The following is a scenario I typed up to help out a friend. I hope it helps clarify the picture for a housewife who wants to "help out" with family finances and thinks that a part time service job might fit the bill. Think again:
"Let's say you work 30 hrs a wk at $8.00 at Costco (or a service job like it). You will be earning $240 a week, or $960 a month. However, there are several "hidden" expenses to a second income, especially a part-time service income. Is it worth it? Subtract:
-$144 federal taxes
-$48 state/local taxes or other withholding
-$180 for 3 meals/wk prepackaged or takeout (for your tired days)
-$50 extra tank of gas a month (assuming you work locally)
-$100 in Costco food and other "great deals" (c'mon, you know I'm right)
That leaves $438 left.
For your 120 hours a month, you're earning $3.65 an hour. At current household spending levels, it will probably just evaporate. Then it seems you're working for nothing. Running to stand still. Is it worth it? What if you:
Reduce your food bill by 1/3 using a price book and doing some (not all) scratch cooking? (1/3 of a $400/month food bill--if that sounds shocking, get out your bank statement and add up the shopping trips)
Examine the monthly services billed to your household for redundant/unneeded services. (Examples: phone/cell/internet/cable bills are enormous...do you really need all of it? Can anything be trimmed back or bundled with just the services you use? Do you really need voice mail when you have an answering machine? Do you need your garbage picked up every single week? Do you drive less than 3,000 miles a year--you could get a low-mileage discount on your insurance policy (worth $100/yr to us))
Reduce debt service payments by paying off high-interest balances or switching to a low-interest, no fee credit card (15% of $300/mo worth of pmts. You have to resolve to pay it off, don't add more debt!)
Examine monthly bank statement for "blown money" (that irresistible sale, those DVD's, trips to Starbucks, internet shopping. Did you really need it?
What about entertainment? What if you rented movies instead of going to the theater? Learned to make your own pizza? Subtracted one restaurant meal in a month?
=$438/mo savings, the same amount you would have earned (net) from Costco.
You have this savings now every month to do with what you will. If you find new ways to save, the added wealth starts piling up every month, because once you figure out how to save, conserve, cut back, or substitute expenses, it is money in your pocket as long as you continue those habits ($500 X 12 months=$6,000 minimum tax-free income to your family for the year).
Some people resist measures like this because they think it will cause feelings of deprivation. To that I say, nothing makes me feel poorer than looking in my bank account and seeing only four digits, regardless of how much "stuff" there is around me. Remember that book about the millionaires next door? They shop clearance and don't waste money on things that you only use/experience once. But I know you are creative enough to find ways to save without lecturing everybody, saying "no" all the time and complaining about bills. By changing habits only slightly, you can cut back considerably. I've low-balled all these figures to prove a point, but I know you can do much better because you know your situation. If not, ask your husband to show you or start digging into your paperwork to find out. If you like where this is going, you can take the next step:
*See your household as a "home-based business" and yourself as a capable business manager.
*Continue monitoring bank statements and hidden spending habits that cost hundreds or thousands a year.
*Determine to make your household an engine of wealth by adopting a capital/net-worth mentality instead of an earn-to-spend consumer mentality.
*Inventory your husband's investments...get rid of time bombs! slash expense ratios!
*Plug money into Roth accounts...do you have an IRA?
If the problem is health care insurance, examine the policy you currently have. Does the company give you any choices? Our company offered a low-premium, high-deductible health plan that didn't seem too attractive until we had piled up some money in the bank. Even with hospital bills, we've racked up savings just on the premiums (and the plan is surprisingly generous once we pay the deductible). Even if you can't change plans, the extra savings can help make up the shortfall.
The point is, cut back and conserve on expenses that don't deliver. Reduce or pay off high-interest debt and make sure your investments are working for you, not just sitting there. Build retirement savings. Build a cash cushion. Have adequate insurance, but not too much (do you have life insurance?) Run financial "fire drills"--what would you do if hubby got laid off? If somebody got injured or really sick? What if the housing market tanks and our houses lose value? What if inflation causes prices to rise across the board?
Our success story...after buying this house we had more credit card debt than we had money in the bank. Now after four years we have a 6 month cash cushion and our net worth has quadrupled. We managed this on one income, with a little luck and a lot of discipline, which was mostly just a change in attitude and an awareness of where the money goes. It does work.
Husbands just want to see the bottom line. Unless you really want to trade 120 hours/mo for $3.65/hr, put these steps into action and prove to your husband that you are an efficient manager who can pull her own weight. You don't have to ask him to spend less or change his standard of living. And his enthusiasm will rise when he sees the money start to pile up in your bank account."
Will my advice be heeded? I don't know. So many people seem stuck in a consumer mentality that they are more willing to trade hundreds of hours of their precious time and labor for a pittance that will simply be melted off in trade for consumer junk. Even with families that aren't rabid spenders, the perceived need for extra income will mask the extra expenses that a working wife can bring.
Case in point: my friend Lisa, who went to work "part-time" to help out with family expenses has now increased her weekly hours to 36, the most she can work w/o pulling benefits. She looks and sounds tired, but she probably thinks she has to work this much because the bills just keep piling up. The incentive to save or cut back household expenses has probably given way to "tired days" and the conveniences or material rewards that make such wheel-spinning seem worthwhile. Give it a second look, please.
ROLL CALL! Where are my readers? Have I lost all five of you? I have lots more savings/economic/finance/investment articles in the pipeline thanks to reams of recent research and I am prepared to explain how it can benefit YOU! If you want to see more posts like the ones I have done recently, please comment as my e-mail is now checked daily and my brain is budgin.'
In the meantime, let's all repeat the new Catholic Housewife mantra--
"A frugal and industrious housewife is ALWAYS worth her keep (kids or no kids)."