Sweating the Big Stuff

Several people have commented on the fact that Sierra left the workforce to be home with her children. I stay home with my own daughter and wanted to point out a few things.

Mythago: What about the opportunity cost of going to work? Is it always worthwhile to exchange time with family, or time with young children who will not be young for long, in order to make money?

Here’s something else to consider: My husband and I live in a smaller house with lower taxes, and if I were to work, it would bump us into a higher tax bracket and negate some of the benefits of working.

Aside from that, my husband has noted our household operates more efficiently with me at home. I’m not coming back from a long day at work and trying to squeeze in grocery shopping, fixing dinner, housecleaning, and quality time with my husband and daughter. I also take care of business my husband can’t always do while working, like taking the car for an oil change, greeting the repairman, calling the insurance company about an issue, etc. My husband says it’s less stressful for him when he can come home to a peaceful, organized, tidy home.

Also for mythago: For people with large extended families or people who like to entertain, how often do they really utilize all the extra space in a large house? Maybe a few times a year? If it’s worth it to pay double for space you use perhaps 10 or 15% of the time, go for it. Or if the immediate family is large – say, five or six children – then I could understand the benefits of a larger home.

This strikes me as a variation on the 80/20 rule. The “big stuff” is the 20% (of your bills ?) that contributes to 80% of your expenses.

Excellent move on your part! As an egotistical little reader, I love your eloquent confirmation of my own suspicion that bigger ain’t necessarily better.

And Peggy (13) is right on in observing that for some folks renting is preferable to owning. Though I own my house and don’t especially want to go back to renting, I have to admit that owning is a lot of work, a lot of hassle, and a lot of expense. For busy young two-earner households (or single-parent households!), paying a landlord to be responsible for maintenance & repair has a lot to recommend it.

In 40 years of apartment- and house-dwelling, my friendliest neighborhood with the most “community” was located smack in the middle of the city. A dear friend and her husband built a beautiful home in a far-flung suburb with an onerous commute to both jobs. The HOA has been a fiasco, the neighbors all hate each other, and two of the residents make a business of harassing people. Instead of looking forward to retirement in the lovely house, my friends are planning to sell it when they retire and move as far into the New Mexico or Texas sticks as they can get. Jason (34) has it right when he says “community…is what you put into it.” Some people put in eye of newt and toe of frog!

Joe Morgan (53)–”This strikes me as a variation on the 80/20 rule. The “big stuff” is the 20% (of your bills ?) that contributes to 80% of your expenses.”

Totally brilliant!!!

For a lot of people, cutting the big stuff is the only thing that’ll make a real difference. Cutting a bunch of little stuff that only take up 20% of your budget (before cutting) will not only not make a big difference in your expenses, but it probably will make you pretty miserable! Meanwhile the big stuff–that’s eating up 80%–sits untouched, and often sacrosanct.

“We can’t sell our home” and “I’m not ditching my car for a beater” while you’re canceling dentist appointments and eating beans and rice every night seems counterproductive on so many levels.

Berteq (58)–you might want to show them this post and the comments that follow.

A house is a good thing to have, don’t get me wrong, but it should never ascend to the level of being a temple that has to be preserved at the risk of all else.

Rachael @51: I’m really not sure what you’re talking about. “Opportunity cost” is not a value judgment; it’s about money. If I spend an hour watching TV rather than doing consulting work at $100/hr, my opportunity cost of that TV-watching is $100. Now, that doesn’t mean that I should skip the TV-watching. Maybe I really, really need that hour break. Maybe it’s a TV show that has useful information that will help me develop my professional skills. Maybe I’m watching my mom performing on American Idol.

Similarly, the fact that one parent stepping out of the workforce has an opportunity cost has nothing to do with whether that’s a good or bad decision for that family. But we’re talking about choices affecting family finances, right?

As for people with larger homes, I would imagine that decision is best left to those people, just as your family’s decision to have your husband choose wage-earning over being home with his children is best left to your family.

@mythago: with all due respect, opportunity cost is not simply about making money. Opportunity cost is defined as the “cost” of forgoing an alternative decision. (Here is a good example: http://www.econlib.org/library/Enc/OpportunityCost.html) That “cost” (in economic terms) can be one of the four finite factors of production: time, capital (money), natural resources, or labor. The opportunity cost of going to work after high school, for example, is the lost time one could have spent going to college instead.

The point of opportunity cost is to remind us what next best alternative we are sacrificing. A person who goes to work rather than staying home with kids is sacrificing the opportunity cost of time spent with those kids. Likewise, a person who buys a large home deals with the opportunity cost of lower bills (capital), lower taxes (capital), and less time spent cleaning (time and labor), among other things. To separate opportunity costs from value judgments makes no sense: opportunity cost is all about considering what values you chose to reject in favor of your chosen decision.

One final point: you argued that this article is about family finances, but that’s not true. Finances in the article were just one of the many issues the writer was dealing with, including fatigue, lonliness, and overwork (both from the job and the house). As I said before “cost” in economic terms is not merely about money, as the article above so sagely notes.

Nestor @63: This article isn’t about family finances? Then what’s it doing on a financial blog, and talking about how their move saved $1000 a month?

“To separate opportunity costs from value judgments makes no sense” – with all respect, please read what I actually wrote. I said that opportunity costs aren’t value judgments. In other words, the fact that choice X costs money doesn’t make it the wrong choice, any more than the fact that choice X increases a family’s income makes it the right choice.

What I was disagreeing with is the notion that when weighing the costs of staying home vs. remaining in the workforce, the only economic weight is “what’s my net income after paying for daycare?”

I think a lot of people are making the same type of move or want too. I myself am planning on trying to sell FSBO even in this market. It started because my DH and I realized that if we stay in our current home we need to refinance due to current rates. We realized that we do not want to stay in the suburbs and drive in. We have no kids and hate the burbs. Why did we buy a house here??? Because it is what was expected out of us by our parents, real estate agent, etc. That is what you are supposed to do right? Graduate from college, get a job, get married, move into the suburbs and start having children. It was not the right decision for us. If we can ever get rid of the house, we plan on renting closer in to the city. I agree with many others that owning a home is not for everyone. I have figured out how much we spend monthly and think that we should be able to save at least $400 a month by renting. My american dream is not to own a home but to be able to retire one day and not work until death.

I wish I could read stories like this more often. Moving into a smaller home? Selling one of your cars? That is beautiful.

I try to advise a lot of people to do this but they can’t! To caught up in social status.

While media propaganda tends to steer people towards believing that Credit Cards and over spending is the big problem… the truth is that the biggest problem for most people is their HOUSE… and CAR Notes (especially the house).

If people could make sensible decisions on these things, then life would be so much easier for most.

Great post. My husband commutes down a flight of stairs to work at home. He began doing this five years ago and it has benefited the entire family. He’s much more relaxed at the end of the day and he spends more time with the kids. He’s the only father who volunteers in our daughter’s classroom–the only father who CAN because he’s right down the street.

I don’t understand the McMansion craze. A huge house is just more to heat/cool and more to clean. I’m going back a few years, but the PBS reality series Frontier House featured a wealthy family who had to live in a two-room cottage on the prairie. When the series was over, they moved into a brand new mansion which the parents, who had spent years planning and building it, now hated. It was cold and impersonal because there was too much space–it kept the family distant. They missed the close quarters of the cottage which kept their family close. A smaller house definitely has its merits.