To see if downsizing from two paychecks to one is feasible for your family, run through our "Can one of you afford to quit?" worksheet. It lets you take a real-life look not only at the obvious -- how your income would decline -- but also at how some expenses will fall, too. You'll be reminded to project how much you might save in child-care costs, taxes and clothing expenses when one of you stays home. Remember, for example, that your car-insurance premium may dip if you stop driving to work.
If the worksheet shows that giving up a paycheck will push you into the red, don't despair. The thorough listing of where your money goes now is a perfect starting point for planning adjustments that will help you reach your goal.
The Marcheggers were in good shape on several fronts: They had put together some savings, paid off their student loans, rolled their credit-card debt into a home refinancing and opened an equity line of credit to use as an emergency fund. Still, their monthly budget relied more on good intentions than on cold-blooded analysis. "We figured, if there are other expenses, we can eliminate them," says Lisa.
Not long after, the couple found a major flaw in that reasoning: Lisa became pregnant with Jared, who arrived just 12 months after Elaina's birth. To be closer to home, Marcus took a job at an auto dealership, a move that involved a pay cut. Then the couple learned that Jared had serious food allergies and required protein-free formula, to the tune of $500 a month.
With no provision in the budget for high-priced formula, much less two babies, the Marcheggers began dipping into their $20,000 equity line and quickly maxed it out. "We realized we weren't making ends meet," says Marcus. Meanwhile, Lisa's former employer was wooing her back with a fat salary.
Plan B: Lisa went back to her old job, and Marcus quit his job to stay home and care for the children.
Seize opportunities
That adjustment represented a setback for the Marcheggers, who preferred that Lisa stay home, but at least they had the flexibility to keep their goal and finances afloat. Two-salary couples whose expenses have risen to match their earning power don't have that luxury, say Elizabeth Warren and Amelia Warren Tyagi in The Two-Income Trap (Basic Books, $26). "They can't afford to quit and can't survive if something goes wrong."
In Marcus's case, jumping off the career ladder actually led to opportunity. Over the following months, he stole moments from diaper duty and playground patrol to study for a real estate license, aiming to take advantage of Sacramento's sizzling housing market by becoming a mortgage lender. By September 2002, he had secured the license -- and a babysitter -- and launched his lending career part-time. (That same sizzling housing market took care of the $20,000 home-equity debt, too. The couple paid it off with profits from the sale of one home when they moved to a new one.)
Meanwhile, Lisa was chafing at her schedule, which often ran 12 hours a day. "I never saw my kids," she recalls. "I knew it wasn't going to work for me when Jared got his first tooth. I was in the boardroom, and Marcus text-messaged me the news on my phone."
Plan C? In a detour, the couple put both kids in day care full-time so that Marcus could develop his new career.
Stay focused
For the next three months, the couple shared the stresses and expenses familiar to all working parents: juggling schedules, relying on prepared foods and footing a $1,300-a-month day-care bill. "Both of us had dry cleaning. I needed business suits," says Lisa. "At day care, the kids would get paint all over themselves, and their clothes would be ruined. It was awful."
The strategy paid off, however. As Marcus's career began to flourish, Lisa cut back to working three days a week, a period during which she prepared for her imminent departure from the job force. "We sat down and went through every single bill," she says. "I went over all our insurance and raised our auto deductible and homeowners deductible. We switched to the absolutely lowest-cost cell-phone plan. I looked at the numbers and said, 'Whoa! Groceries cost this?' We did everything we could do to squeeze."
By April 2003, the couple was not only on solid financial footing but also on track to replace Lisa's six-figure income with Marcus's. Confident in his new career, he told her, "All you have to do is stay home and set me free, and I will take care of us. I can do this." Jettisoning dual-job-related expenses -- especially the cost of day care -- eased the transition.
Now, prospering in their new life, the Marcheggers appreciate the contribution each has made to get there. "He never comes home and asks, 'What did you do all day?' " says Lisa of the former diaper slinger and bottle washer. Adds Marcus, "We're a good team."
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