This article was inspired by a question I've had for quite a long time. I quit my job when we got married, mostly because I could, but also because I didn't think I made enough money to make it worth keeping a second car, etc. Did I make the right choice financially?

The Analysis
What we need to find out is 1) how much money I actually save being at home, versus 1) how much money I make at a job, minus taxes, transportation and other work-related costs. A lot of "wages of a stay at home mom" articles skew the figures by saying you would have to pay a chauffeur, professional cook, personal stylist, etc. I'm not trying to make some political point here, I'm just trying to honestly answer a question. If I worked outside the home, we would still buy cheap food and drive a Craigslist car, so those are my "job cost figures". On the other hand, I'm a decent gardener and pretty good cook, garage sale shopper, hair cutter, etc. These skills are reflected in our savings. I would recommend that each family do their own calculations based on their own real job costs and stay-at-home savings. Perhaps you really do need a second income, but it's smart to do the math anyway.

Extra costs to having a job:
Car: $1731.96
Food: $2938.44*
Other: $1,135.31 **
Daycare***: $7200    (***for one kid)
Taxes: $4500 (30% of income)

I figure that a housewife can easily save/earn $4 per hour (working 40 hrs/week), or $5760 per year. In order to pay for job-related expenses AND earn $4/hr. for her time, a working wife without kids would have to be making at least $13,307.42 per year.

When that same working wife has a baby that needs daycare, she must increase her earnings to $22,667.42 in order to still be making $4 per hour for her time. Every additional child will force Mom to earn an extra $10,000 in order to pay for daycare and baby costs.

Working From Home?
Recently we asked our accountant if it would make sense for me to make an extra income with our farm/homestead. "Not really," she said, "because you would be taxed based on your entire household income. You would run into the same problem you have [with Hubs' business], in that 30-40% of your $5,000-$10,000 would come out to pay taxes. It wouldn't be worth your time." My extra income might put us in a higher tax bracket, thus causing Hubs' earnings to be taxed at a higher rate. And my small earnings would be taxed at Hubs' higher rate. It doesn't make sense any way you look at it.

So for us, it makes more sense for me to stay home and continue to save money doing what I love every day. At my previous job, I was making $15,000 per year- only slightly above $4 per hour. It made financial sense for me to quit, in addition to the better lifestyle I would have without the job.

The problem with going back to work (in addition to the cost of work-related expenses and higher taxes) is that your entire frugal lifestyle starts to fall apart. Nights and weekends are spent doing basic cleaning and basic meal planning. There is no time to shop for deals, no time to go to garage sales or garden or do extra money-saving cooking. There is no time to hang laundry on the line or go for bike rides in the middle of the day, let alone time for making gifts or other more advanced frugal endeavors.

In addition to the frugality aspect falling apart, I would have to be very, very diligent with my time in order to eat healthy and find time to exercise outside of work. I wouldn't be able to do things I enjoy every day, nor would I be able to spend as much time with my husband. Instead of both of us being "off work" at 6:00 pm, I would come home from work and still have laundry, cooking and cleaning to do. My work would never stop, and it would squeeze out any time for my beloved hobbies. 

Is working away from home worth a few extra dollars? For me, absolutely not. Obviously if a lady is making $100,000 or something the family can hire someone to do cleaning and cooking and their lifestyle is not going to suffer. And there is always the option of a stay-at-home dad. But I think many times it would make more sense for a lady to quit her $15k-$30k job (that she doesn't like) if the husband is earning a lot more.

Back To the 1950's
When I say that the low-earner of the family should quit their job, I'm not advocating laziness or relying on welfare. I am advocating a return of good old-fashioned division of labor. The other day I read a "survival budget" put out by the local homeless coalition, which stated that a family of four is barely getting by on $50,000 per year. This is absolutely ridiculous and false... unless you are dealing with a non-frugal family who needs daycare because mom and dad both work. The paper never even addressed the possibility that maybe mom could stay home. It is getting to the point in this country where people think a stay-at-home spouse is a luxury, when in some cases it may be a financial necessity.

I've also talked to many stay-at-home moms who worked outside the home between marriage and kids. Some expressed regret that they continued to work after getting married, even though they didn't have to. Most people think that you have to have kids in order to quit your job, and that's not true. The time between marriage and kids is special because you can be supported financially, but still have no school or work obligations and therefore plenty of time to do whatever you want. This likely hasn't happened since you were four years old, and won't happen again until you are middle aged. This season can be used to reach non-monetary goals like restoring health and fitness, learning new skills or even getting a small business off the ground. 

********************
*This number is the difference between the USDA's cheapest meal plan for two people, and what I spend on groceries for Hubs and I. I'm assuming that a working wife/mom is super organized and can make thrifty meals on nights and weekends.
**This number includes random savings for things like shopping at garage sales, line drying clothes, and other savings. As mentioned above, I'm assuming that a working wife/mom is super organized and can manage doing her own basic laundry and cleaning on nights and weekends.

