Whether you have planned it or not, there may be a point after having kids where you decide that it’s time to stay home. Maybe it was a hard decision that you’ve made due to mounting childcare costs. Or maybe it’s something that you’ve always known you’d do so you could spend more time with your children when they’re young.
It’s always the best decision if it’s the right decision for you and your family. But before you settle into your new life, there is something else you need to consider: the money. There’s more to think about than just making sure the budget works each month.
Read on for five things you should consider to make sure you’re financially prepared for this new role.
So How Does Your Financial Picture Change?
You know that by staying home the big things that change are one person no longer has an income and you no longer need to pay for as much childcare. But that doesn’t take into account all that may change with your financial picture.
Think through the entire financial scenario. Will you save substantially on commute costs and eating out? Will your health insurance costs climb? Will you still need to include some child care or children’s activity expenses into your budget? Do you need more in emergency savings now that you don’t have a second income to fall back on? Work through all of the scenarios to get a full picture of your finances. Once you do, it will make those first few months of adjusting to the new financial reality easier.
Will You Feel Comfortable Long-Term?
Even if you’re planning to stay home for just a year or two, think long-term about what will make you feel most comfortable financially. If that year or two extends to 10 or 15 years, you’ll be prepared and will have thought through important items early on. How will you and your partner handle making big purchases? How much say and oversight do you have into each other’s day to day spending? And is there any money that you will both keep separate from the relationship?
One thing you will want to seriously consider is contributing to a separate retirement account, like an IRA. Not only will this be tax advantageous, but you’ll be protecting your future. When you decide to stay home, not only are you forgoing a salary, you’re also missing out on contributing to your retirement during prime years. You can protect your future self by making sure that your retirement contributions don’t end when your salary does.
How Can You Protect Your Future Earning Power?
Years ago when making the decision to stay home or continue working outside of the home, there weren’t many options to keep skills fresh and relevant while taking care of kids. Now, thanks to the internet, there are options to continue improving your skills or even bring in a little income on the side.
While you may be taking a step back from your current career, is there some way that you can protect your earning power? It may be that you pick up a few consulting projects that require a handful of hours per week. Or you might occasionally take online courses to keep your skills fresh through Coursera or General Assembly.
Keeping your skills fresh can help ensure that if you do ever decide to go back to your career, you won’t have to start over. As a bonus, you might find another career that you’re passionate about pursuing should you decide to re-enter the paid workforce.
Can You Have a Hand in Family Finances?
One of the best things you can do for your family and your financial security is to have a hand in the family finances and investments. As hard as it is to think about, 90% of women will be solely responsible for their finances at some point in their lives, whether from remaining single, divorce, or death, according to Fidelity. Managing finances with your partner will ensure that you feel financially confident, even if the worst happens.
While many people jump to clipping coupons or searching for deals as a way to stay involved in the family finances, being involved at the macro level is probably a better use of your time. Taking the time to rebalance investment accounts or monitoring your savings will help your family financially more in the long run.
Should You Consider a Postnup?
You and your partner might be on the same page now with finances and having one person stay home, but fast forward a few years and the decision you make today could be a little fuzzy. Who wanted who to stay home? And why? A postnup, while unromantic, can help protect you should the worst happen in your relationship.
A postnup will help lay out exactly what will happen if your marriage should end in divorce, which can both protect you financially and minimize disputes and legal fees. Hopefully, you will never need it, but a postnup can ensure a smooth transition during a difficult situation.