Weigh all the costs of going back to work

By Carrie Schwab Pomerantz

Published: September 7, 2008

Like so many new mothers, when my children were little I struggled with the decision to go back to work. It was an emotional, logistical and financial decision that was harder to make than I imagined.

That was quite a few years ago. Today — as the cost of everything from child care to gasoline keeps increasing — I can easily sympathize with anyone who's facing the decision to return to work after a substantial absence. It's still an emotional choice, but the cost/benefit analysis is more complicated than ever.

And it's a common dilemma. For parents who are considering returning to work after an extended leave of absence, today's economic environment is putting pressure on many families to locate ways to earn more.

From first-time moms who took a year or two off to stay-at-home dads who left their jobs for full-time fatherhood — even retirees who are reassessing their future — people are facing the challenges of re-entering the work force.

The reasons for going back to work can be as varied as the individuals themselves. However, for anyone grappling with this decision, there are some important financial and psychological factors to consider before heading back to the office.

I had a neighbor who, when asked if she worked, always responded, "Yes. I work at home.” She didn't earn a salary, but as a homemaker and mother of two teenagers, she certainly deserved one. If you factor in all the jobs that a typical stay-at-home parent does today, the salary should be more than $130,000, according to a report from Salary.com. While this may seem like an exaggeration, consider how many hours you spend running your household.

As a reality check, one of the first items in your cost/benefit analysis is to figure out how much you'll have to pay someone else to do all the tasks you're responsible for at home. Child care, housecleaning, gardening and transportation for the kids — it all adds up. Receive estimates and comparison shop; you might be surprised at just how much the services you provide at home are worth. On top of the actual dollar amount, you'll also want to weigh the emotional cost of finding someone trustworthy to handle these personal and important services.

Now factor in all the work-related expenses. Will you need a new wardrobe? How will you get to work? If you drive, you have to include gas, parking, tolls as well as added wear and tear on your vehicle. Chances are you'll also spend more on everyday items such as dry cleaning, lunches out and daily coffee breaks.

Creating a realistic work budget, on top of your household budget, will assist you when balancing the costs against your potential salary. And remember when running the numbers that you're balancing costs against your after-tax salary.

Of course, there's a plus side to your balance sheet. In addition to your salary, many jobs offer a significant benefits package. This should also be included in your calculations. Do you currently have adequate health insurance? If not, the added coverage offered by an employer could be an advantage. Then there's the possibility of disability insurance and life insurance — both relevant considerations depending on your circumstances.

In my opinion, the most important benefit is a retirement savings plan. If an employer offers a 401(k) with a company match, and you take full advantage of it, the boost to your retirement savings potential is a big plus. With more people now responsible for their own retirement nest egg, it's an opportunity you need to weigh seriously.

Money aside, think carefully about your career goals. If your leave of absence was intended to be temporary, the sooner you get back in your field the better. Hopefully, you've kept in touch with what's happening and what the current skill set is for your line of work. If you're looking at a new field, research it thoroughly.

Once you've crunched the numbers, take a step back and think about your life after you return to work. Will you have personal satisfaction as well as additional income? Can you balance your personal and professional goals in a way that makes the potential trade-offs worth it?

Good luck!

Carrie Schwab Pomerantz is Chief Strategist, Consumer Education, Charles Schwab & Co., Inc., Member SIPC. You can e-mail Carrie at ask carrie@schwab.com.

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