Stay at Home Moms vs. Working Mom's-- The Shocking Truth About Second Incomes!

Whether you are currently a stay at home mom or just deciding to stay at home, this information clearly uncovers the reality of what a second income really does to your family's finances.

I have mentioned this little tool before, MSN's Second Income Calculator but recently, I sent a friend of mine, Kelly, the link and what she found out has caused quite the ruckus in her home. At her request I am posting Kelly's story here in the hope that this will help other families facing this same issue.

I didn't know this, but Kelly has been grappling with the whole stay at home moms vs. working mom's controversy for the last 3 months. Kelly and her husband just had their second child and last week Kelly's Family Leave was up so she had to return to work.

Kelly has always seemed like the dedicated career woman, she has worked her way up the company ladder with 3 promotions over 11 years. Kelly doesn't have a college degree so she has always been afraid to quit her job because she knows that she will never be able to re-enter the work force at even half of what she makes now.

Fortunately for Kelly, and up until now, she has been able to keep daycare time and costs at a minimum. Between her parents and in-laws, she didn't feel like that was an issue. But with the addition of the baby, and her now traveling parents, daycare costs and time have increased substantially.

Also, Kelly got to spend 3 months at home with her newborn daughter and 10 year old son. Something she was unable to do when her first was born.

This 3 months at home has forced her to come to the realization of just how much of her kids childhood she is missing out on.

Her husband David, is very analytical, so pleading the emotional end of this heated topic has done nothing for Kelly or their marriage. However, when Kelly completed the questionnaire on MSN's Second Income Calculator, it was just what her husband needed to gain a very insightful perspective on their current lifestyle.

Here are Kelly's Stats, see what you think her next move will be!

In 2006 Kelly's husband David, made $62,274 and in 2007 he made $63,239.
Kelly made $40,500 in 2006 and in 2007 she made $37,576.
Kelly's salary for 2008 will be $42,000.

Using the MSN Second Income Calculator is quite simple. You plug in your husbands income, how much taxes he paid.

You enter the second income in the "this year's projected income---2nd wage earner field."

Then, you figure out the amount of additional monthly work expenses you incur with Mom's income. Believe it or not, these are not frivolous expenses that you would think an upper middle or upper class couple would incur, but rather everyday expenses that you just take for granted.

Child Care with the additional help Kellys Childcare is $1,100 a month

Clothing Kelly had to buy some new clothes--post pregnancy figure $120 a month

Dry Cleaning $70 a month

Commuting Costs $360 a month

Unreimbursed expenses $100 a month

Entertainment $100 a month

Meals Out $240 a month

Services (Kelly has to work 10hrs a day so she hired a part-time cleaner) $200 a month

RESULTS

Change in Annual household income $878

Additional dollars per hour $0.35

Total annual income Not Working $62,274 Working $104,739

Income taxes, Social Security & Medicare Not Working$12,611 Working$26,718

Related expenses Not Working$ 0 Working$27,470

Household income Not Working$49,663 Working$50,541

Shocking! It seems that in this case study the IRS is the only one that benefits from Kelly and David's dual income.

I showed Kelly my Schedules A and C (business profit and loss tax statements) for 2007. Together, we determined that even if she started a home-based business and only worked very part-time, she would still come out $1,000' s of dollars ahead with all of the deductions she can claim.

Kelly and Dave were also concerned about Kelly's 401k so they have an appointment with an investment counselor at their bank next week. After they get this part of the equation sorted out, Kelly is going to give her two weeks notice.

Kelly can't believe that she has basically been working for .35 Cents an hour!

I think Dave pretty much summed it up though when he said,

"I'll be da____ed if my kids aren't worth more than $878.00!"