3 Mistakes Stay-at-Home Parents Make That Could Cost Them

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Transitioning to a one-income household can be daunting. Here are three financial errors that can impact stay-at-home parents. [[{“value”:”

Being a stay-at-home parent (SAHP) is one of the most gratifying, frustrating jobs in the world. However, unless a SAHP household is flush with cash, financial sacrifices are required to allow one parent to be home. The good news is that there are plenty of ways for a SAHP household to save money. The bad news is that there are plenty of mistakes a SAHP household can make that will cost them money. Here, we cover three of those mistakes.

1. Failing to create a new budget

As someone who opted to put their career on hold and become a SAHP, I can assure you that one of the most important things soon-to-be SAHPs can do is understand that their financial situation is about to change drastically.

Once you stop paying for child care, you’d think you’d feel rich. After all, the average weekly cost of daycare in the U.S. is $321 (per child!). It’s wild to think that the average young family spends almost $17,000 annually on child care — nearly $34,000 for two young children.

While child care is a huge expense, and cutting it from the household budget can help offset the loss of income, there are other financial issues to plan for. For example:

Chances are, the cost of utilities will rise once there are people at home all day.Planning for monthly bills is not enough. Families still need to plan for semi-regular expenses, like auto insurance and personal property taxes.Once a family is down to one consistent salary, having an emergency savings account is more important than ever. The goal is always to have enough money to cover unexpected expenses and avoid counting on credit cards to get through tough financial situations.

In other words, planning for the worst as they set up a new household budget is a good way to be prepared for whatever may come. After a few months of living within the new budget, adjustments can be made. For example, if a couple sees that their utility bills have increased, they may also notice that the money they once spent on gasoline has decreased enough to cover higher utility bills. It’s all about preparing the best they can and then being flexible enough to adjust their budget as needed.

By the way: The high cost of daycare is pushing some parents out of the workforce. According to a recent Baby Center survey, 45% of the parents questioned said they’ve considered reducing their hours or quitting their jobs entirely due to the high cost of child care. Another 13% have already quit and become SAHPs.

2. Not accepting the new financial reality

As a parent quits their job and heads for home, it’s easy to have stars in their eyes. They may be so focused on the thought of being with their children that they lose sight of what it will take to make the change sustainable. Here are some of the changes they may need to make if they want to take care of monthly bills on a single salary:

Purchase fewer meals (and snacks) outside the homeSpend less money on attireAdhere strictly to the household budget (no more impulse buys)Plan for off-budget spending, like day trips and holiday giftsPaying for “extras” may involve taking on a part-time gig or working from home

Like most things in life, being a SAHP involves a learning curve. Even if a parent doesn’t get it right immediately, they should be fine if they’re willing to make small alterations along the way.

3. Lending money to Uncle Sam for free

It’s sobering to watch the checking account balance drop as a two-income household becomes a single-income household, but there’s an easy way to reduce financial stress: Stop loaning money to the government interest free. Every dollar that unnecessarily goes toward income taxes each year could remain with the household.

Let’s say a couple earned a combined income of $130,000 when they both worked, but now that only one partner works outside the home, their income has dropped to $90,000. Instead of being in the 22% tax bracket, they move into the 12% bracket. That means their tax obligation drops by almost half.

Failure to adjust their withholdings means allowing the government to hold their money for free instead of putting it into their own bank account and using it as needed throughout the year.

There’s a great deal to consider when transitioning to a SAHP household. However, getting one’s personal finances in order first is one of the best ways to ensure success.

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