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Guest Viewpoint: A column by James Kruzan


Can you afford to have one spouse at home?



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January 25, 2012 - For many families, this is an important question. Unfortunately, most dual income couples feel that both of them have to work in order to meet their expenses and maintain their lifestyle. However, after careful evaluation, you may find you have a choice. Consider the points below to help you make a more informed decision:

Impact of the loss of second income: Frequently, the real impact of the second income is not as much as the income itself.

Calculating the taxes, extra cost of working, and other expenses to see the real impact (may be far less).

Cost of earning the second income: Here is a list of some typical expenses that you need to consider before making that decision. Identify how many expenses are related to both of you working.

• Child care: Include related expenses (i.e. transportation, nanny payroll taxes).

• Commuting: Include all related expenses (i.e. gasoline, oil changes, wear and tear, insurance).

• Lunches out: What do you spend on office lunches?

• Clothing: What do you spend to buy work clothes?

• Dry cleaning: Could you save money if dry cleaning became unnecessary for one of you?

• Take-out dinners: Prepare more meals and do buy less take-out. Save on groceries by carefully planned shopping.

• Housecleaning services: Are you paying to have your house cleaned?

Hidden benefits: When it comes to taxes, joint income puts you in a higher tax bracket. If filing jointly, calculate the impact of the second income on your taxes.

Long-term cost of not working: Consider the long-term effect on your 401(k) plan. If you or your spouse remains in the workforce, 401(k) plans not only give you immediate tax breaks, but also grow to make a larger retirement nest egg.

Since you'll now be dependent on one income, you are more vulnerable to economic downturns and company downsizing.

Keep in mind that as your children grow, your child-care expenses will decrease considerably.

Lifestyle changes: Making some changes in your present lifestyle might allow one of you to stay home. Here is how you can do it.

• Make two lists: Needs (all "must pay" bills - whether you stay home or work). Wants (entertainment, travel, gifts, etc).

• Little things add up: Small changes save money (i.e. turn off unused lights, dry clothes outside instead of in dryer).

• Be creative: Save a considerable amount of money by making small things (i.e. birthday cards, holiday gifts).

• Alternatives: Switch to a nearby YMCA or less expensive health club. Instead of renting a hotel room at a fancy resort, rent a cabin in a national park.

• Make money from home? Find alternative employment such as a part-time, evening, temporary, or a work-at-home job.

• Can your hobby make money? What do you like to do? Can you get paid? (i.e. write for your local newspaper)

• Plan ahead - Do not quit your job without planning. If you plan ahead, you can pay off a loan to save monthly installments, secure a part-time or at-home job, or start implementing other lifestyle changes to reduce the impact when your second income stops.

This material was prepared by Raymond James for use by James B. Kruzan, CFP®, CRPC® of Raymond James Financial Services, Inc. Member FINRA/SIPC.

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