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Step 4: Consider the Impact to Future Earnings

In my quest to stay home with my son I’ve discussed eliminating unnecessary expenses, adding up expenses and the cost of insurance. The next point of focus is the effect of my choice on future earnings and retirement.

If I step out of the workforce for a couple of years my future salary will likely suffer. If I left my job and returned to the exact same position a few years later my salary wouldn’t benefit from any raises or cost of living increases during the years that I don’t work.

I could argue that I didn’t receive a raise last year and that I wouldn’t have received one this year either, but I think it’s safe to assume most people do get a raise or cost of living adjustment each year and from what I’ve read most advisers suggest factoring in a 2 to 4% loss each year you remain out of the workforce.

Of course, we all know that I will not be returning to the exact same position, so the question becomes what would I earn after I return in a new job at a different company. There’s really no way to know the exact figure, but it is fair to say that I probably won’t make as much as I do now. I currently work in technology and unless I stay up to date in the latest and greatest software my salary is likely to plummet the longer I stay out of work.

The honest truth is that I don’t particularly love writing software. I liked the puzzle solving aspects and of course the big salary, but I think I’m too much of a people person to spend my entire day facing a computer. So the bigger question of leaving the working world is whether or not I would return to a software development job at all.

I don’t love software enough to learn about it and stay up to date on the latest and greatest technologies while I’m at home with my son. If I stay home I will probably take the opportunity to transition into an entirely different role when I return to the working world.

I could apply for positions as an analyst or project manager, (I have a bunch of certifications). While I wouldn’t be particularly in love with these jobs they do have salary ranges similar to my previous position and they involve a lot more human interaction. They also require less overtime and late hours.

I have a feeling that unless I find a job I absolutely adore my family time will remain my number one priority. In fact, I would be willing to take a lesser paying job in the future if it was closer to home and/or provided greater flexibility and decent benefits.

As you can see the question for me is larger than just leaving the workforce, A teacher may stay home and return to teaching a few years later, but if I leave I have a feeling I’m looking at a whole new career.

The question is how does that career impact my future goals and lifestyle? I’m not certain that’s something I can answer.

One Frugal Girl

Sunday 22nd of January 2012

@Shaun - Thanks for commenting. Right now I'm leaning in the same direction and feeling the exact same way!

@kris - Thanks for commenting. I have thought about part time work, but I'm not sure how easy it may be to find a part time position. How did you find your job?

@SarahA - Thanks for commenting. It's such a difficult decision to make and I'm so glad that I write this blog so I can hear from mother's like yourself. Since you went back to work how do you feel about your decision? Some people tell me it's rough for a couple of weeks or months, but in the end they decide that working is the best thing for them anyway. Do you still wish you had the option of staying home?

SarahA

Saturday 21st of January 2012

I had this dilemma when deciding whether to return to work. I, too am in IT and as you say, you can't just step out of the industry for a year or two and expect to right back, especially in this economy. I went back because our finances wouldn't work out otherwise but I have wondered about it. I am enjoying reading your thoughts about it.

kris

Wednesday 18th of January 2012

It's a rough decision, but have you looked into online jobs, or part-time work? I work part-time (although I'm not really career minded at this moment, in between them actually) and the rest of the time I spend with my son. It's a lovely compromise, really. Not saying this is the answer, whatever works best for you and your family is the right thing to do, but it is an alternative to just quitting altogether, especially if you're worried about losing ground in your career. Wishing you the best in your decision. I just made that same decision for our family, so I feel your pain.

Shaun @ Smart Family Finance

Wednesday 18th of January 2012

My wife took a year off from work to be with our two children. It was a sacrifice, but it was also an opportunity we couldn't ignore.