Forgoing $1 Million In Lost Income To Be A Stay At Home Parent

One of my beliefs as a stay at home dad is that I wouldn’t trade the time I spent with my son for any amount of money. Given time is way more valuable than money, especially as you get older, this sounds like a logical statement.

But perhaps this statement is a bunch of BS.

Maybe it’s just a rationalization to make myself feel better about missing out on what I could have made if I had continued to grind it out in finance. If you spend $500 a head on a meal, of course you’re going to say it was the best dinner you ever had unless you want to feel like a fool.

Maybe I’m just making stuff up to mask my shortcomings as someone who hit a glass ceiling and decided to negotiate a severance instead of facing the reality that I simply wasn’t good enough to get promoted.

After all, to justify failure is human nature. Some even blame others for their failures instead of looking within.

The Money You Could Have Made

To see if we stay at home parents are delusional in our beliefs, it’s always good to do the math. Crystallize the value of money by figuring out what it can buy, otherwise, money doesn’t have much meaning.

When I left my finance job in 2012, I had a base salary of $250,000. My bonus ranged from 0% – 200% of base, depending on my performance, the company’s performance, and the overall economy.

Let’s say I go back to work today at 41 with a similar salary and slightly above average bonus. I’m going to assume my total compensation would be $500,000 a year.

Now let’s see what I might have done with the $1,000,000 I forewent given I was a stay at home dad for two years. In reality, I think I would have saved at least 50% of the compensation, but let’s have some fun and say I spent it all.

Breaking Down $1,000,000 In Lost Income

The first thing you’ll notice about the chart is that $1,000,000 quickly turns to about $620,000 after paying an effective tax rate of 38%. 38% includes California state tax and FICA tax. $380,000 is a lot of taxes to pay any way you cut it.

I really tried to realistically think of all the stuff I could spend the $620,000 on and not feel like a completely wasteful person. The Range Rover is nice to take the family around, but after a year or two, it’s just another car.

The 10 years of private school tuition is a great cover if my son doesn’t win the SF public school lottery. I shudder to think how much private high school will cost in San…

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