What is a Mommy to Do?

New parents are often faced with a decision. Will Mom go back to work or stay at home? I am not even going to try and address all the aspects of this vital question, but I can walk you through the decision making model from a financial perspective. Check out what some other blogs have written about the non-financial issues at the bottom of this post.

Is this even a choice? Remember your magic number? Can your family make ends meet without mommy's income? If so, then staying at home becomes a real possibility. Perhaps you need that income. That does not doom Mom to a lifetime of work. Examine your household budget and look for places to lower your financial requirements. I know of many parents who compromise by working part time.

Find your net income. Several clients have found it helpful to see what continuing to work provides to their family after paying taxes and daycare. Here is an example. Let's say a new mother has a position where she makes $50,000 a year. The father also works and is the primary breadwinner. Based on his income alone they are in the 28% federal tax bracket and pay about 9% in Iowa income tax. That means her after tax income is $36,500. Daycare for their two children is $310 a week, or just over $16,000 a year. She earns, net after taxes and daycare, $15,500 a year or just under $1300 a month.

Is it worth the $1300 a month to work, or would you rather be a full time parent? There is no right or wrong answer. Most people, seeing it from this financial perspective, find their answer comes naturally.

Non-Financial Resources:

• No Ladies you CAN'T have it All @ The Face Behind The Camera
• Disgruntled @ The Snarky Squab
• Home Again @ Motherhood is Not for Wimps
• Would you rather be at home with your children? @ The Career Encouragement Blog

Mommy & baby photo by derPlau

Postscript - After I originally published this post I realized I omitted an important factor. In addition to State and Federal taxes, we also have to consider FICA at about 7.5%. All told, that reduces the after tax income down to $22,750 and the net after daycare down to less than $6,700 a year. The question is not if $1300 a month is worth it. Make that about $550 a month.

Comments

[Pinyo]

If affordable, I would like my wife to stay at home. However the primary concern is her future ability to get a decent job if something happens to me. I know this can be taken care of with proper insurance, but then these expenses (e.g., life insurance, disability insurance, etc.) have to be taken into account in the calculation as well.

[Art Dinkin]

Pinyo, Interesting perspective. I had not thought of it in that way.