I am 28 years old working in tax. I make about $88,000 per year.
My wife is 29 years old and works in payroll. She makes about $54,000 per year.
We have a mortgage of $370,000 @ 6.8%. PITI is $3,050 per month.
Outside the mortgage, our other monthly expenses before baby is around $2,000.
We have $50,000 in a HYSA for emergencies. $5,000 in our checking. And $575,000 in $VOO.
She will return to work once our kids are of school age.
It looks like we will be barely scraping by or losing money each year she is out of work. I was thinking I could always sell some of $VOO position just to get us by. I would have to sell maybe $3-8k per year until she returns to work.
Alternatively, I could sell $320,000 worth of stock and pay off the house. My basis is not much different than current share price. Capital gains would be minimal.
Do my finances make sense for my wife to be a stay-at-home mom?
byu/Imustretire inpersonalfinance
Posted by Imustretire
41 Comments
“Barely scraping by or losing money” is a red flag to me. Unexpected things and expenses WILL happen, and you don’t want to be super shaky. Though all things considered you seem to be in a relatively solid state right now.
The big thing to me are: it will likely not be a simple matter of “return to work.” She will probably have a hard time, and if/when she does the years out of the workforce will massively dent her earning potential (personally I know temporary stay at home moms who are struggling to get back into the workforce). Make sure to consider this in your calculations. For us, even though childcare for a couple of kids was pretty much as much as my wife’s take home pay at the time of consideration, we kept this in mind and she stayed working, and it paid off bc of the continuity of her career growth.
Edit to add: I said “barely scraping by” is a red flag but maybe that’s too harsh. As long as you have some clear cushion and a clear off ramp (like a contingency if your wife fails to or chooses not to return to work) you should be fine. More like a yellow flag I guess.
Your personal finances don’t really support it but whatever situation allowed you to accumulate more than a half million dollar investment certainly do
If stay at home parenting is more important than retiring early or other financial goals, it certainly seems attainable
Where did the 575k VOO come from on that salary? That will answer this question. Nothing else does.
Unfortunately, your expenses are too high for this to make financial sense. In addition to this, babies are EXPENSIVE. what if your wife can’t breastfeed? Formula is… EXPENSIVE. What about diapers? They are, you called it… EXPENSIVE. You’ll want to take family vacations every once in a while. What happens if a car needs replaced? What happens if there is a home accident? Babies need clothes, doctors appointments, bottles, crib, toys, food, car seats, strollers, a billion pacifiers they will lose, and on and on.
Staying home only makes sense if DayCare costs would be MORE than wife (or yours if you’d be staying home) salary.
If Daycare costs LESS than wife’s take home pay – remain working.
I’d also probably take 150K of that VOO and put it directly toward the principal on the mortgage.
If the two of you agree for her to be a SAHM, pay off the house. Whomever left that to you wanted to help you, and that will be your biggest help at this point in life.
Then your wife works until she has a baby. Not quitting because you are trying to get pregnant. If she.does payroll, see if she can pick up some clients to work from home. You keep increasing your business so your income goes up. Make a budget and stick to it.
I was making a little less than your wife when my first child was born 15 years ago. Living in a city where daycare cost $2,000 per month, almost 50% of my salary, I opted to stay at home and work freelance part time. I now make close to what I did before, still working just 20 hours a week, and will never go back to the office because our kids have required more of us as parents they older they get. It helps that my husband has been able to advance his career in a stable industry, but regardless we have had to make some sacrifices. I wouldn’t describe it as “scraping by,” just having to forego some expenditures that two-career families don’t have to. And we haven’t regretted it for a second!
Yes, it makes sense. You just need to grow your margin some by spending less and making more.
*Spending:* If she stays home, she needs to get scrappy about cutting down your expenses. All dining out & carry out needs to stop for a while. Shop at ALDI, cook your meals, brown bag lunch, cancel all subscriptions you don’t need, thrift shop for your clothes, DIY as much as possible… you can most definitely make this work if you pull together on this. Your biggest single expense is your house, which is a harder nut to crack. If/when mortgage rates drop, you should refinance.
*Income:* You should also consider looking at ways to grow your income to support her and your kid(s). Look at moving to a new job/position. Pick up some part time work: Tutor students, use your crafty hobbies, detail cars, join the National Guard, whatever. Get scrappy on the income side.
