Most families these days assume it takes two incomes to survive. And many would be shocked if they just took the time to figure out the real hourly wage in that second paycheck.
Dear Mary: With two little boys, my husband and I are paying through the roof for daycare. It seems like almost all the money I earn goes to childcare, so I’ve been thinking of quitting my job and staying home with the kids. I’m excited at the thought of spending more time with them, but I also want to be sure my family will be okay financially. Is there an easy way to make sure the decision is right for us? Bethany
Dear Bethany: I think you’re on to something. But before you make any rash decisions, do this: Write down a figure that represents your monthly take-home (net) pay. Now deduct from that all of your work-related costs including daycare, transportation, clothes, lunches, gifts and office pools and anything else you can come up with that would go away if you stay at home. Divide that result by the number of hours you’re away from home to see what your real hourly wage. But wait, there’s more.
Consider all of the hidden expenses you have because you work, like more fast food, take-out and restaurant meals because you’re too tired to cook. Do you hire help for the yard work or housecleaning? If you are home there’s a good chance you can do those jobs and reduce your expenses even further.
You may be shocked to discover it’s actually costing you to hold down a job because you’re paying out more than you earn, while this job is putting you into a higher tax bracket.
Unless you make a whopping big salary, you may be better off financially by being at home with your kids where you can also cook, clean and garden, too.
Dear Mary: My son Jake graduated from college about a year ago. He has a job, but with student loans and a bit of credit-card debt, he is struggling a bit financially. I know with smarter choices he could pull himself out of this; however, Jake just asked his father and me for help. We want to be good parents and provide for him. At the same time, we also think that since he’s an adult, he needs to start taking care of himself. Is there any compromise? Suzanne
Dear Suzanne: Since he has asked for help, this might be the perfect time to teach as well. Don’t just give him a handout. Help him set up a budget. It’s possible he like so many people has never learned how to manage money.
Because he has come to you asking for help it’s possible he’s open to receiving your guidance as well. He needs to be accountable, but not in a child/parent way. Think of this as more of a client/counselor relationship.
In the same way he would have to create and submit a business plan to get a business loan, have him create a personal finance plan for how he intends to use the money you lend to him, how he intends to manage his income each month and how he plans to pay you back.
It’s time for Jake to get real about his money, and this could be the perfect opportunity you need to teach him valuable lessons. Not sure how or where to start? Pick up a copy of my book, Debt-Proof Living (most libraries have it). I’ll teach you everything Jake needs to know!