Can we afford a mortgage and a SAHP?
Ever heard the saying, “Believing you can do something is half the battle won”? If you’re considering stay-at-home parenthood, then this quote is for you. When you’re convinced of something, it’s easier to commit to it; so if you’re convinced of the benefits of staying home with young children – and there are countless benefits – you’re more likely to make your one-income lifestyle plan a reality. It may involve some financial soul-searching as you calculate a budget for your new level of income, but by keeping the big picture in mind you’ll be able to see your way clear.
Here are some tips to help.
Talk with your partner Make sure you and your partner are both on the same page when it comes to your financial goals, and how you’re going to achieve them. Are your “big picture” visions reasonably aligned? If your attitudes toward saving differ too much, then it may be a challenge to agree on a budget. Now’s the time to address those issues to save hassles further down the track.
Track your spending List all your expenses for each week, month and year under headings such as mortgage/rent, power, phone, groceries, car, entertainment. Remember to include miscellaneous things such as ‘rainy day’ money, pet expenses, dentist bills and clothing, as well as any hire-purchase items or credit card debt to pay off. Then examine that list of expenses under a microscope for obvious places where you could cut back. Is public transport viable for the working partner, instead of having two cars? Can you simplify your grocery menu or adjust your power/phone/broadband plans? Do you do too much spontaneous spending? Like housework, cutting back on spending can be a chore, but the result is worth it, so keep that big picture top of mind!
Make a budget The next step is to work out a budget, so you can track where your income will go each month. Figure out how much your baby will cost over the first year, and factor those costs into your budget now. And, as mentioned above, think positive! Approaching your number crunching as the way, not a way, to SAHP-hood will help you commit to it even more.
Start saving When you’ve trimmed back your current spending and moulded it into a one-income budget, set up a savings account and an AP into it, so you can start saving right now, and make the most of your double income while you have it. Bank accounts can be fee-free and reward you for increasing your balance month on month (excluding interest earned during the period), and making no more than one withdrawal.
Talk to your bank You’ll need to know what mortgage structure options are available to help you work out your budget, so get in touch with your bank and find out. How much can you actually afford based on one income? What payment options can the bank offer? Could you restructure your mortgage halfway through the term, or take a mortgage holiday or an interest-only term? Add to your budget the amount you expect to pay for a mortgage, then (take a deep breath) compare the two.
Test your budget Now it’s time to practise living without too much spontaneous spending and maybe even pay TV. Test your budget for a few months while you’re both still working to see how close you can get to your stay-at-home calculations. Some things like transport costs may not change, but you’ll get an idea of the others. Then review your financial situation with your partner. Is the current budget realistic? Is there anywhere you could squeeze it further? And while you’re at it, why not stay in that testing phase a few months more – perhaps even until baby arrives? Think of the savings…and the big picture!