Prepped for the Transition to Stay-at-Home Full-Time?
Contributed by Ronkisha Terrazas. Ronkisha is a finance consultant and freelance writer residing in Northern Virginia. From 2003-2006, she worked in the home full-time caring for two young children.
Slaving at your 9-to-5, dreaming about what it would be like to be home with your kids, dreaming about not worrying about the balance of home and work that is never met? Decided you are going to take the plunge - quit your job to stay-at-home. Stop!!! Think before you sink. There are lots of wonderful advantages to being at home full-time. However, you need to make sure that your finances and your ego can withstand the tolls of being home before you leave the security of your job. Have you considered other options in lieu of unemployment that may allow you more time at home, such as telecommuting, working part-time, job sharing, flex-time, obtaining in-home care? After considering these options, if you still think that staying at home full-time is the best option for your family, make sure you are prepared before turning in your pink slip.
Losing a full-income can strain even the most financially astute. To prepare yourself for this financial challenge, you need to know the answers to these questions. How long do you plan to be at home? What are you willing to cut in your finances to make it work for the timeframe you want to be at home? To answer these questions, you first need to ask what are your core values--what is most important to you? Categorically, what areas are you willing to cut and not cut from your current lifestyle. For example, when I decided to stay home, for my family, education advancement and maintaining good health/nutrition were two top values. Although our finances were thinned from losing my income, ensuring we still strived to take educational courses and spending money on holistic nutritional products remained a financial priority. However, we did cut back significantly in household luxury choices - we drove older cars, downsized in home maintenance, got rid of cable. Know where you must keep your money and where you can cut yet still maintain your core values.
Once you know what you want to maintain and what you can cut, then create a realistic, workable budget and start to stick to it before you need it. Make sure your budget includes all your expenses, including non-routine items such as minor repairs and discretionary spending for non-essential items such as going to the movies. Test and revise this budget before it has to be active.
Next, set aside a larger dollar amount for emergencies and larger repairs. This emergency fund should cover between 3-6 months of your monthly expenses. If you do not have this amount of money saved, then create a list of your assets. Know what liquid assets you can sell if needed for an emergency without going into debt. These liquid assets are assets that you can turn into cash within a couple of weeks. Have a realistic worth of the asset that is conservative on the low-end.
After you see financially you can make at home for the timeframe you want work from assets you can sell, monies saved, and areas you can cut in your finances, then go for it.
Now that you are own your pathway to staying home, make sure you prep your work benefits. Inventory all the company benefits you have and get a plan of how those needs will be covered after you leave. These benefits may include health insurance, life insurance, disability coverage, dental insurance, or other supplemental policies. Ensure whatever benefits you are losing will either be okay to forego, covered by your spouse's employer, or you have a supplemental plan to maintain them. For instance, you do not want to suddenly discover after you have left your employer, that you no longer have dental coverage or life insurance. Watch out for timing of coverage as well. You do not want to find out after-the-fact that you cannot be covered for health insurance under your spouse's work plan until open season. If you have invested into a retirement account at work, make a wise decision about what you will do with your 401k/403b or other employer retirement plan. When you leave, you will need to make a decision to cash-out of your retirement, transfer into another retirement account, or let the funds sit in the employer account without additional contributions. Cashing out to help cover at-home costs may sound appealing, but remember the IRS will charge you a 10% penalty for early withdrawal if you are under the allowable retirement age which is currently 59.5, and for any age, the amount you withdraw will be taxed as ordinary income. (There may be some hardship exceptions to the 10% penalty, yet the funds are still taxed as ordinary income. Check with the IRS or your tax advisor.) Plus more importantly, if you cash out early, you are losing the opportunity to have that money available for when you retire and the potential exponential growth from earning compound interest.
Settle any anticipated loans before you leave. If you are planning to refinance your mortgage, get a loan, or any financial issues that would need to have your income secured for approval, settle these securities before you quit your job. It is more difficult to get financing without full-time employment.
Stay in good contact with work colleagues--network while away. You may need them as a reference at a later time and good to nurture those relationships to help you stay abreast of your field. If you are able to do contracting projects on the side for your employer, this is good for networking and helping your income. By starting a self-employment/contractor venture, you may gain several tax benefits by being able to write-off expenses that are not allowed as an employee.
If after being at home, you find yourself struggling financially and will soon run out of saved resources, start a part-time or self-employment venture well before you run out of funds. It takes time to get a self-employment venture going. Get it started and profitable before you are in a situation in which you feel forced to go back to work full-time because you have to in order to survive financially. Give time for your venture to succeed or to save the additional income from a part-time job to keep you at home longer.
These are financial considerations; however, there are mental challenges you need to consider as well before leaving the job-security nest.
Don't forget about yourself. With children and home demanding 100% of your attention with no pressure to look or perform at a business level, you can easily lose focus on yourself and slowly lose your personal identity. You have to fight to maintain a high sense of self value. Take time to care for yourself and your own goals. Do not feel guilty getting good part-time babysitting when needed. You can only give your best to others from the overflow of you being fulfilled and energized.
Being at home is a good time to increase your credentials--take college courses, obtain certifications, start a small business venture, pursue a career change that is closer inline with your passion, get in shape. This is the time to take risks. Go for goals you really could not have focused on while working full-time. Keep your identity of who you are growing.
Also, you must be confident in yourself and decision to stay at home to dodge the arrows of misconstrued family members and friends. Expect that some family/friends will not be supportive, will criticize you for giving up your wonderful career, wasting your education to settle for being a full-time babysitter (in their opinion). Be confident in yourself and your decision. Be ready to justify this attitude--"well you must just sit around all day and have it easy. You should have time for everything now that you are home." Before you stay-at-home, you may have these same misconceptions which are far from the truth. Staying-at-home will be very demanding on your time if you are caring for young children. There is more work, higher household appearance expectations, and overall it is more mentally taxing. There are no dependable lunchbreaks, unless you create them which can still be taxing with young children on your heels. You must organize your time. Just because you are home does not mean you have to do all the little projects. Prioritize what is important to you. Create a daily or weekly routines list that helps you stay on track to achieve your goals and maintain balance. Be realistic about what you can do given your situational limitations. Reward yourself for achieving your goals and keeping pace with your routines list.
ENJOY this time. Remember why you want to stay at home. Focus on making your dreams of what this time can be a reality. Document this time with your family; it passes quickly. Remain balanced. Don't get so focused on kids, to the point that you lose yourself. Yet don't go the other direction and get so caught up into creating a fulfilling career, participating in events, or completing chores to the point that you start to lose focus on your family. Either extreme is easy to do.
If planned wisely, this could be the best time of your life to gain balance, discover what you truly want in life, and nurture your kids all at the same time. Good luck!!!