Financial moves to consider: At 6.8% interest, you might be better off just paying off your house with your brokerage savings. That should cut that monthly bill in half and give you some margin (which you should invest as much as you can). I’m not optimistic that you’ll be getting better than 6.8% in VOO for some years to come; price to earnings ratio in the stock market is very high right now.
Pre-covid We were on similar income in a smaller mortgage with 2 at home and 1 in moderately affordable preschool. I think you’re asking a lot of your income without a specific plan to bring down your monthly expenses, especially with kids growing and consuming $$ as they do.
You’re also definitely not putting cash towards your next car or your emergency fund replenishment in that situation either.
Separately We are in MCOL and tax associate at $88k/yr is a bit low unless you’re not working a lot or haven’t gotten your CPA. If you’re LCOL then you might have too much house unless you plan to have 3+ kids. If you see path to partner in public tax then you’re probably fine where you are but I would nose around on that salary and make sure you aren’t leaving $10k or more on the table.
You make 88k a year gross with 60k annual expenses. The answer is that no, your income cannot support your lifestyle without kids.
Also kids are very expensive.
You’re rich because of your inheritance. If the plan is to be a single income house, you could probably drop housing from 3k a month to 1k a month (or less) by paying off your house in full right now. Considering the fairly high interest rate on the home that’s probably the optimal play anyway since 7% is about what you should expect for long term growth anyhow.
So if you sell off your stock, get rid of the mortgage, and make no lifestyle changes… you’re definitely in good shape then.
Gosh that’s hard! Kids going to school is what 4-5 years until kindergarten / 1st grade…. If she quits her job is there a state program that could help with food etc? You will need a higher salary job… it’s hard because you have a mortgage and can’t just downsize. Selling some shares to get by for couple years is what 50k max we will say? You guys will have to cut your lifestyle down drastically… I don’t recommend paying mortgage in full as it is going to be 100x harder to get that 575k back… and you would it to compound and keep growing. I say leave it at 500k and use the rest to help those years but live very very poorly if you can’t get a higher paying job… I’m sure lots will disagree as it’s not the “best financial decision” but if it works for you guys it works…. Also with her salary being low ish are there really no state assistance program for day care? But on the other note getting rid of all of it cuts alway 3k a month that you could use to build back up quickly but are you going to stick to investing 3k until you’re back to where you are??? Probably not?
I was at about that salary when we decided to have a baby and my wife wanted to stay home. I made a move and ending up making more than our combined salaries were previously. I would suggest you try to do that…
Tell her to find a work from home job, admin or maybe paralegal work. In most cases, the extra income pays off. Allows you to pay off extra debt, travel, invest more. Pray about it! Don’t sell! Keep stacking to an M.
I personally think it’s ok to dip into the inheritance for your wife to stay at home if it is for a limited number of years and it improves your family’s quality of life. But I also think your wife should continue to try and work in her chosen career in some capacity so she can keep her hands in it to get a job when the kids go to school.
Sell the stock! Let her be a SAHM. What an amazing blessing that you guys can make that work. I would pay down the whole mortgage for the peace of mind instead of trying to game the stock market. It’s a super diversified stock, but still. You never know.
If you want her to stay at home, then paying the mortgage is the move as you won’t be able to afford a 3k mortgage payment.
Since your interest rate is 7%, paying off your mortgage is a 0 risk 7% return rate investment. Even without the stay at home thing, it would still be a good decision.
Financially, it doesn’t make sense for her to stop working.
As a parent, though, the first few years are the most important.
Pay off the house with the inheritance and keep ~30k in the emergency fund. Then she can quit and stay at home with the kid(s). Once they’re in kindergarten, she can go back to work if it makes sense. Also, as others have said, just make more money dummy.
You do not make enough money for your wife to not work after having children for a decade unless you start burning through that inheritance. After that long out of the workforce, she’d need to go back to school to gain back earning potential.
Your household needs more money in, to lower expenses, or to figure out a part time remote position for your wife.
In my household we are planning to have kids in the next few years. We are looking at part time remote positions, either within a company or contracting, for one of us in order to manage child care while maintaining earning potential and bringing some money in.
It seems like payroll is the kind of thing she could find a part time remote position in, either with a company or with her own LLC? Can she do some small business accounting as well?
What do y’all have for retirement savings? Choosing to become a stay at home parent is admirable, but puts you at a huge deficit when it comes to saving for retirement. Regardless of whether she chooses to stay home, I would pay off the mortgage at that interest rate…and then I wouldn’t touch the balance of that investment fund. A paid off mortgage and $200k in investments before 30 is outstanding.
