One of the most common and hardest personal finance decisions people have to make involves the tradeoff between time and money. This post discusses the largest time vs. money decision my wife and I have had to make to date.
As recently as 4 years ago, life was pretty damn easy financially, for the WPF family. My wife and I both had great careers along with the healthy paychecks that came along with them. We had no debt, since we chose to go to an in-state school and were fortunate that our parents covered most of the tuition. We quickly paid off the remaining student loans once we were working. We had no kids. We lived just outside of Manhattan with a short commute to work in the city. Our abode was a large luxury apartment that had a gym, pool, and rooftop deck with city views. It was everything we could have wished for. We watched our spending only to the degree that we made sure we got ‘value’ out of our purchases. We rarely, if ever, used the phrase “we can’t afford it,” for anything we really wanted.
Then, the moment happened. I was training for the NYC half marathon and I walked back into the apartment from a training run.
Mrs. WPF was hysterical. I literally could not understand what she was saying when she pointed to the bathroom and I was able to make out the word “test.” She was pregnant!
Our son was born and he brought an indescribable amount of joy to our lives. His arrival also brought great change. After a year or so, we were fed up with quite a few aspects of our new life. We really liked the daycare that our son attended. However, neither of us liked that “strangers” were raising him. We were frustrated that whenever one of the 14 kids in his classroom got a cold or worse, all three of us ended up sick. I don’t even want to add up how much we spent on doctors visits and how many times we had to call out sick from work. We wanted more. At that point, we ran some numbers and made a strategic decision for my wife to leave her job and stay home with our son. We planned the move for a few months by shopping and purchasing a house way below what a mortgage calculator said we can ‘afford.’ We also identified the best time for Mrs. WPF to resign based on financial incentives at her job. Finally, in January 2016, she was home for good. So far, we are extremely happy with this decision. Mrs. WPF no longer has the stress of a demanding full time job. She’s now able to get most household errands done during the week giving us more quality time to spend together on weekends.
Here is how we were able to decrease our expenses to afford the change.
- Daycare: $21K decrease. Yes, we were spending that much for the care of one child. It is one of the disadvantages to living in an expensive neighborhood. It’s really nice to not have to make that payment anymore. In fact, this cost was only his care for three days a week as we were fortunate enough for grandparents to watch him the other two days.
- Housing: $11K decrease. We moved to the ‘burbs and purchased a home that met our needs. Notice, I said met our needs not met our every last desire. We love our home but it’s a far cry from what we could have had if we bought a house for the amount our mortgage broker pre-approved us for. We are now in a three bedroom home in a great neighborhood. Our monthly payment for housing decreased when comparing our 2015 rent to our 2016 mortgage, taxes and insurance. The savings amount excludes the impact of the itemized tax deduction we are now entitled to for property taxes and mortgage interest. That deduction is included in the tax savings below.
- Taxes: $38K decrease. The amount includes payroll tax savings plus the difference between our combined federal and state income taxes in 2015 (when Mrs. WPF was working) and 2016 (when she was not). Yes, having a lower income and being able to itemize our mortgage interest and real estate taxes led to a huge savings.
- Travel: $12K decrease. In the last year of having two incomes, we paid for 13 round trip airline tickets. In our first year of one income, we paid for 3 round trip airline tickets. For one trip, we were able to use hotel points earned through a credit card bonus to stay in a luxurious hotel. For some vacations, we looked into vacation destinations within driving distance and took road trips. Sometimes we took a day trip and enjoyed sleeping in our own beds. We stayed domestic for all of our vacations so far on one income. Our vacations in both years were wonderful and memorable. Any small sacrifice we made, was well worth the financial savings.
- Food: $6K decrease. The biggest piece here was that we stopped going out for lunch every work day, this alone saved about $5K. I brown bag most lunches now. As a result, I’ve been more productive with my time, enabling me to get home earlier on average and spend more time with my family. We cut down on other restaurant meals by about $2K. With the amazing cooking that Mrs. WPF has done lately, I don’t miss those work lunches or restaurant meals at all. Our grocery bill increased by about $1K to pay for all the food we were not eating at restaurants. Our grocery bill was mitigated by being able to buy in bulk, having the time to clip coupons and shop sales at the supermarket. As an added bonus, all of the grocery shopping and most other errands are now getting done during the week so our weekends are free to enjoy as we please.
- Shopping: $6K decrease. This number was shocking to me as I had not even considered this a potential area for savings when I thought of this list. As discussed in the post, My $121K Mistake, when you are not tracking your spending, you can very easily hemorrhage money. Before we planned the move to one income, we had not been tracking our spending very closely and I think this expense category is where we can see that mistake the most. This was probably the biggest money mistake I ever made. I can’t even put a finger on what stuff we bought for all this cash. I’m guessing a good portion of it was impulse online shopping. I’m sure the extra spending did not really increase our overall happiness. There is nothing that I feel we needed and could not afford after we went down to one income. After the change, there were many items I considered purchasing that I chose not to. I can’t even tell you what those items were anymore, so they clearly were not missed. However, Mrs. WPF feels a little differently, as she is doing the majority of the shopping now. She pointed out that on two incomes, we were able to make almost any purchase that we wanted that seemed “worth it” without much of a second thought about price. Now, purchases are made with added layers of scrutiny on their necessity and price. Even if the purchase is made, there is sometimes a sense of guilt over it, which is something we never really felt before. We both still agree that the added challenge of being more frugal is worth the sacrifice.
All things considered, we reduced our costs by over $94K in our first year with one income compared to the prior year with two. From a financial perspective, to maximize our net worth, we still would have been better off with two incomes, especially when you factor in the missed employer 401(k) match and social security credit. From a life perspective, we are much happier now than we would be with two jobs. Even with all the cuts we made to our spending, our quality of life has increased considerably.
We always have the option for Mrs. WPF to go back to work at some point in the future. This potential future choice serves as a safety net if something happens with our primary income. It can also be a game changer if we go back to two incomes to increase our savings rate and accelerate our path towards financial independence.
Our solid savings habits in our twenties, left us in a strong position financially to make this decision. We had strong retirement savings and enough other savings for the down payment on our home with a strong emergency fund left over.
By making this life change, I feel like we bought time. Time when your children are growing up only happens once and you can’t put a price on it. I’m so glad we made this decision. The fact that we have still been able to continue to add to our net worth at the same time is just icing on the cake. Just writing this paragraph makes we want to count my lucky stars.
Thanks for reading. Have you gone from a two income household to one? Please share your story in the comments.