I am so thrilled that Jake and his crew agreed to create a Sketch Video for this post that I wrote:
Can Becky Afford to Stay Home With Her Baby?
Big thanks to the guys at Becomingyourownbank.com for this cool video.
Before you watch the 2 minute video, here are some details about Becky and Jack and their financial situation.
Introducing Becky and Jack
Becky and Jack met in college and instantly became inseparable. Jack was studying to be an Engineer and Becky was studying to be a nurse. In between classes and studying they spent a lot of time together and they were married shortly after graduation.
They were both fortunate to find jobs quite quickly.
They purchased and moved into a 2 bedroom townhouse.
They also purchased 2 nice cars since they each worked in opposite directions of where they lived.
Their college tuition was paid via scholarships, personal savings, and with some help from their parents, so they don’t have any student loans to worry about.
Fast forward 3 years later.
Becky wakes up one morning and doesn’t feel very good. After arriving at work she shares how she feels with one of the doctors on staff and after taking a test, she discovers that she is pregnant.
After sharing the good news with Jack and learning that she is due in 8 months she begins to think about what their life will be like when they become parents.
How will they manage financially?
Is their current home big enough?
From as far back as Becky can remember her dream was to one day be a stay at home Mom.
Both of her parents worked in high profile careers while Becky was growing up. And they didn’t just work 40 hours a week, they worked 60 to 70 hours a week, which meant that Becky rarely saw them.
During her lonely times at home as a kid she vowed to herself that when she one day became a Mom she would find a way to stay home and be there for her children everyday.
She wanted to watch them take their first steps and be there when they said their first words.
She wanted to be able to look after them when they were ill, comfort them when they were upset, and play with them and make them laugh. All the things she felt she missed out on as a kid.
But becoming a nurse was important to her as well. She knew she would be able to find a good job, she knew that she enjoyed taking care of people, and she wanted a job that paid well.
But Becky decided that staying home with her new baby would be the right thing to do.
However, the big question is - Can Becky afford to stay home with her baby?
Jack was onboard with Becky staying home but he worried about whether they could truly afford it.
Instead of just winging it, they realized that the smart thing to do was to come up with a plan now as to how all of this would work.
After the baby arrives Becky would be allowed a 1 year maternity leave and would receive roughly half of her current pay cheque through unemployment insurance during that time.
Jack and Becky began making a number of lists.
They listed all of the items that they would need for their new baby.
They listed all of their current expenses including the mortgage on their townhouse of $380,000 and the outstanding loan on one of their cars which is $10,000 ($250 per month).
They have an emergency fund of $2,000.
Their current combined monthly income after all deductions is $6,100. Jack’s share is $3,200 and Becky’s share is $2,900.
Their current combined monthly expenses are $5,800, which will obviously increase once their baby is born.
For comparison sake they also did a separate calculation to determine exactly what it currently cost them on a monthly basis for Becky to go to work. How much she paid in gas, car maintenance, food, clothing, and so on. They added to that the cost of full-time childcare if she did return to work.
The average cost per month for daycare for a baby is approximately $1140.00.
If Becky goes back to work they now have an additional expense of $1140 a month.
If Becky stays home they lose $2,900 a month.
Without going into all of the annual tax write-offs associated with each option, they are essentially out $2,900 a month if Becky stays home with her baby.
What changes can Becky and Jack start making right away so that they can cover the loss of Becky’s income of $2,900 as well as cover the additional costs that they will incur for everything that their baby will need?
Becky and Jack’s Financial Plan
Create a budget and slash expenses, so that they can add more money to their savings account now.
Focus on paying off their car loan within the next 8 months.
See if they can refinance their current mortgage if it is feasible to do so.
Sell any household items that they can live without.
Have a strict no-spend policy on anything that is outside of their new budget.
Shop for baby items at garage sales, moving sales and online. Shop wisely for big ticket items that have certain safety requirements such as the crib, car seat and stroller.
Keep in mind that once Becky is no longer working she will no longer be paying for any monthly expenses, such as work clothes, gas, food, and so on.
Look for ways to make extra money. Based on their extensive education, both of them should look at becoming an online Tutor, as a side hustle, starting immediately.
Becky currently works shift-work with several days off in a row. On her days off she needs to look at other ways to make money both during the next 8 months, and after her baby is born.
Her options are huge and could include sewing or doing crafts and selling her items on Etsy, doing freelance work, baking, bookkeeping, photography, selling Avon, teaching music lessons, or whatever she is skilled at and passionate about.
By paying off their car loan, sticking to their budget, and finding ways to make money from home, Becky and Jack agree that Becky will be able to stay home with her baby.
Do you think they can afford for Becky to be a stay at home mom?