Wednesday, February 23, 2011

"But I HAVE to work!!" - Part Four - Reality Check

This is Part Four of a four-part series:Preschool      School-Age     Part-Time      Reality Check

PART FOUR - This post is based in reality and explores my own financial decisions.

For the last three posts I've created a fictional set of characters and situations that I think is a fair representation of reality.  I've given them a few breaks and a few challenges, to try to reflect what might actually play out.  Obviously there are a myriad of variables that could apply to any situation, and I can't begin to consider all of them.  And of course bear in mind that I am not a financial expert, a tax advisor nor a lawyer.

Doing this series has been a bit of a 'reality check' even for me.  I knew it wouldn't pay off on any great scale for me to get a job, but I didn't think too much about it because I don't want a job.  But in the last little while, there have been questions, I have heard conversations, and I have felt challenged to put pen to paper and really start analyzing these things.  And the results surprised me, I have to admit.  Especially when we did the math again using our own figures - but that comes a little later.

The sad conclusion that I have come to is this - a lot of families are probably in worse shape than even they realize.  We just jump on the hamster wheel and run, run, run, assuming that's what we need to do... and then find ourselves with two incomes and still no money left over.  Why is that?  Why have we bought into the story that we "need" two incomes to make it?  Why have we not taken the time to question that "truth," to break down the dollars and cents of it and find the reality?

Three things have become crystal-clear to me in writing this series:
  • First - It is essential for husband and wife to sit down together, discuss their money situation, and to make educated decisions about their work and finances.  "Jill" could have just assumed it was all for the best, gone to work, and spent the next several years wondering why it was that they were still not making any progress financially.
  • Second - If a husband and wife both want to work for whatever reason (personal enjoyment, professional development, etc), then sure - go ahead!  But make sure that decision is made from a fully thought-out position.  Know the numbers.  Know what you're getting into and don't make the decision based on what society tells you is "necessary." 
  • Third - In all three scenarios, "Jack and Jill" were just one financial decision away from being completely in the hole.  Say for example they had decided she should have her own car - after all, we're talking about a full-time, $30K job here!  Even going as cheap as possible with that decision would still eat up ALL of her financial gain.  And then some.
In the remainder of this post, I will do a much shorter analysis using numbers from my own real-life situation.  It's been pointed out to me that the previous posts, while well thought out and reasonably true-to-life, could be construed by some as being tilted toward 'proving my point' vs providing legitimate information that someone else should use for making a decision.  It was suggested that using real numbers might be better.  I've enjoyed playing with my imaginary family very much, but now it's crunch time.  Bear in mind that I am trying to avoid posting personal details about my husband's income and such, so if there is a bit of vagueness, that is the reason for it.

Choosing a job at random from the classifieds that I think I could get...
Administrative Assistant, $12.00/hour, 40 hours per week.

GROSS PAY:  $12.00 per hour, 40 hours per week. 
$480/week = $24960/year

TITHING.  $2102.67 per year.

CHILDCARE.   Based on posted rates at local daycares.... for Anika it would be $600/month on base.  For Cara it would be $5.25 per day for after school care on base.
$705/month = $8460/year

TRAVEL.   Jeff leaves pretty early in the morning, but even though this job is full-time, the pay scale doesn't justify a second vehicle.  The simplest solution is for Jeff to carpool with a co-worker and for me to pick him up after work on the way home.  If he has an evening shift, then he can take the car back with him.  We'll offer a gas contribution of $20/week.
$20/week = $1040/year

FOOD.   I will go with the same numbers I assumed for Jack and Jill when she was working full-time: a $40/week increase in groceries and a $50/week increase in eating out.
Groceries increase: $40/week = $2080/year 
Eating Out increase: $50/week = $2600/year

Let's don't forget about those payroll deductions.  At this income level there is federal income tax deducted at the rate of 15%.   And provincial income tax of 10% (Alberta has flat-rate taxation).  And EI.  And CPP.  Using CRA's online calculator, the deductions will be:
FED:  $34.22 (1779.44/yr)
PRV: $12.45 (647.40/yr)
CPP: $20.43 (1062.36/yr)
EI: $8.54 (444.08/yr)
Deductions = $75.64/week = $3933.28/year

I know without question that I would need to do a major wardrobe overhaul before working in a professional environment.  However, this particular job is in a more casual setting, so I think I could get away with a few new pairs of pants and some new shoes.  
Total cost: $200 for the year.

I am pretty tight when it comes to the 'latte factor' but it is a given that being out and about leads to a bit of spending.  So I will modestly estimate $10.00 per week for a couple of trips to Beantrees for a chai chiller.
$10/week = $520/year

Let's explore the tax situation.   Based on the above figures and two kids under seven, I'd end up with a tax refund of $2106.20.  Not too shabby. (Except of course if I think about having given that amount as an interest-free loan to the government all year.)   As for Jeff, if I had no income, he'd get a refund of $4490.81, but with me having this job he would actually end up owing $9.12.  Sorry, hon.

CCTB :  $198.73/month assuming I have no income, drops to $115.53 with this job.  Loss of $1512.00 per year
AFETC: $961.92/year, drops to $0.00
UCCB : remains the same as it is not income-dependent
GST/HST : $57.44 quarterly if I have no income, $0.00 with this job.  Loss of $229.76.
WITB : already ineligible

Crunching the numbers... 

Gross pay:  $24960/year
- Tithe $2102.67
- Deductions $3933.28/year
- Childcare: $8460.00year
- Travel $1040.00/year
- Eating Out $2600/year
- Grocery Increase $2080/year 
- Clothing $200/year
- 'Latte Factor' $520/year
- Loss of CCTB $998.40
- Loss of AFETC $961.92
- Loss of GST Rebate $229.76
- Loss on Jeff's tax refund $4499.93
= Financial LOSS of $2665.96

I guess Jeff wasn't kidding when he joked that his response if someone asked why I don't have a job would be "We can't afford for her to go to work!"

The rest of the picture is this... I of course do bring in some money.  I do graphic design for a magazine in Nova Scotia ( and I do web design as well.  I also babysit on occasion.  And all the work that I do, I do from home, so I benefit from being able to subtract a portion of our home expenses from my income.   I work to save money as well, and those dollars are a benefit to our bottom line that doesn't show up on any tax return (see my post about dollars earned vs dollars saved).  So I am not overly burdened by a feeling of being a non-contributor to the household finances.  We've chosen for me to be a 'keeper at home', and have also chosen to homeschool our children.  Not to mention the military lifestyle  involves moving every few years, which would sort of cut off any kind of career track.  Those things considered, working outside of the home would be possible but quite challenging to fit into the rest of our lifestyle.  Adding the financial considerations, it just doesn't make sense for us.

Working for nothing more than paying what it costs you to work...  Unless you're doing it because you really want to be working, it hardly seems worth it.

Run the numbers:
(this calculator is simpler than what I did in this series, but you can use it to make the math a little faster)

Additional Reading:

How to live on 1 income without going broke - Liz Weston
9 tips for those going to one income - PT Money
Our One Income Family - Dollar Stretcher
How to Live on One Income - Frugal Dad
Living on One Income - The Centsible Life

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