Comparing Working vs. Staying Home

I recently did some math, and found a SAHW with no kids to care for would have to earn $7.25/hour with a 15% total tax burden (state and federal), working 27.5 hours per week, and 51 weeks per year to net the same amount of money that the personal exemption and standard deduction would earn her as an individual. She earns (through Uncle Sam) $8750 just to be alive as long as her husband keeps working. Uncle Sam pays her (through tax deductions and credits) to stay married and out of the job market. She (and every other SAH individual) is worth this much to make room in the job market for someone else—then they get married, learn this trick, stay home themselves (making room for another worker), and so on.

If she has kids, each qualifying kid would be worth $3400 just to be alive, and worth more for going to daycare. If Grandma moved in and qualified as a dependent, she too would be worth $3400 just to be alive. It’s all right there on the 1040 and 1040A forms.

None of this takes into account Hubby’s additional tax benefits of $8750 just to be alive and working, or the IRA credits and saver’s credit, which could amount to as much as an additional $2000. If a 401(k) plan is available at his work, there’s an additional $15,500 in tax benefits.

Now, compare that to some of the expenses involved with working outside the home:

• Wardrobe, makeup, and hair styling products—room to store and time to apply all

• Second vehicle initial cost, insurance, fuel, maintenance, registration and taxes

• Money spent in others performing chores at home for you (lawn service, maid, painting, etc.)

• Money spent on lunches and/or dinners away from home, and convenience foods

• Medical bills from added stress and reliance on convenience foods

• Lost time and personal energy

• Gym membership to make up for inactivity

• Daycare, private schooling, after-school care/activities, tutoring, etc.

• Security system for daytime absence from home

• Additional taxes (marriage penalty, AMT, etc.)

See how much money is involved with working outside the home compared to staying at home? When you factor in all the taxes and expenses, whatever salary’s left is a mere pittance—you finally get to see what little you’re actually working for. I know this seems sexist, but my personal experience tells me that unless you are making a large salary (which involves higher education expenses), it’s not worth it to work outside the home. More money can be made (or saved) through tax credits and deductions, and good old-fashioned D-I-Y labor than simply going to work every day. The unfortunate reality is that someone in the family has to work, and it makes sense that the higher earner (usually but not always male) remain working, while the lower earner trade in the expenses, stress, and waste of a futile effort.

It would take nearly $41,000 net (this is after taxes and expenses) annually to get the equivalent amount that Uncle Sam pays a married couple with 2 kids and a SAHW in tax credits and exemptions just for being alive, one spouse working, having two IRAs, and participating in a 401(k) plan. That $41,000 + an estimated 40% total tax burden (state and federal) + all the expenses listed above = a high-paying job with about a $100k (or more) salary annually. Add another $15,500 to that annual salary if you plan on participating in a 401(k) plan yourself. If you’re married and don’t have the capacity for earning that kind of salary on your own (through education level, qualifications, performance, and/or job market conditions), then you might want to consider staying home, unless your job provides benefits and stability that the other spouse’s doesn’t.

Side benefits of staying home include more successful kids, better family health, more happiness, and more time and personal energy to be creative with the money you do have coming in.

Common wisdom says it’s easier to suit up and go to work for more money, but the money itself says something entirely different. If you apply frugal living skills along with your new-found money maker (Uncle Sam), you stand to make (or save) even more! The best part of all: these tax credits, deductions, and exemptions are all indexed to either inflation or the cost of living—it’s like getting a pay raise every year without having to work any harder for it.

How spectacularly hyper-productive would you have to be at work before the boss hands out raises in an inflationary/recessionary environment? Uncle Sam doesn’t care what the economy is doing—this money is available to you whether you lounge around drinking coffee wearing your bunny sippers and pajamas, or if you take the June Cleaver route instead. Staying home has bought you freedom to do both and more. Soon, you’ll be wondering where the “penalty” is in marriage penalty. The penalty’s obviously in working for a second income.

Meanwhile, your old work place is laying off or buying out lots of people, headed offshore, being bought by another company, or may just go out of business altogether. Uncle Sam isn’t going anywhere.

Before you suddenly up and decide to quit working, do the math—can you make do on one income after deleting all those expenses listed above that caused you to have to work in the first place? Are there more expenses you can and will delete to enable you to stay home? Whip out that calculator and start making some serious financially beneficial life changes.