Does staying at home make cents for parents?

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WEST FARGO — It’s a question certified financial planner Jim Dunkel has been asked by clients in his First International Bank and Trust office, and one he’s asked himself at home with wife Shari, a nurse practitioner.

Can we afford one parent to stay at home?

While the decision to become a stay-at-home parent encompasses many factors, such as personal fulfillment, professional aspirations and the children’s well-being, the most practical consideration is finances.

“A family has to live within their means,” says Dunkel, who has two sons. “You can look at numbers objectively and make a decision.”

The first step would be to look at the money coming in and subtract out all the expenses associated with that income, such as taxes, Dunkel says.

Because the federal tax system is progressive — from 10 percent to 15, 25, 28, 33 and then 35 percent — a family’s second income is taxed at a higher rate than the first. In 2012, the 25 percent bracket starts at $70,700 on a joint return.

After state and payroll taxes, about 35 percent of that second income could go straight to taxes, Dunkel says. A second income earner making $30,000 annually may be down to $1,600 of take-home pay each month, depending on the spouse’s income.

Day care costs then need to be considered. In 2011, the average weekly cost of infant care in Cass County was $160.22 at a center and $122.87 at a licensed home-based provider, according to Child Care Resource and Referral figures. For preschool care, the weekly averages in Cass County were $140.20 at a center and $117.62 for home-based child care.

At that point, the second income earner may be working for less than minimum wage, Dunkel says.

“You start to think, is it worth it for me to work full time and have my child at day care for a $1,000-a-month difference?” Dunkel says. “And for some families, absolutely, $1,000 will make or break it.”

He also encourages families to think about other costs associated with working.

“When you’re busy with jobs, both spouses are tending to go out to eat more or get convenience foods, run for coffee in the morning on the way to work,” he says. “When one spouse is home, there’s more time to take care of things in ways that aren’t quite as expensive.”

On the other hand, parents also need to consider the employee benefits they receive, especially health insurance.

“Sometimes, we see the spouse can’t quit his or her job because they need the health care benefits,” Dunkel says.

Dunkel says he can sit down with couples and do “what-if” scenarios, adjusting for the different tax situations, health insurance premiums and adding back in day care savings. Online calculators can help families make those calculations themselves, too.

Duane Emmel, a financial counselor at The Village Family Service Center in Fargo, says he often is asked about the financial factors of staying at home once a second child is expected.

“What drives this is day care. A lot of individuals, they might have the one child and then they have the second baby and they start looking at the day care numbers,” Emmel says.

Emmel says many young couples maintain a separate approach to their finances, which isn’t feasible if one party is going to stay home. They have to trust each other enough to blend finances.

Parents also must be willing to make a lifestyle change if one parent is going to stay not work, Emmel says. There won’t be as much money to do the things people get used to, such as eating out, traveling or redecorating the house.

“Unfortunately in our modern-day society we have blended our wants and needs together, and in many cases, we never separate those things out,” Emmel says. “A lot of people have never gone through and figured out: what does it cost to make sure all of their priorities are being paid.”

Parents should also consider the nonmonetary benefits of staying at home and of working. Communication is key, Emmel says.

“Even before they start getting to the numbers, they really have to be on the same page. Is this our objective? Is this our goal?” he says.

Once they’ve determined what the family’s priorities are, it’s possible some intermediate steps can be taken to reach those goals.

Paying off a car loan, student loan or credit card — or cutting expenses like cable of phone plans — may free up enough cash flow to balance a one-income budget. If two incomes are still needed, or both parents want to work but day care is cost-prohibitive, perhaps the parents can stagger their shifts to reduce child care costs.

“Every family is unique. I think they have to sit down and analyze what they want,” Emmel says. “Then at that point, make a determination. How can we make it work?”

Stacey Carlson of Fargo says she left a good job of eight years after her son was born. The pull to stay at home with him was greater than any financial consideration.

“We decided there were things we would do without,” Carlson says, such as clothes and shoe-shopping, trips and building up their savings.

She worked part-time until 2009, when she had two kids. Leaving that job was more of a financial decision. They made a pros and cons list, figured out the numbers and decided it made no sense for her to work part-time.

Carlson now has three kids. She’s babysat, clipped coupons and plans to one day go back to work, but she says she wouldn’t trade being at home now.

“I’m happiest being home with my kids, whether we’re building anything financially or not,” she says. “Whether you work outside of the home or at home, if you’re happy and content with your decision, that rubs off on your kids.”

‘Comeback Moms’

In the book “Comeback Moms,” a manual on how to leave the professional ranks, raise children and eventually return, authors Monica Samuels and J.C. Conklin say when a worker earning $30,000 gross annually, about $26,000 is tied up in the costs of working, such as taxes, clothing, eating out, transportation and child care.

“So the question for you is: Can you cut $4,000 a year out of your budget? If you can’t do that at the moment then make a plan so you can do it in a year or two years,” they write.

Some suggestions in the book for reducing expenses include:

• Switch to cheaper phone and cable plans

• Cancel subscriptions to unread magazines

• Trade in one of your cars for an older, less expensive model

• Cut down on eating out and prepackaged convenience foods

• Adjust your thermostat a degree lower in the winter and higher in the summer

On the Web:

An online decision-making tool for whether to work or stay-at-home is available at childcareaware.org

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