Single Income Living
by Gary Foreman - gary@stretcher.com

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Dear Dollar Stretcher,

I am a new mother with a 3 month old baby girl. I desperately want to be with her. I feel like she is with her caregiver more than with me. The dilemma I face is this: my husband's check is not enough to cover our mortgage and regular monthly bills. When I add up our bills we fall $400 short of making ends meet before groceries or any other expenses. I have thought about a home business but so far nothing seems good enough to cover the extra amount needed.

Thanks.
Debbie

If my in box is any indication, Debbie isn't the only young mother to wrestle with this question. And it really has two levels. We'll try to take a look at the financial side of the question. There's also the women's career and child development issues. For those Debbie will need to look to her own heart and consult experts in those fields.

The first task is to list income and expenses when both parents work. It's similar to assembling a family budget. First you list all your sources of income. It's best to do this before taxes and payroll deductions.

Then take a look at your expenses. If you need help remembering everything use your checking account register and credit card statements. Use actual expense figures, not what you think you might be able to do if you cut corners.

As Debbie already knows, the baby will cause some new expenses. Daycare is the biggie. But she'll also need some money to cover doctor's visits, clothing and food for the little one, too.

Then it's time to bring the income and expense figures together. What does it look like if both parents are working? Don't be surprised if it's significantly different from your pre-baby situation. Two may be able to live nearly as cheaply as one. But, when baby comes it's a whole new ball game!

The next step is a 'what if' exercise. What income and expense items would change if she stayed at home? This is mostly a matter of looking at each entry and thinking of how things would be different. Some figures will remain the same. Others will be reduced or eliminated entirely.

For example, if Debbie stays home she'll obviously have less income. But staying home will probably reduce the amount that she spends on clothing and eating out. Don't forget to include payroll deductions, insurance and taxes.

Many families are very surprised when they find out how little extra spendable income is made by the second wage earner after childcare costs are deducted. Unless Debbie is earning a fairly substantial wage very little of her income will make it home.

Before we go any further let me address one controversy. Please don't take anything that's been said so far to mean that Debbie is the one that has to stay home. I understand that some families are very happy with Dad staying at home while Mom works. We're not going to get into that debate. Debbie indicated that she wanted to stay home. We're answering her question. If you want to see if Dad can stay home, the info here will work just fine.

At this point Debbie should have a feel for what income and expenses would be if she stays home. She says that they're spending $400 more than income each month before groceries and other miscellaneous expenses are considered. It's going to be hard to make up the difference.

Which leads us into the second part of Debbie's question. How can she find a home business that would create some income?

We'll start with what not to do. Do not begin by reading ads for home-based businesses. You'll just get confused. Begin by taking a look at yourself. Think about what things you do well and what activities that you like to do. Be realistic. Lying to yourself could doom your business to failure.

Once you know what you like to do and do well, you're in a position to start thinking of possible businesses. Compare your skills to the demands of the business.

There's a lot to consider. You'll need more than the right personality and skills. Do you have the space at home and any necessary tools? Do you have enough cash to get the business started? Enough to last until you begin getting paid for sales? Would the business be conducive to the lifestyle you desire?

Don't be shy about asking friends and family what they think. Avoid those who are always negative. But listen carefully to everyone else. They might have seen something that you've missed. Of course it's also possible that they're missing the opportunity that you see.

One caution for Debbie. Be careful of businesses that require you to spend a lot to get started. The goal here is to make money, not spend it. Also be careful about businesses that require you to sell to friends and family. If Debbie is going to stay at home she won't be interacting with that many potential buyers.

Any business that's supposed to be very easy to start probably isn't a good candidate. Avoid any situation where your biggest asset is that you know a lot of people. Unless you've been mentioned in People Magazine, you probably don't know enough people to be successful.

Before starting any business, Debbie needs to find out about any licenses or necessary insurance. She also needs to take a realistic projection of how much money she might make. Is the $500 or so that Debbie needs each month a realistic profit goal for the business?

Think of it this way. She's trying to make about $125 after taxes per week for working part-time at home. Assuming she works twelve hours per week that's over $10 per hour after taxes. Realistically, Debbie is going to need some desirable skills to earn that type of money.

Can it be done? Yes, thousands of families are living a single income lifestyle. Whatever decision Debbie and her husband makes, we hope they're happy and enjoy that baby.

Gary Foreman has worked as a Certified Financial Planner and purchasing manager. He currently edits The Dollar Stretcher newsletter. For a sample issue send your name and address, along with $2 to: The Dollar Stretcher, PO Box 23785, Ft. Lauderdale FL 33307.

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