How to Financially Prepare Before You Quit Your Job

Excerpted from
Comeback Moms: How to Leave Work, Raise Children, and Restart Your Career Even if You Haven't Had a Job in Years
By Monica Samuels, J. C. Conklin

Quitting is about more than packing up your office and throwing away your pantyhose. Whether or not you're the main breadwinner, reducing your family income can have seismic impact. As soon as you think you may want to stay home with your child (even if it's a year before you get pregnant) you should make adjustments to your spending. You need to prepare yourself for the reality of the financial cost.

Feasibility of Quitting

Those squirmy, adorable bundles of joy are expensive. Here are a few financial facts that will give you an idea of what you'll be spending.

• Parents spend $20,000 in the first two years of a child's life on average, according to the U.S. Department of Agriculture.

• Families making $70,000 or more will spend $353,000 on a child by his eighteenth birthday, according to the USDA.

• Consumer Credit Counseling Service suggests couples budget an increase of $200 a month with the arrival of a baby.

• A baby's health-care expenses in the first year of life are $4,000 on average, if he isn't covered by his parents' plan.

• On average women who take time off suffer a 17 percent loss in retirement savings and earning potential for every - year they take off compared to their working peers.

Financial advisors recommend saving and getting your financial house in order a year before you have a child. Planning in advance could make the difference between being able to stay home with your baby and trudging reluctantly back to work.

What to Do First

To figure out if you can stay home or not and for how long, you have to know your financial information better than you know Britney Spears's love life. Once you determine where your money is going, you'll know if you can cut back your spending and by how much.

Sit down with all your monthly bills.

Sometimes it's better to do this with your husband, emphasis on the sometimes. If he's a big spender and needs to understand how much debt the two of you are in and what you need to do to save, then take him through it. Show him the large stack of papers and corresponding checks you're about to write. Scare him into saving.

Maybe he's the one who usually pays the bills and you need to figure out what's going on with the budget. You're the big spender. Buy yourself a bag of candy and force yourself to go step by step over the budget with him. Educate yourself. Think of this as the horrible prerequisite you have to take in order to graduate. Muscle through it. You'll gain some shopping willpower when you look at the credit card bill and truly understand how much of your money goes to shoes and manicures.

To get a handle on your expenses start with the basics. Get a notebook and at the start of the month write down every bill you pay. Make a list with columns for: the company you're paying the bill to, the monthly amount of the bill; the total balance remaining; and the interest rate charged.

Tally up all your bills in an outgoing column. Look at your bank statement and add up how much you take out each month at the ATM on average. Categorize what you're spending this money on, for example, entertainment, food, gas. Put the average ATM amount in your outgoing column as well.

Look at what your husband's and your net income is each month. Write those figures down in the notebook in an incoming column.

Subtract the outgoing column from the incoming column. What do you have left? Be it two hundred or two thousand, you're going to use that money to start tackling debt and other financial necessities.

This is the hardest part. Getting the game plan together is like experiencing amateur dentistry without painkillers. You're confronting all the little and large mistakes you've made in the past few years-those beautiful boots you had to buy and never wear because they kill your feet. It's all in there and now you're taking responsibility for it. It doesn't feel good now but it will when you see a zero balance on the credit card.

Can You Quit Your Job?

It depends on how much debt you have, how many expenses you can cut down and what you're willing to sacrifice.

• Would you consider moving to a smaller and cheaper house farther away from town?

• What about trading in one of your cars for an older, less expensive model?

• How about cutting down on eating out?

• What about the somewhat financially risky move of using money gained from refinancing your mortgage to support your time at home?

Try living on just your husband's salary for at least two months. Put your paycheck in the bank and don't touch it. Is this doable? Were the sacrifices horrible? Or just a little unpleasant?

Consider this: If your gross income is $30,000 a year or less, the family might be better off with you staying at home. Let's look at where your money is going. If you make $30,000 annually:

• $9,000 is taken out in income taxes

• $2,000 for work clothes and dry cleaning

• $3,000 eating out

• $3,000 in home repairs and housekeeping that you're not there to do because you're at the office

• $2,000 in parking fees, gas, and higher insurance costs because you're driving to work every day

• $1,000 for cell phones and computers

• $6,000 for each child for child care

That leaves you with $4,000. That means that $26,000 of a $30,000 salary is tied up in helping you work. So the question for you is: Can you cut $4,000 a year out of your budget? If you can't do that at the moment then make a plan so you can do it in a year or two years. Be patient. You'll feel better if you quit when your finances are in order.

You can begin by economizing. Create a budget you can comfortably live on. If you're ambitious and want to speed the process along, you could make some big sacrifices like moving to another city altogether. Life in Manhattan is quite a bit pricier than it is in Denver, Colorado. We know one woman who moved to Charleston, South Carolina, from Boston with her husband after the birth of their first child. They're both psychologists. They share a practice and work alternate days so they can take turns caring for their daughter. They hope to slowly ramp up her husband's hours and practice until they're comfortable that they can make it on his income alone. By moving they estimate they reduced what they need to live on in half, so instead of taking four years to achieve their goal they think it will take two.

There are several things you can cut down on while working that will speed up your ability to take time off, including car and house payments by opting to drive or move into something cheaper. You can also look at:

• Home and cell phone plans. Are there cheaper ones out there? Can you get away with fewer minutes? You could save a couple thousand dollars a year with some vigilance.

• Cable package. Can you do without HBO?

• Magazine or newspaper subscriptions. Do you read everything you get?

• Prepackaged food. It's a lot more expensive than making it from scratch.

• Heating and cooling. Try knocking your house's temperature down a degree in the winter and up a degree in the summer, you'll save. Or program your thermostat to automatically change when you sleep to save money.

The one thing we don't recommend is going part time as a way to save money. You won't. Most of the money you make will go into child care, probably at least $3,000 per child for part-time care. If you want to go part time as a way to keep your foot in the door, go ahead. It's a great way to keep up contacts. Just realize you probably won't be contributing much to the family income.

Since you're not quitting right away don't let everyone at work from your boss to the parking attendant know that you're even thinking of quitting someday because you might just change your mind. You want to keep your job if you do.