Preparing Financially for a Stay-At-Home Parent

*Special thanks to our partner, Clint Brady with Northwestern Mutual, for sharing this information with us!*

It hit him like a cold bucket of water to the face. A shock that takes your breath away for a second. He was stammering a bit and not finding the words to respond. As I was talking over spending habits with one of my new clients, she said she didn’t feel like she was “contributing.” It was something he wasn’t prepared to hear because he didn’t realize how she was feeling. She felt like she couldn’t spend their money because, in her words, “she didn’t help earn it.”

According to a Pew Research Study, one-in-five U.S. parents were not working outside the home. *Full disclosure, we’re a family with a stay-at-home parent strategy, this is one of those topics that is important to me because it really hits home. No pun intended…well, maybe it was. 😊 But the conversation my clients were having was something I understood on a personal level.

Your reasons for having a stay-at-home parent are personal. Often people assume this means that the partner working outside the home is making a lot of money. This isn’t always the case. Our decision was based around what we felt was in the best interest of our children and our relationship with them.

Preparing Financially for a Stay at Home ParentHere are four things I’ve gleaned from being and working with one-income households:

UNDERSTAND THE CASH FLOW

It’s vital to knowing how you’re going to make this work. As a family you must know how much money will be coming in and how much is going out. What are you losing in income versus saving in daycare? There will be unexpected costs that will creep up like taking the kids to do things as they get older. Do your best to plan for this and include them in the budget.

Also, while there is technically only one salary coming in, that doesn’t discount the hard work of being at home. Work that earns the same indulgence that working outside the home would; like the occasional stop at a favorite coffee shop, lunch out with a former colleague, or a happy hour cocktail or two. Just make sure the kids are with a sitter for that last one.

Carve out some dollars for stuff like this. Like anything with budgeting, it’s about balance and discipline.

SAVING FOR RETIREMENT

One of the biggest hang-ups we discussed was saving for retirement during those years. How do we make that money back? The truth is, we can’t. But, we can alter how we do things in the future to try and make up for it. I have the privilege to work with people at the end of their careers getting ready to retire, and I haven’t heard one of them tell me they wish they would have worked more and spent less time with their children.

The key is to understand your retirement goal and develop plans for the next 2 – 3 years and 5 – 10 years. In five years, the parent at home may look to get a part-time job or get a job they can do from home. Actually, my wife has done the latter. She works from home a couple hours a day. The extra money is nice, and she values having adult conversations throughout the week and as I much as I try, I can’t seem to check that box for her either. 😊

DEFENSE MAY BE YOUR BEST OFFENSE

You must understand the importance of protecting your family. It doesn’t have the allure of investments, which we touched on in a previous post, but I don’t know if there is a more important topic for a one-income household to discuss.

Many families understand the importance of life insurance, but few consider the toll of a spouse not being able to continue their day-to-day activities because of disability or illness. A parent can become disabled from any number of incidents, accidents or illnesses. If that happens, who will work? Will the kids need to start daycare? How will you pay for it? We don’t like to think of life under those circumstances, but good plans always have contingencies for the what-ifs. Protecting your income is a strategy that almost every person underestimates until they see it firsthand.

TALK TO A PROFESSIONAL

As I alluded to in the opening and Ashley referenced in her experience of working with an advisor, talking to someone outside of the relationship can bring things to light. Talking finances is never easy, even in the happiest of marriages, but I haven’t come across people who didn’t find value in it. That’s including people who haven’t become clients. I truly believe that it’s incredibly helpful to people wanting to improve their financial stability.

If you’re like most people, you’re probably nervous or embarrassed because of the vulnerability it takes to get help with something as personal as your finances. But know this, you are the same as many of the people who speak with a financial professional. They’re all a little nervous, no matter how successful.

My wife has been at home with our girls for more than three years now. Candidly, there have been some unbelievably stressful weeks when we would second guess ourselves. As with most things in life, you learn, adjust, adapt and keep moving forward. You make it work.

Looking back over that time, I can say honestly that we don’t regret the decision we made. We wouldn’t trade it in for that money “lost,” because you can’t get the time back either.


Clint is a financial advisor with Northwestern Mutual. He is an advocate for families and business owners on creating a path to financial independence

Click here for a free, no obligation consultation with Clint.

Disclosure


Interested in finding out more about financial planning? Check out these great posts!