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The Cost of Work: How Much Do You Really
Earn?
by Scott W. Danger, CPA
The decision to be a
stay-at-home mom is one of the most difficult many new or prospective
parents face. The main reason many parents feel it is not possible is
financial. How can a couple with two wage-earners get by on one salary
while adding another member to the family? It certainly is not easy. While
every family is different, they all have one thing in common: nobody takes
home their entire salary. That is where the cost of work comes
in.
Let’s use an example. Joe and Julie are
married and expecting their first child in three months. They live in a
modest house in the suburbs. Joe is an electrician with good benefits,
including family health insurance. Julie is an office manager
downtown. Joe and Julie would like her to be able to stay home with the
new baby, but they don't see how they can make it work. How could they
ever get by without her $25,000 salary? Let’s look at how much of that
$25,000 salary they would actually see:
| Salary $25,000 |
|
| Taxes
(7,500) |
15% Federal, 7% State and 8% FICA and Medicare |
| Daycare
(6,250) |
$2.50 per x 10
hours per day x 5 days x 50 weeks |
| Commuting
(2,500) |
$.25/mile x 40 mile round-trip x 5 days x
50 weeks |
| Work
clothes (1,200) |
$100 per month |
| Meals out
(1,000) |
Twice a week at $10
each time x 50 weeks |
| Other
(500) |
Office gifts, professional fees, convenience items |
| Total $ 6,050 |
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Of Julie's $25,000 salary, they would only see
$6,050. Based on a 40-hour work week, this is only $2.91 per hour.
The difference of $18,950 is Julie's cost of work. Julie may
be able to find work at home to make up the $6,050 gap in their
earnings.
While this example is specific to Joe and Julie,
it is typical of many couples. For them, it may make sense to have her
stay home. For you, the answer may be the same. The decision to stay home is
one of the most difficult decisions families face. Only you can decide if it
is right for your family. Just remember that you need to look at the cost of
work just as closely as your salary when making this decision.
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