How a family with one income can make strides toward Financial Independence
by FI Designer
A recurring story in the Financial Independence space is that of dual-income households. This post will tell the alternate story of our family, with a stay-at-home mother and two children, living within the 12% tax bracket and making strides toward Financial Independence in the intermediate term. I want to make the case that you do not have to choose between pursuing Financial Independence and a non-working spouse.
According to the U.S. Bureau of Labor Statistics, 30% of married couples with children under the age of 18 had one full-time with one non-working spouse between 2015 and 2017. This statistic surprised me because I thought the percentage would be less based on what I observed in my social circles.
I wrote this post to provide advice for new or soon-to-be parents who value the prospect of having one parent stay home to raise their small children. It is not intended to say that this lifestyle is right for everyone. Some people find their identity and derive purpose in their careers which is fine in my book. I for one do not know if I would find that same fulfillment in raising our children that my wife has found, and I am grateful for what she is doing. But if you value having one spouse stay at home to raise your children, I hope this post will empower you.
Reduce Structural Expenses
A key fundamental of Financial Independence is to focus on growing the gap between your income and expenses. That becomes even more critical when your earning potential is limited to a single income. Cutting expenses is where you can make the most impact in the immediate term. Start with the strategy of balancing impact versus difficulty. The biggest impacts on your budget would be housing, transportation, and food, while the least difficult expenses to reduce would be food, insurance, and communication.
Do not get overwhelmed by trying to tackle everything at once. Set a goal to watch expenses like a hawk and gradually become more optimized. Think of this as a new part-time job that saves money instead of earning it. Saving money can be better than earning it because you do not pay income tax on saved money. With the strategies outlined in this post, we have been able to live on 40% to 60% of our after-tax income while in the 12% tax bracket and invested the difference.
Live On One Income Before Kids
Mrs. FI Designer worked full-time before having children. During that time we lived entirely off of my income and used her income to eliminate debt such as student and vehicle loans. That was beneficial for two reasons. First, it gave us a clean slate such that our mortgage was the only debt we carried when our first child was born. Second, it gave us confidence that we could cover all structural expenses with one income while still having a surplus to save and invest. I cannot overstate how much better we slept at night knowing that we had lived for years without needing her income to keep the lights on.
The average monthly cost of center-based childcare for an infant in 2022 was $1,230 in the U.S. according to World Population Review. At nearly $15,000 per year (per child) that is a significant headwind to overcome for the income provided by another job. Another cost of childcare is the added stress of dealing with the limited availability of childcare and working your schedule around childcare.
Having a stay-at-home parent during the Covid pandemic of 2020 was a blessing for our family because our lives were less disrupted. My wife was previously on the fence about homeschooling but began teaching our kids during the pandemic.
You will be rich by the privilege of staying at home with your children. That is what my wife and I felt when she decided to quit her job, and that mantra still provides much of the justification for our frugal choices in our day-to-day lives. One of my concerns, when we began embracing frugality, was that it could alienate us from our friends and family. Generally, our family respects the way we are raising our children and what a stay-at-home spouse provides, but there are times they think we are depriving our children and they know we can afford to buy them more. We may have lost a couple of casual friends because we are now living a more frugal life, but for the most part, I think we have maintained our true friendships. Plus the new friendships we have gained in the Financial Independence space have become stronger because they share many of our same values.
Having kids is the distinct end of one chapter of your life and the beginning of a new one. You can use this as an opportunity to be intentional about what activities you introduce back into your life and ensure that they align with your values. For example, we discovered our kids have just as much fun at a free park as an admission-charging play zone. My wife and 4-year-old son at the time leaned into this by making a goal to visit 20 different local parks in one summer.
My wife excels in frugality even more than I do. She buys high-quality, name-brand, clothes for herself and our children at second-hand or consignment shops. One hack is to shop second-hand in affluent neighborhoods that have more inventory of name-brand clothing. We also hear from friends who find amazing deals at garage sales but our family has not had much luck in that area.
Find A Network
Opportunities and resources may be available in your area for new mothers who are no longer working. My wife found networks of like-minded people in mothers’ groups sponsored by local churches that hosted weekly meetups. She was welcome even though we were not members of their church. At the meetups, childcare was available to give the moms a break and it also provided social interaction for the children. For the first five years, we received the majority of our kid’s clothing during clothes swaps at the mothers’ group.
Libraries are a great resource for educational daytime activities. While the mothers’ group is not an option if you are a stay-at-home dad, the library is very approachable if you are a dad. Our local library sponsors games, crafts, and storytime for children during the week. It would be a lie to say you will have more bandwidth in your life because your babies have gobbled up your free time, but a stay-at-home parent will provide new opportunities for your family to flourish.
Keep Housing Expenses Low
The cost of housing is one of the largest factors that influences your overall financial success. Unfortunately, this might also be the most difficult life expense to unwind if you have already purchased an expensive home. I urge you to avoid the conventional wisdom that one should buy the biggest house one can afford. Instead, consider buying a home that allows you to budget with some breathing room on only one income. This is great advice for anyone on the path to Financial Independence. I go into much more detail on housing expenses and avoiding lifestyle creep in my previous post titled Financial Benefits Of A Modest Home.
An additional benefit of having one working parent is that it has made it easier for us to justify the modest outward appearance of our home to our friends and family without having to explain our audacious goal of achieving Financial Independence well before normal retirement age.
Doing minor repair work or home improvements yourself instead of hiring it out is a powerful lever to reduce your living expenses and accelerate your progress to Financial Independence. I covered this topic in greater detail in a previous post titled Financial Benefits Of Being Handy.
Tracking your expenses is a good way to boost your confidence in the years leading up to one spouse leaving the workforce. One of the greatest pieces of advice I can recall hearing is “You will never feel like you have enough money unless you know where it is going.” I started tracking our expenses using Quicken software around the time we were married. Tracking our expenses has been nothing less than a part-time job but it provided us the confidence that we could continue to thrive financially on only one income. And now having over 10 years of cost data, we know exactly what our present life costs when we estimate our Financial Independence number. The benefit of becoming a part-time accountant will be the topic of a future post.
Call to Action
Please do not stop here. Consider the following actions, and please share your thoughts in the comments below.
- Do not become discouraged if stay-at-home parenting appeals to you but you do not see anyone else doing it. It is possible to live on one income without sacrificing your goals of Financial Independence.
- Discover what networks are in your community for stay-at-home parents.
- Visit your local library. Libraries offer many free resources like crafts, storytime, and DVDs for kids plus Consumer Reports and ebook subscriptions for adults. If you do not already have a library card, do it now!