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If a woman wants to leave work and stay home there are a lot of financial things to take into account. The woman may make a salary, but pay for eating out more, professional clothing, child care.....what else financially would a woman have to take into account when deciding on whether or not to stay home. Have you transitioned to staying home? Where do you find you actually save money because you are home? What were some of the hidden financial costs of working?
Answer
I recently went from working full-time outside of the home to staying home with our almost 3 y.o son. Like everything else in life, it has its good and bad points.
You will probably save money by eating at home and shopping smarter. Pre-SAHM, I'd never have bothered clipping coupons - who had the time? These behaviors extend to larger purchases as well (I shopped around for a great price on our new garage door opener, for example), so it can add up.
If you wore business or business casual clothes to work, then there may be some slight savings. My experience was that I actually had to buy jeans, tees and sneakers - I only owned a few things for the weekends, not enough for the daily grind.
Commuting costs may decrease, too. My husband now hops the train, and my son and I walk nearly everywhere. This had made a big savings, and if it means we don't replace our car for an extra year or two, then that's some major bucks.
I also think that thinking about your budget simply leads to spending less money. And now that there's time to make better decisions, most of us do. I don't feel deprived if I can't have that sweater, for example, because the 15 sweaters I already have are neatly laundered and stored in the right place. Less chaos, more calm - it can't be bought! :)
There are a few areas, though, that might surprise you.
* We still pay for childcare. Now that our son is nearly 3, he needs time with other kids - more than he was getting in a once-weekly playgroup or story time at the library. Part-time nursery school can be expensive, but it's worth it.
* Now that you have time to take your kid to lessons, you might want to enroll in Gymboree or swimming ... even with a smaller kid. Some things are free or cheap, but that's not always the case. (My hockey-obsessed 3 y.o. wants ice skating lessons. Cha-ching.)
* Some women have also mentioned to me that they finally have the time to take on those projects around the house - planting a garden, painting the study - but realize that they're breaking the budget taking them on. Likewise, if you're a recreational shopper, watch out! It's an easy trap, especially when you have the time and the mall has that great kids' playspace in the center.
* When your primary role is caregiver, you'll need to budget in some bucks for luxuries - a latte, a movie, a pedicure. Taking care of yourself is important, especially when you've just taken on a 24/7 kind of job.
* Lastly, and this is the big one, you'll need to figure out how to save for retirement now that you don't have an income. In addition to looking at your monthly budget to see where you can make cuts, examine your long-term financial position. If you're not saving for retirement at all, now's the time to start. And if you're saving through automatic payroll deduction, you'll need to figure out how to replace those dollars.
I recently went from working full-time outside of the home to staying home with our almost 3 y.o son. Like everything else in life, it has its good and bad points.
You will probably save money by eating at home and shopping smarter. Pre-SAHM, I'd never have bothered clipping coupons - who had the time? These behaviors extend to larger purchases as well (I shopped around for a great price on our new garage door opener, for example), so it can add up.
If you wore business or business casual clothes to work, then there may be some slight savings. My experience was that I actually had to buy jeans, tees and sneakers - I only owned a few things for the weekends, not enough for the daily grind.
Commuting costs may decrease, too. My husband now hops the train, and my son and I walk nearly everywhere. This had made a big savings, and if it means we don't replace our car for an extra year or two, then that's some major bucks.
I also think that thinking about your budget simply leads to spending less money. And now that there's time to make better decisions, most of us do. I don't feel deprived if I can't have that sweater, for example, because the 15 sweaters I already have are neatly laundered and stored in the right place. Less chaos, more calm - it can't be bought! :)
There are a few areas, though, that might surprise you.
* We still pay for childcare. Now that our son is nearly 3, he needs time with other kids - more than he was getting in a once-weekly playgroup or story time at the library. Part-time nursery school can be expensive, but it's worth it.
* Now that you have time to take your kid to lessons, you might want to enroll in Gymboree or swimming ... even with a smaller kid. Some things are free or cheap, but that's not always the case. (My hockey-obsessed 3 y.o. wants ice skating lessons. Cha-ching.)
* Some women have also mentioned to me that they finally have the time to take on those projects around the house - planting a garden, painting the study - but realize that they're breaking the budget taking them on. Likewise, if you're a recreational shopper, watch out! It's an easy trap, especially when you have the time and the mall has that great kids' playspace in the center.
* When your primary role is caregiver, you'll need to budget in some bucks for luxuries - a latte, a movie, a pedicure. Taking care of yourself is important, especially when you've just taken on a 24/7 kind of job.
* Lastly, and this is the big one, you'll need to figure out how to save for retirement now that you don't have an income. In addition to looking at your monthly budget to see where you can make cuts, examine your long-term financial position. If you're not saving for retirement at all, now's the time to start. And if you're saving through automatic payroll deduction, you'll need to figure out how to replace those dollars.
How much car can I afford, and what car should I get with that budget?
Nick
Hey guys, so I'm a young professional in my mid 20s and I still have my first car that my parents bought for me after I graduated high school (An old VW Golf GTI It's not bad). I think its time for a change, as it's kind of embarassing to pick up women in it. So currently I'm making around 175k after tax per year, and around 25k in rent is coming to me as well per year, but that's not guaranteed. My total expenses are 4 k a month, sometimes less. So, what would you guys recommend? Preferrably the car would be at least capable in all weather conditions.
