Determining whether you can afford to live off of one income
There are many reasons that you might be thinking about life on one income. In these uncertain times, it may even be forced upon you and your family. If you’ve recently lost your job then the pressures of money will be weighing heavily on you. You might have already been planning to finish up work.
Whether you’re pregnant, on maternity leave, or just contemplating starting a family, chances are you’ve considered the idea of wanting to stay home with your baby. This is an extremely personal decision with a lot of different factors for each person involved.
The Australian Institute of Family released a study that found that 46% of mothers who take maternity leave do not return to work full time once they begin bearing children. Let’s take some time to figure out whether or not being a stay at home parent is something that you can afford to do financially, as this is one element of the decision that most people need to factor in. These figures apply to any reason you might be going down to one income.
Figure out your expenses
Make sure you have a thorough budget that factors in all of your expenses, from mortgage payments to savings and beyond. You can’t figure out if you can afford anything if you don’t know how much money you actually have to spend.
Keep in mind that on top of your regular expenses you should also be allocating some of your budget aside for unexpected expenses (the car breaking down, an unexpected doctor’s visit).
Now that you have your expenses figured out, you can move on to the next step.
Figure out the positives of not returning to work
Going to work isn’t all great news. It costs money in fuel, lunches, parking, and even subtle elements like keeping your wardrobe up to date and cleaned. Not returning to work saves all of this money, plus the expenses related to childcare, so figure out exactly how much you’re saving.
Figure out the negatives of not returning to work
On top of not having your income coming in regularly, you may also be missing out on pensions and super contributions. Calculate exactly how much you’ll be losing by not going back to work as well.
Even if you plan on returning to work, factor in that your income won’t be the same that it is now – your job may not even still be there. So don’t count on being able to return “whenever you want”, at the very least not at the same position and salary.
You can’t make an informed decision until you fully understand both the positives and the negatives of the decision. So make sure that you factor both in your decision-making process.
Consider your partner’s position
What does your partner do? Can they support your family? Is their job secure? How secure? You need to realise that if you do not return to work your partners’ income is all that you will have to rely on. So consider all the factors related to your partners’ income, from how much it is to the security of that workplace.
Crunch the numbers
At this point, you should have enough information to make an informed decision. How do your expenses compare to your partners’ income? What are the benefits and the pitfalls of you not returning to work? How will this factor into your future costs? Can you still climb out of debt with just one income to rely on?
If you’re still not sure, consider a trial period of living on one income for six months. If it doesn’t work out, reconsider your options then. If it does work out, then you’ll know that this is a legitimate option. Even if this doesn’t work out, there are alternatives to be considered.
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The final step, considering the alternatives
There are alternatives to completely removing yourself from the workforce. You could cut back your hours, negotiate to work from home part-time or see about taking some extended time off.
Each of these options allows you to have some additional time with the children without completely removing your income from the family situation.
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