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There can be a number of reasons why you or your partner might drop down to part-time work, such as caring for a child, going back to study or starting a business. Here’s five things you should be doing and considering to best manage your finances when a partner goes part-time:
1. Track your money
Being aware of where your money is going helps you gain control over your finances before going part-time.
“There are apps that scan your bank data and automatically categorise where you’re spending your money,” says Brenton Tong, Managing Director of independent financial planning firm Financial Spectrum.
“Once you’ve done this, take any regular expense and turn it into an annual cost. Spending $4 on a coffee may not seem like much, but if you and your partner buy two each per day, that’s $5,840 per year.”
2. Cut back before part-time work begins
“A few months before you go part-time, prepare gradually by cutting back in one area a month,” Tong says. Cutting out bought coffees, giving up pay TV, bringing your lunch from home and renegotiating utility contracts are all good ways to reduce spending.
“Gradual changes lead to sustainable change and a smoother transition,” Tong says.
“If you’re in a situation where you either don’t have time, or you’ve left it to the last minute, you’ll have to condense all those savings ideas into a short period.”
3. Set savings goals
Setting goals and breaking them down before part-time work begins is an excellent way to transition to living on less.
“If you want to quit your job in six months to start a freelance business, you have six months to cut back at a rate of 1/6 per month,” says Tong.
“This gives you a step-by-step process to follow. But, since you’re still earning money over this period, you’re saving more, and your savings will give you that vital buffer of cash that may be needed until you’re earning again.”
You can also renegotiate your home loan.
“If your bank doesn’t cooperate and give you a discount, consider seeing a mortgage broker,” says Tong. “Do this as early as possible because full-time employment makes it easier to get approval.”
4. Know your entitlements
If you’re returning to part-time work after having a child, make sure you’re aware of the impact of this on any parental leave payments, child care fees and/or rebates.
Also if one partner is dropping down to part-time work, the other might wish to ‘top up’ their partner’s superannuation fund, and may be able to claim a tax offset in doing so.
5. Acknowledge this time can be stressful
“A part-timer will typically be juggling more since they’ll be working or looking for work if they’re freelancing and also spending time as a carer for their child,” says Tong.
“Having a deep understanding of your finances allows you to predict what’s coming. That can be the key to making this adjustment successfully.”
By understanding the impact of one partner working part-time and planning for the reduction in working hours, the disruption to your life and your finances will be minimal.
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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Financial Spectrum is an external entity that is not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Financial Spectrum and its employees does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties.