Should I Stay or Should I Go?

I receive "Money Tip" newsletters in my email from a popular financial advisor who I will not name. Because the "tips" offered in this edition were pretty silly.

The advisor was suggesting three tips to expecting parents who were considering being stay-at-home moms or dads. First tip is to cancel all unnecessary credit cards. Well, as my dear sibling found out the hard way (she should have asked me!) if you cancel a lot of credit cards at one time, a red flag can be issued on your credit report. Look into the effects of canceling credit cards before you do it. It may be better to just lock them away in a secure place and not use them.

Second tip was to look for a used car. Not a bad tip, but depending on where you live and your access to public transportation, you may be able to go without a second car. Consider critically your needs.

Third tip was to search thrifty sites for tips to cut costs. Again, not a bad tip, but the advice offerings end there.

If you are truly thinking about being a stay at home parent, start living off of one income NOW. Does it hurt? Are there places you can cut back-food, gas, clothing... ? Many new parents get swept up in buying gadgets and clothes for their babies-honestly folks, babies need food, clothing, sleep and love. They do not need a room completely decorated in Winnie-the-Pooh accessories. They just don't care. My kid wasn't really even interested in a lot of toys until about a month ago and she's now 16 months old.

Things you have to calculate if you are considering staying at home vs going back to work:

-daycare-in my area, daycare runs $1000 a month. Expensive.
-taxes-if you stay at home, your tax rate will drop. Yay.
-healthcare-compare plans between you and your spouse/sig. other
-retirement savings-good gravy, do not ignore this. I know it's the last thing on your mind. But the best advice I have ever heard is that your kid can always get a loan for their education, but no one is ever going to give you a loan for your retirement. Besides, what is worse for your child-paying off their student loans, or supporting you for 30 years after you retire?

These are the big things. Smaller things to consider:

-your kid will probably get sick less if s/he/it stays at home instead of daycare
-can you save money by not buying work clothes, eating out, etc...

Even if you do not plan on staying home, you still need to prepare for your maternity leave. On my work's plan, my disability did not kick in until a week after my kid was born-that's a week's pay gone. I either had to go without pay or use paid vacation.

You also need to plan for emergencies. My kid was born with jaundice (50% of babies are) and needed a special biliblanket and emergency room visits, totaling $600 which my insurance did not (initially) cover. It took several months to get this resolved. We had good savings, but still-plan for the worst and you won't be disappointed.

So talk with your employer, get the facts, and sit down with a calculator. Before you check out the latest baby room decor magazines.