I had the pleasure of sharing some tips on Phoenix 12News with Nicole McGregor last week and I thought the topic was worth discussing in more detail here on our blog!
We were a family of 3, one toddler, two parents (plus two dogs), with two incomes. I was a financial analyst for a large telecom company and my husband worked in avionics at a much smaller company. We had a good, steady income, but always spent whatever there was – never saving enough it seemed.
When my company announced layoffs we were briefly concerned. I was pregnant with our second child and we had never even considered that I may not have a job. Eventually my company began offering “voluntary separation” so they wouldn’t have to lay-off people who really wanted to keep their jobs.
I instantly thought this may be a great opportunity for us!
I have to admit, I felt kind of “bad” even suggesting to my husband that I would no longer work (of course, this was before I had any idea what it meant to be a stay-at-home-mom!). I wanted to be armed with all sorts of numbers because I knew that’s what he would be concerned with.
Here’s how I came to the decision that our two-income, one-child life could transform to a one-income, two-child life while staying on stable ground!
First, you have to evaluate the cost of keeping a job:
What?!?
- How much does it cost you to work?
- Auto expenses
- gas
- parking
- bus or metro fare
- more frequent maintenance that may not be necessary if you were not driving to work
- Clothing
- uniforms or other special requirements for work
- dry-cleaning
- occasional new clothing purchases
- shoes/other accessories
- Food
- do you eat out on a regular basis?
- do you buy snacks/drinks at work regularly?
- be sure to include Happy Hours/business entertaining
- Childcare
- any extra driving you do to take your child to child care each day
- fees/tuition
- donations/gifts/pictures/events
- tip: be sure to account for tax savings you may receive through dependent daycare account participation
- Misc
- cell phones/air cards
- other services or accounts you maintain for business purposes
- Auto expenses
For my family, we estimated we would SAVE $2500 a year just in gas! At the time gas was just barely over $2.00/gallon. Add childcare to that and we would save nearly $17,000…not to mention all the “other stuff” we could cut out.
Second, you have to evaluate how much it will cost you to quit your job:
- What will you give up (financially)? I suggest using monthly figures (not annual) so as to keep things in a “budget” perspective.
- Your NET pay
- This is really all you are giving up – be sure not to consider your FULL salary
- add to that any increased cost of health/life insurance benefits and flexible spending account participation
- if you carry the benefits for your family, this will obviously be a negative financial equation for you but hopefully not too bad!
- add any retirement savings you will continue after your employment ends
- any perk or benefit you will continue to utilize and be required to pay for or will lose, post employment
- gym memberships
- cell phones
- auto/home insurance savings
- other?
- Your NET pay
Now, subtract the savings from the “loss” to see your actual financial impact. I was shocked to see that my net pay was reduced to HALF when I got to the end!
This was a big motivator for me!
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