Many Canadian homes have both parents working; either by choice or financial necessity. If you are planning on having one parent stay home full time, it's important to plan for it financially and emotionally. Although reducing your family income can be a rough transition, being prepared can help you adjust to the new changes.
Don't just quit your job. It's a good idea to actually try living on one income before actually quitting your job. Do a "dry run" for 3 months living solely on the one paycheck, and bank the other. This gives you the option of changing your plans if necessary without having to look for another job, as well as some savings!
Review your financial plan. You will need to re-work your financial plan, as your yearly income will be decreased. This change in income will affect not only your short-term finances, but your long term goals as well. Expensive items, such as cars, vacations, etc. will need to be discussed and planned for. As well, long term financial goals such as retirement may need to be reworked.
Make a new budget that reflects the change in income. Your new budget should cover all the household expenses as well as savings based on the one salary. It is recommended that 60% of your gross income goes to committed expenses, i.e. taxes, mortgage, utilities, credit cards, etc. 10% should be saved as an emergency fund (ideally this fund covers 3-6 months of living expenses). 20% should be committed to your long term plans and retirement fund. The remaining 10% of your income should be spending money to cover expenses that are not considered a necessity. Each spouse should have their own bank account, in which they each receive 5% of the "fun" money each month to spend as they please. This gives both partners some financial independence.
Review your insurance before quitting your job. The stay-at-home parent needs to maintain adequate insurance. Life insurance not only covers lost income in case of death, but the costs required to maintain the family. Should the stay-at-home parent die, expenses such as daycare, home maintenance, etc will need to be covered. Disability insurance at this stage is also recommended in case the working parent suffers an accident or illness. It is also important to review health insurance policies to ensure that the working parent has sufficient coverage that covers the whole family. If the parent who is quitting their job has been the sole provider of health coverage through their employer, other insurance is available. HealthQuotes.ca offers FollowMe, which does not require a medical questionnaire if applied for within 60 days of discontinuation of group insurance. This policy provides health and dental insurance at an affordable rate.
As family finances change, it is important that all financial goals are reconsidered. Your insurance coverage needs to reflect these changes in order to best provide for your family. Before making any major decisions, consult with your insurance broker in order to ensure you have the correct coverage, and to make the necessary changes.