So you want to be a homemaker?

So you want to be a homemaker?

… First you have to work out the finances.  Unfortunately, because we’ve come to expect a two income family, this can take some doing especially if both husband and wife have significant student loans as we do. 

A few weeks after my son was born, I peered down at him sleeping and thought to myself, “How can I ever leave him for 80 hours per week?”  Then, I shook my head and pulled myself together, reminding myself that of course I would go back to work just like everyone else.  As my maternity leave became more past than future, though, I knew in my heart that I couldn’t leave my baby.  I brought it up with my husband, and he was very sympathetic, but reminded me that there was no way we could afford to live on just his income. 

The problem is that our fixed expenses (rent… Thank God we hadn’t bought a house yet… student loan minimum payments, car payment, etc.) were based on two incomes.  As I ran the numbers, I noticed that what really pushed us over the edge was our debt payments: car and student loans.  Plus a lot of wasteful spending.  And by a lot I mean a lot.  Eating out.  Impluse buys.  The sum total of consumer culture.

I’m going to recommend two books here, which had a big influence on me as I came to terms with the financial reality of becoming a homemaker: 

The Two Income Trap: Why Middle-Class Parents are Going Broke by Elizabeth Warren and her daughter Amelia Warren Tyagi.  Whether or not you agree with her solution, her description of the problem is mind-blowing.  Even if you aren’t thinking about becoming a homemaker, it’s worth reading because it discusses how traditional, two-income based financial planning fails to take into account the increased risk of basing your fixed expenses on two incomes.

The second book I’m going to recommend is far more practical:  The Total Money Makeover by Dave Ramsey.  Am I a strict Ramsey-ite?  No.  We still spend a little extra on certain things because we have to keep our home warm and inviting for this to work for us.  That said, we are darn close.  Let me summarize a few of the most important things I took away from his book.

 First, the debt snowball.  I wish we had started ours earlier.  Basically, the idea is that you pay off your lowest balance loan first (not your highest interest) so that you have some early victory.  It also has the advantage of lowering your minimum payments.  You then roll that minimum payment into making additional payments on your next lowest balance loan.  At first, I thought this was a motivational gimmick at the expense of good financial planning, but at the time I didn’t understand the disaster factor outlined in the Two Income Trap.  Namely, if one of us gets laid off, will we be able to afford to live?  Had we not started our debt snowball in exactly the way DR describes, we would have been in real trouble when my husband was laid off a few months ago.  As it was, we had paid off enough of our very low balance loans that our minimum payments were much lower.  Just low enough, in fact, that we are still making it on just my income. 

Second Dave Ramsey pearl: paying off debt is mostly a motivational problem.  You have to break with our consumer culture in order to make additional payments.  Our break with consumer culture was deciding not to buy a new car when our last car developed a leaky sunroof, flooding the car twice in a two month period.  The car STANK!!!  We discussed just buying a new car.  We were frustrated.  I nearly vomited every time I got in from the smell.  But you know what?  We had just paid off the car.  It may have been a junker, but it was our junker.  So we took a roll of duct tape and taped over the sunroof.  Leak fixed, we then cleaned everything out.  The car still doesn’t smell pristine, but it gets us from point A to point B.  It hurts my pride still, though, when I give a friend a ride in my stinky duct-tape mobile.