most likely to be white women, 30 years or older, with one or more years of college and husbands who presumably have good jobs. Even if you don't fit that profile, there's a chance you may be able to afford to stay home.

Transitional advice

Here's how Topolnicki and other stay-at-home moms do it:

Tally your take-home pay. Do the math. You might realize you can afford to quit your job without significantly reducing your lifestyle. Let's look at the example Topolnicki gives in her book: Andy and Anna, who both work full time. Andy earns $45,000 and Anna makes $25,000. They spend $15,000 a year to send their two kids to a day care center. Anna spends $1,200 on bus fare to work.

After taking into account taxes (including deductions and credits), day care and transportation expenses, the net pay for the couple is $46,845. When Anna quits, the couple's taxable income drops. But the day care and commuting costs vanish. Now their income is $41,976. That's a difference of $4,869, or $13 a day. Of course, if Andy had decided to quit his job, or if Anna was making as much as Andy, the financial sacrifice would be much greater.

Cut your expenses. Right now I bet you're thinking, "Please. We are living paycheck to paycheck." Do you eat out a lot? Topolnicki found $2,000 a year from the lunches she didn't have to buy anymore. "When you add all this stuff up it can be mind-boggling," she said.

Don't try to do it all. You may not be able to save enough to meet all your financial goals, such as planning your retirement or footing the entire bill for your child's college education. So save what you can. Focus first on your retirement. "Remember, your child can borrow to go to college. You can't borrow to pay for your retirement," Topolnicki said.

Stand by your man (or woman, if that's the case). It sounds a little corny, but if someone is going to stay at home, it's going to take a team effort, said Joanne Watson, author of "Team Work: How to Help Your Husband Make More Money, So You Can Be a Stay-at-Home Mom."

For example, the Los Angeles-based Watson suggests helping your husband (or wife) get a raise or move up to a better-paying job. As a former real estate agent, Watson said she did some networking to help her husband land a job as a manager of a high-tech company.

Before his job interview, she researched the company and helped her husband practice for the interview.

He got the job and now earns a six-figure salary, allowing her to stay home with their three children.

Not for everybody

Still, for many mothers, staying at home isn't an option. According to the census, the decline in the number of mothers leaving the work force to stay at home with their infants did not decline among women under the age of 30, African Americans, Hispanics and those who had a high school education or less.

These women work because if they don't, their families will suffer. In other cases, parents work to support not just their children but a host of less-fortunate relatives. And still other families see a two-income household as their ticket to a better life, one without financial struggle.

Ultimately, you have to do what you think is right for your family. But if you have the choice to stay at home, planning and some sacrifice can help you trade your long commute and a boss that gets on your everlasting nerves into more time with your children.

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