Don't Quit Your Day Job

Those words of wisdom are often spoken in the arts world, usually to talented people with big ambitions but as yet no big successes. But today, as I was reading Michelle Singletary’s personal finance blog at WashingtonPost.com, it came up in relation to a young woman about to have twins, who already has a young child. She plans to quit her $100,000-a-year job and stay home with the kids. Her husband, who also makes $100,000 a year, will support them all. It’s a lovely idea, but it’s a recipe for disaster.

Singletary rightly suggested they try to live on just his salary beforehand, to test it out. But I was unsatisfied with her answer, which seemed too encouraging of this plan. Talk of buying a practical used van to haul all the kids is fine, but you don’t start a period of lessened income by making a large investment in a depreciating asset (a car). And the couple would pay for it out of their savings, which are only $50,000.

I know, you say, $50,000 is a lot. But it’s only a quarter of what this couple currently earns per year. At the rate they are living today, it would be exhausted in three months. And if they buy a $25,000 minivan, their rainy day savings drop to a mere $25,000, enough to cover just one-and-a-half months. That’s not good enough for Suze Orman, who wants people to have eight months of living expenses in savings. And it’s not good enough for me, either. I know people who have been out of work over a year now. What makes this couple believe that they won’t need enough savings to last that long? Add in the cost of COBRA, which with three small children they must have, and the rainy day savings look like nothing.

Probably this couple is feeling overwhelmed by the thought of having twins, and who can blame them? But they need to get over that and focus on ensuring that they have sufficient income to raise their children. This young woman may think she has a secure career she can return to in the future, but these are uncertain times and I would not take a bet on it if she walks away. Her husband may have a secure career, but again, we’ve seen recently that few jobs today are 100% safe.

So what should they do? They can’t hold off on having the twins in order to build up savings; these babies are coming soon. This mother wants to be with her children, a natural desire, and not one I would deny her. She should negotiate with her employer to go from full-time to part-time, of course. If she is valued enough to be paid $100,000 a year, I suspect she has some leverage. And right now is the perfect moment to negotiate, because she can spare her company the expensive task of finding her replacement, something companies hate. She should work out an arrangement that has her in the office part of the week and at home the rest, or part days, or telecommuting, or whatever. As a key element of the deal, she should strive to maintain as much of her status and responsibilities as she can. Only by doing so will she remain a necessary employee. And along with her current seniority, she needs to keep her health coverage.

Assume the ideal, that this woman retains half of her job and salary. Who will look after the children? She and her husband will, but with household help. A woman earning $50,000 a year can afford to hire a housekeeper, nanny, baby sitter, or au pair, or any combination, on a part-time basis. Assume she pays $20,000 a year to various part-time helpers, what’s the advantage? First, the household has $30,000 more net income per year than if she simply quit. Second, the woman still has her job, that’s the big one. It’s a lot easier to go full-time again (or find a new job) if she’s regularly at the office and/or telecommuting. And if her husband loses his job, or they want to switch off, she can negotiate to take on extra work for extra pay, or go back to full-time work. A third advantage is that her husband will not feel resentful because she gets to stay home and “do nothing all day” while he still has to drag himself to an office. Nor will he be able to cop an attitude about how she’s just a housewife and not interesting anymore—not when she’s still in the workplace and dressing the part and meeting other men just as he meets other women. And remember, they’ll have $130,000 a year instead of $100,000, and the babies will have plenty of quality attention. The couple can buy that used minivan and still keep their $50,000 in rainy day savings. They’ll still have to make compromises with their lifestyle, but they won’t have to cut it to the bone.

Yes, my alternate scenario presumes a flexible employer, and most of us have had experiences with the other kind. But it can be done. The woman’s future earnings depend on staying in the game. You might reasonably ask why should this woman have to keep working? Raising three children is a full-time job in itself. True. But only by accepting a much reduced lifestyle on a permanent basis can this couple live on just the husband’s salary. That puts a lot of pressure on the husband, the kind of pressure that makes men die young—or run away. And meanwhile, the entire burden of tending three small children all day long falls on the wife. That’s a lot of pressure on her, too. Together, this woman and her husband currently earn $200,000 a year, well above the national average. They aren’t in an either/or situation; they just think they are. They can create their own mix and have the best of both worlds.