My wife and I are expecting our second child in September. As soon as we made the decision to have a second child, we sat down and did a number of calculations on the subject and we quickly realized that the expenses were going to be tremendous. Let’s walk through the expenses just a bit so we can see what’s happening.
Housing, We live in an area where a nice three bedroom home costs about $160,000 to $200,000 a year. This means we would be making mortgage payments in the area of $1,500 a month, roughly.
Child care We take our son to a place where the cost of infant care is $160 a week. When he reaches the age of two (which will happen later this year), the cost will go down to $130 a week. So, for now, the amount is roughly $720 a month for nine months out of the year (my wife is a teacher).
Additional costs Our maintenance costs for our child (food, diapers, etc.) is somewhere around $25 a week.
What happens when we introduce a second child into the mix? The housing cost will stay the same, but…
Child care With an infant and a two year old at our child care facility, they offer a $10 discount on the package, so the cost is $280 a week. This totals out to roughly $1,260 a month for nine months out of the year, an increase of $540 a month.
Additional costs Our maintenance costs will go up but not quite double; we estimate $45 a week until our son moves out of diapers, then it will go down to about $35 a week, an increase of about $45 a month.
To look at how we’re going to come up with that extra $600 a month, we’re evaluating several options:
We look for new child care. I don’t like this option much at all, at least not in our area. We have our child in with what is widely considered to be the best “bang for your buck” high-end child care facility in the area. He loves it there and is building social skills with his peers in a safe setting. I simply do not feel as confident in any other facility we’ve visited.
She quits her job and we stay where we’re at With our child care cost at $1,260 a month, this begins to approach my wife’s take-home pay, and since we’re both salaried, the option of her quitting her job (at least until both children are in school) begins to look appealing. My health insurance is solid (not quite as good as hers), but it would be adequate to cover them. This option eliminates child care costs and causes the smallest reduction in income.
I quit my job and we stay where we’re at This is another option – I quit to be a stay at home dad. Again, that eliminates child care costs and allows us to keep our best insurance option, but the reduction in overall income is greater. Personality-wise, it makes more sense for me to be the stay-at-home parent than it does for her. This option eliminates child care costs and has the least impact on our lives as a whole, but causes a greater loss in income.
I quit my job, she changes her job, and we move This is an option we’ve been looking at to target next spring. The advantage here is that we both have parents who live very near each other, but several hours away from us. My parents are both retired at this point and they would love to be free daycare for us a couple days a week. So, our plan here would be that my wife would seek a teaching position in that area and if one was located, we simply move back there. This would also likely involve me converting to a stay-at-home dad. Why do this, you ask? The biggest factor is housing costs. The area where we would move to has homes that cost 40 to 50% less than the homes do in this area, because not only is it rural, but there are no major cities anywhere close to the area at all. This option eliminates child care costs and reduces housing costs, but has the greatest salary reduction and causes the greatest change by far to our lives.
To me, the third option is the one that is the most pleasant, but it’s also the one that is going to require the most careful planning and probably require the biggest amount of cash in hand to make it happen. It also happens to be one that my wife is most uncertain about in terms of her own feelings.
What do these options hinge upon? The biggest factor in determining which one of these that we do is honestly the success of The Simple Dollar. If I knew without question that the current level of success of the site could be maintained, we would strongly consider option #3 – but I don’t know that.
What’s the bottom line, the point that I can take home? Personal finance is much, much more than just dollars and cents – it’s about making choices that not only enable you to live today, but also live tomorrow as well. When you look at a major purchase or a major life move, calculating the raw dollars is important, but it often doesn’t make up the whole picture.