Moving to Single Income

December 5, 2023
3 min read
Thomas Kopelman

We’re going to talk through one of the most difficult decisions a couple can make: can they live on a single income to be able to stay at home with their kids. 

This usually happens during another large life change - the introduction of children to the family. So many changes so quickly can be very overwhelming, so let me walk you through how to think about it. 

Oftentimes, in these situations, the couple has agreed that one of them will care for the child and then they’ll return to work when they feel comfortable that the child can be adequately cared for through other means. That can mean daycare, a nanny, or a reliance on working from home. What they don’t account for is that it’s very difficult to let go of this new caretaker role. 

Feeling guilty for trading time with their kid for returning to work is a feeling that many can sympathize with. A first time parent planning to continue working after having a child is not going to know what it feels like to leave their child behind even if it’s just for the work day. I’m not here to tell you how to feel about it, this is a deeply individualized experience. However, we can talk about some things you can do financially to prepare. 

First off, focus on living on one income. Let’s use an example to explore this.

We have a couple, one makes $150,000 per year, and another makes $100,000. For this example, we’ll assume the $100,000 earner will be the one to stay at home. 

For these imagined people, I would recommend that the family uses the $150,000 to live on and that they save all of the $100,000 earner’s income for one to two years prior to having the child. 

What this will do is two things: 

  1. It lets them understand if it’s financially feasible. For some families, having two incomes is a requirement, and the option for a single income is not possible.
  2. It builds up savings in a hurry. So maybe a single income isn’t possible, but the family can potentially scale back on work. Maybe one of them can move to a part time position while they nurture the child. The savings will act as a buffer until they return to full time work when the child is older. 

The next thing to consider is the cost of childcare and having an understanding of what work means to you.

For some people, they might say they make $40,000 and a full time nanny costs nearly the same amount. They should automatically quit and take care of the child right? Wrong.

Many people find more meaning than just a paycheck in their jobs. This is obviously not everyone, but working can be empowering. Other people might find the exact opposite. 

Next consider the time horizon. How long are you prepared to stay at home for? When you move to a single income, you lose more than just that income. Of course, there are all of the things that most will think about right away like how they will likely not be able to save and invest as much, which will in turn push retirement further out. But maybe that partner’s job had amazing benefits that you no longer have access to, or they lose a substantial 401(k) match, you need to understand you’re losing more than just that extra monthly income. 

For those that had a very high savings rate in their earlier lives, they will likely be better equipped to shoulder this additional burden, but for those that didn’t or were unable to, this means more work for you in the future or really scaling back lifestyle. And that is okay, you just need to be aware of this and make the best choice for what you want. 

One thing that some people are afraid to do or simply don’t think about is working with their employer to come to an agreement. This can be especially effective with small businesses as they don’t want to lose key staff. If the type of work allows, ask them if you can rearrange your scheduling or move to certain days where you’ll be doing limited remote work, or reduce your hours entirely. 

Some people will exhaust their maternity/paternity leave, their PTO, and then take 3-6 months off unpaid. It’s all about communicating, planning, and working with your employer to find an arrangement that will fit your situation. 

Again, this is just about as challenging of a life decision that you’ll face. I’d imagine most parents are going to place spending time with their baby as their top priority, so build a solution that works for you.

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