Stay At Home Mom, Or Working Mom?
Posted by John Hitchcock on 2012/04/13
Playing off of Foxfier’s excellent article (which everyone should read):
Let’s say you spend 100 dollars a week for child care (a very low cost child care, that). And you use it 50 weeks out of the year.
That’s 5,000 dollars.
Now, let’s say you got a really good deal on a safe, economic car, so you spend 200 dollars a month in car payments.
That’s 2,400 dollars.
You’re now up to 7,400 dollars.
Add in the full coverage insurance for your second car. You and your husband are excellent drivers, so you get bargain basement prices.
An extra 400 dollars a year for car insurance for your second car.
You’re now up to 7,800 dollars.
Your car gets excellent city gas mileage of 30 mpg. You drive 3.5 miles to day care, and 4.0 miles to work, then 4.0 miles to day care, and 3.5 miles back home. You drive 15 miles per day for your job. 5 days a week, 50 weeks a year at 15 miles per day and you’re at 3,750 miles per year for your job. That’s 125 gallons of gasoline per year. At unreachably low rates of 3.25 per gallon, that is an additional cost of 406 dollars.
You’re now up to 8,200 dollars.
Now, let’s look at your income.
Let’s say you make 400 dollars a week, 52 weeks a year, although you only work 50.
That’s 20,800 dollars a year.
You cannot take personal deductions or dependent deductions because your income is a second income, and your husband’s income has already taken those deductions. (If you need further explanation, do ask.) You can take child care deductions. That reduces your taxable income to 15,800 — but not for FICA or Medicare tax. You work for someone else and not for yourself (and in this scenario, you’re far better off working for someone else).
For 2011 and 2012, the employee share of FICA tax (that’s Social Security) is 4.2 percent instead of the normal 6.2 percent (meaning the rapidly bankrupting Social Security “Trust Fund” is going bankrupt that much faster), and the employee share of the Medicare Tax (which used to be part of FICA years ago but was separated out so the Fed could get more tax dollars) is 1.45 percent, meaning you pay 5.65 percent of all your income, before deductions, in Payroll Taxes.
So your 20,800 dollars is dropped to 19,625 dollars.
Your income, combined with your husband’s income, puts you in the 15 percent Federal Income Tax bracket. So, your 15,800 dollars in taxable income is reduced by 2,370 dollars.
So, you’ve dropped to 17,255 dollars.
Luckily, you live in a state that doesn’t have income taxes, or your income would have dropped even further. And, after working 2,000 hours on the clock and paying only the above expenses to work, you have 9,055 dollars in hand.
Now, let’s suppose instead of 3.5 miles to day care, you have to drive 5.5 miles, a mere 2.0 miles further. And suppose instead of driving 4.0 miles from day care to work, you drive 7.0 miles, a mere 3.0 miles further. You have just added 2,500 miles and 83 gallons of gasoline to your cost to work. And supposing, instead of the outrageously low, low price of 3.25 a gallon, you pay the still outrageously low price of 3.60 a gallon for your gasoline. You have increased your cost by roughly 350 dollars, bringing your cash in hand to 8,705.
Now, let’s suppose your income causes your family income to climb from the 15 percent tax bracket without your income to the 25 percent tax bracket (the next one up) with your income. You would cost your family 5,000 dollars in more taxes against your husband’s income, meaning your family cash in hand for your working would drop to 3,705. Not only that, but your own taxes on your own income would climb substantially. An aditional 1,580 dollars. Bringing your 2,000 hours on the clock cash in hand to a whopping 2,125 dollars!
And that’s without buying tires, changing the oil in your car, buying clothes for work, or feeding the vending machines while at work. That’s also with outrageously low gasoline prices, outrageously short driving distances, very low child care costs (with 100 percent deductibility), and no extras of any sort.
Now, let’s look at those hours again. 2,000 hours on the clock in 250 days. That’s 250 days of half hour lunches.
That’s an extra 125 hours.
Half hour to day care and to work. Half hour back to day care and back home. (Because you’re Speedy Gonzalez.) That’s another 250 hours.
2,375 hours for 2,125 dollars! And you don’t even get to spend much time at all with your child (children would put day care expenses at double the above, at a minimum).
I realize I’m speaking to the choir here with the stay-at-home house-wife moms. But have any of you actually run the numbers for your own situations? It is very easy to see, from the above numbers, how you could quickly get into the level of actually paying to work instead of getting paid to work. Add a few miles to your commute. Add a few dollars to your car payment. Add a few dollars to your insurance payment. Add a few cents to the price of gasoline. Add 5 dollars a week to the vending machines. Add the cost of work clothes. Add tires, oil changes, windshield wipers, headlights. Add 20 or 30 dollars a week to daycare.
And very soon, you’re not making a cent but paying for the priv1lege to work, the privilege to have other people raise your children for you, the privilege to drive in rush hour traffic.
That is not to say there aren’t instances where two-person incomes are necessary. For much of my married life (I’m happily divorced), our combined income equaled zero dollars in Federal Income Tax or less. We often worked different shifts. She often worked less than full-time. Many of my full-time years achieved that on less than 5 days a week work (12 hour shifts). We had family and friends to care for our daughter for free or far below standard daycare rates. So it was not only financially beneficial for us both to work, it was financially necessary. (When your Federal Income Tax is less than zero, you’re not making much money while working.)
One Response to “Stay At Home Mom, Or Working Mom?”
Sorry, the comment form is closed at this time.