Well, Hubs and I took in our second big load of ditch-picked cans this week, more than doubling our earnings for this year (see the sidebar for this year's total). We were talking to someone at church and mentioned returning the cans. The other guy said, "So I'm not the only one that does that!" Turns out there are a lot of people that enjoy recycling roadside cans, from the casual can collector to the hard-core fills-up-bike-trailer almost-looks-homeless guy.

You know you're a can collector if you can relate:

1. Brand Loyalty. Drinker or not, you know every brand and label out there: Budweiser, Milwaukee's Best, Bud Light, Busch, Beer-Rita, Twisted Tea, Smirnoff, Redd's Apple Ale, Angry Orchard, Blue Moon, Heineken, Samuel Adams... and on it goes. You learn to look for certain brands in certain areas. And what's more, you form an opinion of these drinks based solely upon their packaging. 

2. Automobile Regret. You feel a bit wistful just leaving it there, but it's not quite worth backing up, getting out and tossing it in the back seat. Just sometimes...

3. The Providential Can. When you get off your bike to pick up a can, and there happens to be another one nearby. Or when you stop to get a drink/identify a plant/ admire the scenery and there- RIGHT where you stopped- is a bottle. Almost as if someone put it there just for you.

4. Bonus Items. Golf balls, highlighters, medicinal plants, hand warmers, bird eggs, CDs. 

5. Gatorade Annoyance. And water bottles and Peace Tea, and other non-refundable beverages that litter the roadside. How's a water bottle different than a Pepsi bottle, anyway?

6. Crushed Cans. WHY? I know it feels manly to crush a can with your two bare hands, but why not crush a non-refundable water bottle? At least leave the barcode readable.

7. Cans and Money are Interchangeable. You start thinking in terms of, "How many cans does this cost?" and when asked how many you normally find every week, you respond "About three dollars."

Are you a ditch-diving roadside recycler? Can you relate?

Today I'm going to wax eloquent- or not so eloquent- on the subject of home-based businesses. I think far too many women get sucked into the trap of being a "business owner" or an "entrepreneur" and waste a lot of money on home-based businesses that go nowhere. I'm not trying to judge, but speaking from experience of wasting time and money on fantasy businesses. Be smart before jumping into any business, especially one that seems too good to be true.

As Springtime rolls around, I'm looking at all of these seedlings that I started and I'm wondering... what am I really going to do with 50 pepper plants? You could sell them at the farmer's market! You could cook them all into pepper jelly, mark the price way up and make hundreds of dollars!!!



Fantasy Business Alert! Just because something SOUNDS like a good idea doesn't mean it is. Just because other people are doing it doesn't mean it's a good idea. Just because you "invest" lot of money up front doesn't guarantee a return. And just because an idea has the potential to make money doesn't mean it will.

In the past I would get an idea and really convince myself that it would work. I would buy business cards and a domain name, make a website and even go so far as to make some products. But then I would never follow through, because I came up with another idea without being diligent with the first one.  

And then of course there were the times when my "businesses" operated at a loss. Like the time I was cleaning house at $6 per hour and it took most of my profits to pay for gas to get there. Or when I bought a bunch of video-making equipment because I was going to earn thousands making how-to DVDs. With this idea I actually followed through and sold... three DVDs.

Have you started any fantasy businesses? It seems like everyone wants to be an entrepreneur, and with good reason. Home-based businesses are an excellent opportunity for housewives like you and me to make some extra cash on the side, in our free time. Unfortunately, however, many of these new home-based businesses are operating at a loss. Check out the following example:

Wanda's Business
Wanda loves to arm knit. It's fast, easy and fun. She decides to start a business selling arm-knit scarves.
Supplies: $2 per scarf x 25 scarves = $50
Craft show booth: $40
Driving to the craft show: $6
Time spent: 10 hours knitting + 6 hours at the show = 16 hrs. x $10 per hour = $160

Just to break even without a profit, Wanda would have to sell each scarf at $10.24. Wanda doesn't think people will pay $10 for a scarf, so she prices her product at $5. If she figures her time is worth $0 because she enjoys doing it, Wanda may make a small profit of $1.15 per scarf. If all the scarves sold, she might be able to buy pizza for the family!

There are two major problems with this fantasy business.

1. There is a tiny profit margin. 
2. The market is flooded, so making sales will be difficult. Things that have flooded the market: soaps, cupcakes, baby products, American Girl doll clothes, scarves, soy candles. Everyone makes these things because they are easy, cheap and enjoyable to make. It's not the soap-makers, cupcake bakers, seamstresses or knitters that get rich off these products- it's Wilton, Hobby Lobby, and Etsy.

A Hobby, Not a Business
How can you call something a BUSINESS when you can't sell anything and it doesn't make any money? I think Wanda, in this case, really likes making scarfs, but she knows it would be silly to make dozens of scarves for fun. So she attempts to make some money at it, or at least call it a business to justify her fun.

Is there anything wrong with a hobby? No! But I know from experience that fantasy businesses can be financially destructive (and habit-forming, if I do say so myself.) At least hobbies don't require farmer's market booths, business cards, conference registration, or domain names.

A Real Business
What is a real business? It's some kind of activity that makes money... even if you don't have business cards. Business cards are not what make a "real" business. So how does a housewife go about starting a real business? It doesn't look like a "real" business, but it does make money.