Answer
I answered another question kind of like this... This is the answer I gave the other person below. You don't say what your age is, so I can't recalculate the numbers, but you're a young professional â I am sure you can figure out how to work a compound interest calculator. Some other guy said 50% of your income is acceptable... which is over $80k for you. Since you shouldn't have a car loan for more than 3 years, you could buy a 40k car and invest the other 40k...
You can get a lot for 40k. Does it have to be brand new? You could get a 2 year old 5 series or a 3 or 4 year old 750xi for around 40k with AWD. A 2 or 3 year old car has already depreciated a lot in value, and as long as you get a car that is still being made (meaning the body style, etc., hasn't completely changed) no one will know it is old unless you tell them. If you buy it pre-owned from a car dealer, you can probably get an extended warranty, etc. If you don't like BMW, check out the Infiniti M37x or M56x. You can get a 1 or 2 year old one for around half of what they are selling for brand new.
As for a car being suitable for all weather conditions, if you get a car that is AWD and put snow tires on it, you will be fine. The tires are SOOOOOO important. Don't cheap out and just get "all-season" tires. You need winter tires for the winter. Check this out: http://www.youtube.com/watch?v=L2wTg0l3_wI it shows summer vs all season vs winter tires.
~~~~~~
Your car loan shouldn't be for more than 3 years... Since you're 22 now (you didn't give me your age, so i can't recalculate this), if you invested that 40k over the next three years and could average 6-8% over the next 40 years, you would have...
$442,000 â $935,000. Is that car really worth almost an extra $1,000,000? (Accounting for inflation at 2.5%/year, that comes to almost $170,000 â $353,000. So, whatever you could buy for that today, you could buy the same exact thing when you are 65.)
Also, make sure you fully fund your ROTH IRA and your 401(k) to the match (if you get a 401(K) plan through your company) before you even worry about buying a car that is well above your means. You're very young, so now is the time to invest for your retirement... You'll thank me when you are old :) BY THE WAY!!! You can get a Roth IRA even though you don't qualify for one because you make too much money. Open a non-tax-deductible traditional IRA and do ROTH conversions.
~~~~~~~
My rule of thumb is don't spend more than 10% of your monthly after-tax income on a car payment... You probably make around 120k/yr after-taxes without counting your rental income. Don't figure your rental income into what you make because at any time your tenants could simply stop paying you. 120k/yr is 10k/month. A 40k car loan with no down payment over three years is going to be around 1150-1200/month depending on the interest rate you get. I think that's perfectly acceptable to go a little over the 10% in your case because you make a larger amount of money than the average person.
Also, count on your gas bill and insurance bill going up with having a luxury car. It shouldn't really affect you too much, but it's something to consider.
I answered another question kind of like this... This is the answer I gave the other person below. You don't say what your age is, so I can't recalculate the numbers, but you're a young professional â I am sure you can figure out how to work a compound interest calculator. Some other guy said 50% of your income is acceptable... which is over $80k for you. Since you shouldn't have a car loan for more than 3 years, you could buy a 40k car and invest the other 40k...
You can get a lot for 40k. Does it have to be brand new? You could get a 2 year old 5 series or a 3 or 4 year old 750xi for around 40k with AWD. A 2 or 3 year old car has already depreciated a lot in value, and as long as you get a car that is still being made (meaning the body style, etc., hasn't completely changed) no one will know it is old unless you tell them. If you buy it pre-owned from a car dealer, you can probably get an extended warranty, etc. If you don't like BMW, check out the Infiniti M37x or M56x. You can get a 1 or 2 year old one for around half of what they are selling for brand new.
As for a car being suitable for all weather conditions, if you get a car that is AWD and put snow tires on it, you will be fine. The tires are SOOOOOO important. Don't cheap out and just get "all-season" tires. You need winter tires for the winter. Check this out: http://www.youtube.com/watch?v=L2wTg0l3_wI it shows summer vs all season vs winter tires.
~~~~~~
Your car loan shouldn't be for more than 3 years... Since you're 22 now (you didn't give me your age, so i can't recalculate this), if you invested that 40k over the next three years and could average 6-8% over the next 40 years, you would have...
$442,000 â $935,000. Is that car really worth almost an extra $1,000,000? (Accounting for inflation at 2.5%/year, that comes to almost $170,000 â $353,000. So, whatever you could buy for that today, you could buy the same exact thing when you are 65.)
Also, make sure you fully fund your ROTH IRA and your 401(k) to the match (if you get a 401(K) plan through your company) before you even worry about buying a car that is well above your means. You're very young, so now is the time to invest for your retirement... You'll thank me when you are old :) BY THE WAY!!! You can get a Roth IRA even though you don't qualify for one because you make too much money. Open a non-tax-deductible traditional IRA and do ROTH conversions.
~~~~~~~
My rule of thumb is don't spend more than 10% of your monthly after-tax income on a car payment... You probably make around 120k/yr after-taxes without counting your rental income. Don't figure your rental income into what you make because at any time your tenants could simply stop paying you. 120k/yr is 10k/month. A 40k car loan with no down payment over three years is going to be around 1150-1200/month depending on the interest rate you get. I think that's perfectly acceptable to go a little over the 10% in your case because you make a larger amount of money than the average person.
Also, count on your gas bill and insurance bill going up with having a luxury car. It shouldn't really affect you too much, but it's something to consider.
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Title Post: What should a woman take into account financially when wanting to become a stay at home mother?
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