Going back to work after nearly 11 years was an exciting and daunting prospect. For me, it was also a career change. I was diving into a new job in a new industry armed with a freshly completed Master’s degree and an infectious enthusiasm for my newly chosen profession. My kids – ages 11, 8, and 8 (yes that’s right, twins) – went back to school this fall, and I went back to work.
Why Return to the Workforce in the First Place?
I was fortunate enough to be in a position where I didn’t have to work. My husband made enough money to support our family, and we had lived comfortably off one income since our son was born. My desire to reenter the workforce had more to do with my need to get out of the house (especially after COVID), be intellectually challenged, and have a positive impact on the lives and finances of others. Financial planning, done right, is a helping profession, and I couldn’t wait to help people.
Justifying Work over Childcare & Household Responsibilities
However, given the lack of financial need our family had, I struggled to justify putting my job ahead of my childcare and household responsibilities. Spoiler alert, it’s impossible to go back to work full-time (or even part-time) and still do everything you were doing before. Something had to give.
In addition to the shifting of responsibilities, I had to decide how to allocate the new income I was bringing in. During the years I stayed home, I dutifully contributed the $6,000 per year to my spousal IRA, but that just doesn’t add up that fast, especially when compared to what my husband was accruing in his 401k account with an employer match. Once I became eligible for the 401k plan at my new job, I made the election to contribute 100% of my paycheck to the plan through the end of the year. I was only eligible for a couple of months, so I would be well short of the annual limit, but I can tell you it’s a bit odd to get a $0 paycheck. I had to shake the feeling that I was shifting responsibility to my husband and my kids in order to bring home no extra income.
Not Alone in the Back to Work Struggle
I thought I was in a unique situation. I was going back to work for a salary that paled in comparison to my husband’s, feeling like I was putting more strain on our time and lives for less compensation.
But, as I started talking to clients and friends, I realized that I wasn’t alone. There are many spouses who struggle with the decision to go back to work once their kids get older. There are spouses who struggle with the decision to go back to work even when their kids are little, especially if the cost of childcare is as much or more than they are making by working. It can feel like you are working for “nothing”.
The high cost of childcare is a whole other topic that I’m not going to get into here, but I can say that the decision to go back to work is about much more than the impact on the family’s finances. It’s about the mental, social and personal value it provides. Ultimately, the trade-off for me going back to work is measured in more than dollars. It’s about my need for fulfillment outside the home, my happiness, and also my desire to begin building a career that I will continue long after my kids have grown and gone out on their own.
My Financial Approach for Career Compensation in 2023
My plan for next year is to contribute the maximum amount to my 401k (which is $22,500 for 2023). I’m also going to still contribute the maximum amount to my IRA ($6,500 for 2023). I think it’s tempting to not max out your retirement account contributions to feel like you are making a bigger financial impact for your family today. But, I would argue that by maxing out those retirement contributions, you’re having an even bigger financial impact on your family’s future.
The time value of money is the concept that a sum of money is more valuable today than the same sum in the future. That’s why we expect to be paid interest when we save or invest our money instead of spending it. We need to know that the money we aren’t spending now will be worth more in the future and that we are getting enough of a benefit by delaying that gratification. There is not only value in the money that I’m saving for retirement, there is value in the investment I’m making into my career, that (I’m hoping) will pay off in the future.
Mental Accounting and the Value of Your Career
A behavioral bias called mental accounting causes us to view the money we earn differently than the money our spouse earns or the money we get from another source. But, assuming you have combined family finances, a dollar is a dollar regardless of where it comes from. You want to be sure you are allocating your family’s dollars in the most efficient way, while also ensuring that your spending and saving are aligning with your goals and values.
Perhaps the biggest hurdle though, especially for me, is valuing my decision to go back to work from a happiness and fulfillment perspective, not purely a financial one. You could make the same argument for why you might choose to stop working. It may be tough on your finances to lose that income, but worth it due to other reasons like health, happiness, and family.
Our financial decisions are never based purely on how they affect our finances. We must also examine how those decisions will impact our lives and the ability to do the things we want to do, whether that is spending more time with family or building a career.