- The Washington Times - Sunday, October 28, 2001

When Lynette and Bob Palmer thought about starting a family, they envisioned Lynette as an at-home mom. They practiced for the future for a few years by banking most of the $50,000 annual salary more than half the household income Mrs. Palmer made as an accountant.

The Palmers put a substantial down payment on their three-bedroom home in Laurel, thinking about what type of monthly payment they could afford after their first child was born. Four years later, the Palmers are parents of a 4-year-old son and a 1-year-old daughter and have the life they wanted.

Mr. Palmer, an environmental specialist with an engineering firm, has seen his salary increase, but the couple still live within the budget they planned years ago. That means no cable TV, buying nothing on credit and taking simple vacations. The Palmers have money in savings and no car payments to make.

"When I talk to friends, they think it is inconceivable that they could live on one of their incomes," says Mrs. Palmer, 31. "I tell them I know it is easier for us. We are both savers. I know people who make twice as much money as us, and their lives aren't a whole lot different. I'm glad we thought about what we wanted ahead of time. I think my husband and I both like having me around."

The cost of living, working

Planning ahead as the Palmers did is key to being able to make the choice between working or staying home, says McLean financial planner Ric Edelman.

More than 60 percent of mothers of young children are in the work force, according to the U.S. Bureau of Labor Statistics. There is no official number for the women who say they would stay home with their children if they thought they could afford it.

"It is a huge myth when many women think they can't afford to stay home," Mr. Edelman says. "If you look at a person who makes $30,000 or $40,000 a year, they end up working for $2 an hour when they get done with costs like day care, lunches out and commuting.They are kidding themselves if they think they are making an economic impact."

In addition to discussing finances and the future before getting married, Mr. Edelman advises looking at who is making how much. If the two incomes are disparate such as one spouse earning $60,000 and the other earning $30,000 a large portion of the couple's salary is taxed at 28 percent. With only the $60,000 income, the tax rate of the working spouse would fall to 15 percent.

The actual lack of take-home pay can be startling when a couple figures in the expenses of working. Some of those expenses are obvious, such as child care. Others, such as daily lattes and convenience dinners, are not so obvious.

When Mary Snyder, a mother of two in Birmingham, Ala., did the math, she figured out that her $28,000 salary about half her family's income was really about $3,000. When she began subtracting day care, gas and surprising items such as $40 a month on pantyhose, Mrs. Snyder determined she was contributing a little more than $400 a month to the household.

With debts to pay and little in savings, Mrs. Snyder quit her sales job.

"I truly did not think we could make it," says Mrs. Snyder, co-author of the book "You Can Afford to Stay Home With Your Kids: A Step-by-Step Guide for Converting Your Family From Two Incomes to One." "I wasn't frugal. I was embarrassingly not frugal. I learned we could do anything we set our minds to."

Where does the money go?

Mrs. Snyder started looking at her finances by keeping a little notebook and writing down each purchase, no matter how small. She advises other parents who want to opt out of the work force to do the same, categorizing each purchase into groupings such as housing, utilities, groceries, clothing and cars.

When people start seeing that a few trips to McDonald's a month can add up to $60, they might see they need less to live on than they thought, she says.

"After you make a list of the expenses, categorize each of them into a 'need' or a 'want,'" Mrs. Snyder says. "Is cable a need or a want? A health club is not a need. You really have to simplify your life to do this. You can't just spend at will, but eventually you will get the same high from saving money that you did from spending money."

Mr. Edelman agrees that a fundamental review of a family's lifestyle is essential to making the transition.

"In most cases, a family is not going to maintain the material lifestyle they currently enjoy," he says. "Instead of dinner out, it might mean pizza in, but in many cases, there is a tremendous improvement in lifestyle. If you are looking at life frazzled and it is a hassle to get dinner on the table, you shouldn't look at the diminished economic aspect of it."

Still, each family has its own comfort level for cutting back. Some are willing to make their own baby wipes and dry the laundry on a clothesline to cut the electric bill. For others, clipping a few coupons and coloring hair at home is enough of a sacrifice.

Jill Downing, a Fairmount Heights mother of two school-age girls, has been home since the older, Whitney, was born nine years ago. She was making about $25,000 half her household's income when she quit her government job.

"It is hard because I love clothes and I love looking nice," says Mrs. Downing, whose husband, Kevin, works for Amtrak. "But I made the decision that having the latest things is not as important as being home with my children. I loved my job, but I think this was the best decision. I felt that I didn't want someone else raising my child. I didn't want to get home and be so tired I didn't have time to do anything but give them dinner and put them to bed."

Planning for the long term

If families take advantage of savings benefits such as 401(k) plans at the working partner's job, the hit to retirement shouldn't be too severe, Mr. Edelman says.

Again, planning ahead is important, he says. It is important that people contribute money to retirement plans as early as possible so the money can continue to grow should one spouse take time off to raise children.

Jonni McCoy, author of the book "Miserly Moms: Living on One Income in a Two Income Economy," says sometimes people, particularly men, place too much concern on retirement.

"I hear from a lot of dads who tend to be more bottom line," Mrs. McCoy says. "They say, 'We wouldn't be good parents if we weren't putting money away.' I say you are robbing them now if you are not with them all day. When they go to college, the stay-at-home spouse can go back and pay for college and retirement."

That may be easier said than done, says Ann Douglas, co-author of "Family Finance: The Essential Guide for Parents."

"This is a huge item to consider," she says. "Even if you do go back, it is unlikely you will be at the same earning potential as before. Or you may be ready, and it could be another year between the time you start looking and the time you get the job of your dreams. So you shouldn't make your budget so tight that you have got to get back on track. Those years may be lost forever, even if you do go back."

The Downings and the Palmers both take advantage of 401(k) plans at the employed spouse's workplace. While they have several months of expenses in savings, Mrs. Palmer says they have no formal college fund yet.

"We'll figure it out later," she says.

Becoming frugal has prompted Mrs. Snyder to actually enjoy putting money away. She and her husband have socked money into prepaid college tuition funds for their daughters. Mrs. Snyder says she recently thought about replacing one of their paid-off cars. She decided that the $400 or so monthly payment that would involve would find a better place in their investment account.

"We actually save for retirement more than when I was working," she says. "I am frugal now. I am happier, calmer, and I actually have more money."

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