When our first son Aiden was born, my wife made the switch from full-time employee to stay-at-home mom (though with a kick-ass counseling practice on the side).
It was a big deal. Not only were we adding all the expenses of a newborn, which we had zero experience with, but we were adding the financial and emotional stress of switching to a single income. That’s two big changes all at once.
Of course, we’re far from the only ones who go through this. Pretty much all new parents at least consider having one person stay at home, and many parents who go back to work start having second thoughts at some point about whether one of them could stay home.
So, whether you’re having your first child or you already have kids, I want to give you a simple way to make the transition to a single income a little easier and a little less stressful.
Step 1: Ballpark your new expenses
It’s pretty likely that your spending is going to have to change when you switch to a single income. If you’re doing it at the same time as you’re adding a child, you’re obviously going to have new expenses for the baby. But no matter what, the reality is that you’re going to have less money coming in and therefore probably won’t be able to afford as much money going out.
So the first step is to estimate what those changes are going to look like. Now I’ll be honest with you: you aren’t going to get this exactly right. It’s impossible to know exactly what your spending is going to look like in this new situation until you’re actually there, but you can get in the ballpark enough to start preparing.
First you’ll need to get your baseline: what does your spending look like today? If you’re already either keeping a budget or tracking your spending, you’ll have a good sense of what you currently spend in a typical month. If you don’t already know those numbers, I would suggest following this process to get a handle on it: How I Track My Spending.
Then you’re going to have to think about two different types of changes:
- New baby expenses, and
- Reduced spending based on reduced income
1. How much will the baby cost?
If you’re having your first child, this is the million dollar question, right? The honest answer is that there’s no way to know for sure ahead of time, but you can definitely work on getting a reasonable estimate.
Babycenter has a good tool that will show you some national averages. This can be a good place to start: Cost of Raising a Child.
But those are simply average numbers that may or may not reflect your personal situation. When we were prepping for our first son, I went through Babycenter’s numbers and took things out or added things in where it made sense for us. For some specifics on how our situation differed from the average (and how yours might too), here are two articles that could help you out:
Here’s another tip that can make this process a little easier. When we did this for ourselves, we didn’t worry about getting incredibly specific with how our budget would change. That is, we didn’t worry about how much we’d be adding to our grocery budget vs. our clothing budget, or other line items like that. We just adjusted the annual spending number we got from Babycenter, divided that number by 12 and assumed we would average spending that much more per month. It kept the process much simpler.
2. How will your other expenses change?
Of course, adding a baby isn’t the only change here. One of you is switching from a full-time job that pays you money to a full-time job that doesn’t. That’s going to bring up it’s own set of changes in spending.
Some of your spending will change naturally as a result of your change in daily habits. Maybe you spend less on gas getting to and from work, but maybe you spend more on electricity since you’re home more of the day. You’ll almost definitely spend more on life insurance, but you’ll probably also spend less on going out (trust me, you’ll be too tired).
Other spending will probably have to decrease simply because you’re going to have a smaller income. Those specific choices are going to be up to you, but you’ll have to look at your new income, the new expenses for the baby, and see if there’s any part of your budget you should be planning to cut back on.
Step 2: Start living on your projected expenses and save the rest
Okay, so now you’ve got some idea of what your budget will look like once the baby gets here and you’re living on a single income. That’s a big step, but it’s not the end.
Now what you can do is start living on that new budget a few months before you actually have to make the switch. This will do two big things for you:
You get to iron out some of the kinks BEFORE you actually have to make the switch
Living on a smaller income is going to take some teamwork. It will probably be a difficult transition financially as you have to adjust to new habits and new spending patterns. It may also be a difficult transition emotionally. When two people start fully sharing the money that one person is earning, there is plenty of room for hard feelings to enter the picture on both sides.
It’s best to try and work on some of these issues BEFORE you’re also dealing with the stress of actually having only one income. And if you’re also making the switch at the same time as you’re adding a baby? Well, you’ll have enough to worry about there that having a handle on the day-to-day financial stuff will be a big relief.
You can build up a savings buffer
If you’re having a baby then you’ll definitely have some new expenses there. But on the whole you’ll probably be spending less once you switch to a single income simply because you’ll have less money to spend.
So during this trial period, when you’re living off one income but you still actually have two, you should have some extra money coming in that you can funnel into a savings account. That extra savings will give you a nice little cushion that can take some of the stress away from the transition. Like a little extra emergency fund to help you navigate those first few months.
We started doing this about three months before our son was born, but it would have been nice to start a little bit sooner and build up a little bit more of a cushion. The earlier you can do it the better. The worst that happens is you build up more savings than you actually need (whoops!).
Living off a single income certainly isn’t for everyone. Some families need both incomes to make ends meet. And some parents just love their jobs too much to give them up.
But if the idea of staying at home is appealing to you, use these tips to give it a test run before you dive in. The worst case scenario is that you build up a little extra savings before returning to business as usual. But if you do end up making the switch, this preparation should make it a lot easier.