Once your mortgage is paid off, don’t forget that you still have taxes and insurance. And both of those tend to increase every year without some diligence dedicated to shopping around for insurance. Once you nail those costs down, it’ll be easier to see how it all pans out.
You two should be pretty capable of using spreadsheets with what you do for work. This is mostly a simple math problem that I think you know the answer to.
I think what your really asking is should you sell stock to fund the family for a few years till the kids are in school and your wife starts working again. My fear for this would be if she doesn’t go back when the time comes or really struggles to find a job are you prepared for this to be a long term thing and have to be forced to make harder decisions then. Living on a budget and planning is going to be key here.
You’ll probably want to try to find ways to reduce that $2,000 of non-mortgage per month but it looks doable. Not optimal but doable.
Your specific question is “Does it make sense”. You’ll have to make that a little more objective. And no one here is going to be able to tell you how to value staying at home with the kids (which 100% has value, just different value for different people).
You need to assess the full expense side of the equation, not just the income side. There is no question that her not going to work every day will save money somewhere.
I answer these questions by what I would do.
I was a SAHM for 14 years. I call it my million dollar decision. It would have been a deal at twice the price. No amount money will take the pace of raising my little ones myself.
If I’m you, I’m paying off my house tomorrow and helping wife make an exit plan from work.
Congratulations to you, your wife and your kids. It’s an amazing life I wouldn’t trade for all the 401(k) money in the world 🌎
I’ve been thinking about quitting my job and staying home with my kid. My husband makes a lot more than you and I don’t see how we could do it even with our mortgage being less than that. I just don’t see how you could do it without constantly having to draw from your savings (which by the way, I didn’t even look at cause I think that’s irrelevant whatever you have in there don’t touch).
How many kids do you have? Do you plan on having more?
In twenty years, no one will remember you working late every night other than your kids.
If childcare is expensive in your area, and your wife’s salary isn’t more than double the cost, have her stay home. You will appreciate it. She will appreciate it. The kids will appreciate it. Life will be better in the short and medium term.
Your inheritance is a gift to allow you all to have an amazing foundation to raise your kids. Use it if that’s how y’all best see fit. Just know that retirement and future endeavors will be affected. As long as you know that, go for it.
I remember how hard I worked for 54k a year. I would gladly be a stay at home dad (if I had or even wanted kids…) if it was an option.
Financially you could go either way. I think you’d need to up your income a bit, but it’s doable.
It’s not as easy to just “go back” as it seems.
I’ve been a SAHM for years. I change my mind every day about if I’m making the smart choice.
I started working very part time recently, because I realized how insecure it is for my kids to have only one parent with adequate income earning potential. My husband makes over $250, but what if he becomes disabled? What if he experiences a personality changing head injury, drains the bank account, and leaves (happened to my friend). I can always take care of myself but I need to be in a position to take care of my kids no matter what. Especially since I have a diabetic child, I’d need a job with health insurance immediately.
In my earlier mom/working years I always tried to squeeze my job in around everyone else’s needs and it was very stressful. I wish I had just created a good, regular schedule for myself and baby and stuck to it. They still would have had hours and hours each day with me. Even something part time, but consistent, to keep her skills up and her resume looking good is a huge benefit to your family long term.
How much is daycare? More or less than what she makes? What’s her field? A break in career isn’t a good thing and COULD impact her future job chances.
Make extra payments to your mortgage (paying down the principal only), even if you don’t pay it off in full. It’s an immediate 6.8% return on investment. And the earlier you pay it down, the more you save on interest in the long run (this is the way mortgages are set up).
Trim your expenses. Learn to do more with less. Be *very* picky about your monthly subscriptions, coffees, groceries, restaurants, etc.
Let your wife (and you) have the time at home with your young kids. It’s literally the only time she’ll be able to, and when they’re 18 you’ll hardly see them again. Once they’re gone, she’ll still have plenty of working years in front of her, but the young-child years will always be behind her.
Good luck!
A single income at $88k salary and said expenses with a necessary drawdown on your net worth would scare the living shit out of me.
Also most likely paying your house would be the last thing you’d do unless there’s a car loan with lower interest. The only case this would be inaccurate is if the stock market collapsed and didn’t recover for a long period of time.
Plus assuming in years she can just return to doing payroll at $54k annually with tech pushing fast is also quite risky.