1. Use your time to make some money with your own hands. Teach music lessons, clean up someone's yard, babysit, whatever. Do this at home or close to home, so there are no hidden costs like gasoline. 

2. Use the money you made to invest in some kind of product or service that you can sell. Seeds to grow flowers, new pruning shears so you can prune other people's trees, etc.

3. Never "invest" more money than you have made in step #1.  As a rule, don't invest more than half of your profits*. This rule will keep you from running your "business" at a loss. And DON'T subsidize or "help" your business with your husband's salary or other household money. That's not making money, that's getting a loan. 

You will know right away if your business is a profitable idea when you stop subsidizing and keep track of how much everything costs, and subtract that from your actual profits. Don't say, "Well, it's only been a week/month/year since I started.... NEXT year I'll make some profits." Demand a profit right from the start.

What if it IS a Fantasy Business?
So you've discovered that making and selling arm-knit scarves isn't profitable. After receiving this sad news, you box up your knitting supplies and resign yourself to only making one scarf every year. Not so fast! You can still keep on making scarves and lots of them... AND still be ahead financially.

Many people have a set amount of money each year that is used on gifts. They spend $5 on birthdays, $20 on Mother's Day, $30 on Christmas gifts, etc. If you have this budgeted anyway, why not replace some of these gifts with your homemade scarves? Looking at it this way, your scarf-making habit would be SAVING money, which is even better than earning it!

$10 birthday budget - $2 per scarf for supplies = $8 "profit"!
$8 profit x 25 scarves = total savings of $200!!!

Gifts are a good way to bridge the gap between "hobby" and "business". Gift-giving can also jump-start marketing for a real business. "You know Sally, who makes those amazing bacon cookies?" If people rave about your gifts, then you know it's a good product. If nobody says anything... well, at least you didn't invest hundreds of dollars.

***

Have you started any fantasy businesses? 
Have you started any profitable home-based businesses? 

I look forward to sharing my experience with side-hustles, micro-businesses, and making money as a housewife.

*I know that many successful business owners use leverage to start profitable businesses. But those people are usually not frugal housewives.

Hey everyone! In honor of tax season (it's all due next Wednesday!!), I've written a post about how to save money on taxes. It's probably not what you think.

The Smiths
The Smiths make $80k a year between husband and wife. Mr. Smith makes $50k per year as a computer technician. Mrs. Smith makes $30k per year as a florist. They have two kids in daycare.

The Smiths are doing very well... or are they? 

Average Income per month: $6666  

Housing costs (mortgage payment and insurance)- $1500
Food-$700
Clothing -$100
Gifts -$100
Transportation- $420
Medical- $420
Savings- $666
Charitable Giving- $300
Entertainment- $140
Daycare- $1300
Utilities, Phone & Internet- $140
Income Tax- $1667

Total Average Spending per month: $7453

Did that last item surprise you? Taxes aren't what you normally see on the budget, but Uncle Sam shouldn't be ignored. It's a real eye-opener to see how taxes, as an expense, compare to other items in your budget. The Smiths are in a 25% income tax bracket*.

The Smiths realize that they can't afford to keep going on like this. They are continually running short on money; $787 short each month, in fact. Even with modest housing and other costs, $80k per year isn't enough for this family of four.

In a surprising turn of events, Mother lost her job at the flower shop. This set the Smith family back $30k per year- a drastic cut, especially because they were so short on cash already. 

Interestingly, the Smith family's income tax went down by 66%, even though their income only went down 37%. When Mrs. Smith lost her job, there was less income to tax, but it also brought the family into a 15% tax bracket.
Because they have two kids and a newly-lowered income, the Smiths are now eligible for more discounts, benefits and programs from the government. Although the Smiths are $30k poorer, the tax savings of $13,500 plus daycare savings of $15,600 leaves them only $900 per year poorer than when Mother had a job. If Mother clips some coupons and saves $100 a month (14%) on groceries, this difference is easily made up and the Smith family is richer making $50k than when they made $80k. 

Don't Forget Sales Tax
 For every new shirt or disposable diaper or restaurant meal you buy, there's a 6% sales tax. It doesn't sound like much, but if the Smith family goes through $7000 worth of taxable purchases per year, they are spending another $420 in sales tax. When Mother makes her own goods, shops second-hand at garage sales or utilizes scavenging, she's massively saving money on the product itself. But don't forget the extra $420. 

A Better Way to Earn
Instead of Mother going back to work, the Smiths have decided to save money with gazelle intensity. Their savings will be put into mutual funds and other investments. These investments will allow the Smiths to slowly increase their yearly income without paying half of it back to the government, because investment income is taxed differently than job-earned income.

***

If you're making way more money than you need, paying taxes is no big deal. But if you're spending more than you make, like the fictional Smith family, it may be time to re-evaluate your earning situation.

*Though the Smith family has standard and child deductions, they also pay Social Security (6.2%) and Medicare (1.45%) taxes on top of 25% regular income tax. This pretty much cancels out their deductions.

Happy tax-paying!
-Bethany