Most families now need 2 people working to make it sustainable, selling stock while she is capable of working is an insane decision
Here is something to think about:
If she stops working, her whole life will revolve around the kids until they’re school age. That can be wonderful, but also incredibly stressful, and it will really highlight how much you do or don’t help when you get home from work each day.
If she keeps her job, you can send the kids to daycare (choose wisely, double check references since it’s your child we’re talking about). In daycare, they’ll learn to socialize and pick up skills from other kids, and when you pick them up, you’ll look forward to that special time together.
Another thing to consider is that there’s no guarantee a job will be waiting for her after being out of the workforce for so many years.
**I can’t say what the right answer is for your situation**, but for us, putting our boys in daycare while continuing to work was the right decision. We didn’t have to spend more than we made, and we were able to keep growing our savings and investments, including opening Roth IRAs for both kids and building a solid college fund.
You’re right to question whether your finances could handle your wife staying home for 5+ years. You have liquid savings, which is tempting to use to pay off or pay down the house. Caution there, if the house is a marital asset and the inheritance is yours alone. I don’t see how you could be ever get to positive cash flow without a higher salary. You’d be setting yourselves up for a stressful existence, especially once kids arrive.
There is a lot of good advice here. What a fascinating and good set of questions with great vulnerability for us to analyze your situation.
Just going to ask the question I thought when reading your OP and the comments: have you all considered moving to downsize the mortgage? Is there any location near work that will allow you to cut that mortgage in half while still having the kind of home you want? Yes I know it’s a drastic thought but it’s what came to mind.
Edit to add: in my humble opinion, you are equipped to set yourself up with a favorable retirement portfolio and probably an early retirement to boot, on top of being able to cover most of life’s curveballs and dreams – if you are to make a couple large sacrifices now. You have so much time to let that money grow. I would not let it bleed away. Best of luck!
I think that it depends on what you value the most, but yes it’s doable.
If I were you I would do exactly what you said and pay off the mortgage and give yourself an extra $3,000 a month of wiggle room. You also free up your wife from “having” to go back to work to make it so you aren’t skimming by every month. Then in the case that your child goes to school and allows her some time to work, she can the decision based on what’s best for your family and not just what needs to be done financially.
When my wife and I were both working we bought a house and were doing fine. We had a kid and she stopped working and things got very tight (didn’t help that our property taxes doubled). So instead of her going back to work we decided to just lower our cost of living by selling the house and renting a much cheaper place. Just depends on what you want out of life.
That’s crazy high mortgage & expenses to swing on $88k salary. I would suggest liquidating a portion of your investments and recasting your mortgage.
Don’t let her stop working for two reasons.
First, you don’t have the cushion. Unexpected things happen, and dipping into your savings when they should be left alone is a really bad idea.
Second, and not that it would happen, but my ex-wife quit for our first kid with a plan to go back after they went to school. Then we had a second, then a third. Then she just stayed home to raise our kids.
When we got a divorce, it was difficult for both of us. I had to pay a significant amount of alimony, and she had a difficult time finding a job being out of work for so long.
Don’t get caught supporting someone else. It is a dead end for you and her if anything ever happens in your marriage.
I did the SAHM route and never went back. The kids needed so much and I didn’t want them in before and after school care. I did the preschool, volunteered and kept them out of trouble. I was there for appointments, braces and everything while my husband frequently traveled for work. My being home freed him up to apply himself fully to his career which took off and now we are very comfortable. It’s a great decision and worth making the effort to work it out. Our babysitter’s mom told me the most important time in a child’s life to be home are the high school years. Turns out she was right. Our kids are doctors now, debt free and just the bestest people.
I have to ask this question…how did you get $575K in VOO on those salaries? Especially with $5K in monthly expenses BEFORE the baby.
It is never a good idea for a woman to stay at home with the children. I realize childcare is a lot more expensive when my kids were young.
I really hope you guys have the best marriage, but if you don’t your wife is going to be the one left high and dry. She needs to think about financing her old age.
You’re fine! 575k is invested. Even if you take out 4% to cover some expenses (safe withdraw rate) you probably still end up with 700-800k invested after 5 years. If market is bad you have maybe 300-400 and you’re still way ahead since you already have a house and your wife goes back to work.
Don’t optimize everything not every dollar is worth it. If your wife wants to be a sahm she can. But trust me that being a sahm is probably harder than your job so better help her out where you can 🙂
Does SHE WANT to be at SAHM? Note: it is not necessarily easy to get back in the workforce down the road but definitely doable!