NEW YORK (MONEY Magazine) - On the first day in 2002 that Cynthia Neff dropped off her three-month-old daughter McKenzie at day care, she had such a hard time leaving her that the center's manager bet she'd be back to pick up her baby long before the workday ended.

In fact, Cynthia, a middle school teacher, made it through that first day, and all the ones that followed, but the ache of spending just two to three hours a day with her daughter during the week never eased.

"I was unhappy in my job and resented that the day-care director got to see our baby stand up for the first time," recalls Cynthia, 36, who lives in Jacksonville. "I loved teaching, but with McKenzie in day care, my heart was somewhere else."

Tommy Neff, 35, was equally unhappy. He had to leave home for his job as a sales rep for a construction-supply company before the baby even woke up, giving him only an hour or two to play with her at night. He puts it bluntly, "We felt like someone else was raising our child."

Instead of finding it easier to cope as time passed, the Neffs found that the struggle to balance work and family life was getting tougher as the milestones in McKenzie's life passed -- first steps, first words, first everything -- too often not on their watch.

So when the couple began to think seriously about a second child, they also began to think seriously about whether they could afford to have Cynthia quit work. They lived comfortably on their combined income of $88,000 a year, and getting by on Tommy's $55,000 salary alone would be a struggle. Yet when McKenzie's sister Hayden was born last June, the Neffs were determined to give life on one income a try.

Although no one is quite predicting a return to the Ozzie-and-Harriet era, the Neffs are among a growing number of U.S. families who are now choosing to have one parent stay home while their children are young. After peaking at nearly 58 percent in 1998, the ranks of married working mothers with children one year old or younger have dropped to 53 percent -- a reversal of a generation-long trend that, since 1976, saw the number of young moms in the work force rise steadily.

All told, more than 10 million American children now live in households with stay-at-home moms, while 189,000 have stay-at-home dads.

For many of these young families, two incomes simply don't add up to a better quality of life, says Joanne Brundage, executive director of Mothers & More, an organization for mothers who've quit or changed their jobs.

She notes, "After they deduct the cost of child care and taxes on that second income, many mothers conclude that what they're adding in true take-home pay doesn't justify the stress of juggling and time away from their kids."

As the Neffs have discovered, though, making do on one salary comes with its own set of challenges. While they have no regrets about their decision, they haven't been able to make the numbers add up yet and have been dipping into savings to cover a shortfall of about $600 a month.

"It's scary to see your emergency savings keep dwindling," says Cynthia. Their main goal: Improve cash flow so that Cynthia can remain home for at least three years.

Even before Cynthia quit her job, the Neffs started cutting expenses to prepare for life on one income. Trading down was their biggest move: When Tommy was offered a job that required relocating from North Carolina to Florida in June 2003, the couple downsized from the spacious $215,000 historic home they'd owned to a $152,000 ranch home in a Jacksonville subdivision.

"We hated these cookie-cutter houses, but the sacrifice is worth it," says Tommy.

Once Cynthia stopped teaching, the couple automatically eliminated work-related costs such as day care bills, work clothes and commuting. The Neffs also slashed their eating-out tab from about $250 a month to $50 now.

Notes Cynthia, "We'd come home from work too exhausted to cook, so we'd usually eat out three or four nights a week. Now it's just two fast-food runs or one halfway decent restaurant meal a month."

But overall, living on one paycheck turned out to be a lot harder than they anticipated, particularly after a series of unexpected expenses.

First, the health insurance benefits at Tommy's new job turned out to cost $576 a month, or three times as much as his previous employer's plan. Adding fuel to the fire, the new policy doesn't kick in until January. So when both children got sick in November, the Neffs had to pay $600 out of pocket for doctor visits and medicine.

"It's just so discouraging," Cynthia says. "Who would ever imagine the cost of prescriptions could sink you?"

The tighter their finances got, the more the Neffs argued about money, wrangling even over relatively minor expenses.

"He wanted new bed sheets. I wanted frames for the baby's christening pictures," Cynthia recalls. "In the past, we'd have gotten both without a second thought, but now we had to negotiate."

Just four months into life on one paycheck, the Neffs were down to less than $1,500 in emergency reserves. Says Tommy, "That's when the question comes into your mind: Can we really afford to do this?"

Unwilling to have Cynthia go back to work, the Neffs looked for more ways to economize. They said good-bye to their biweekly housecleaning service ($100 a month), then to the lawn service ($39 a month), and drew up a strict budget.

To make sure they didn't blow the budget, they instituted a cash-only envelope system for discretionary expenses. For instance, at the beginning of the month, they place in an envelope their $50 allowance for eating out; when the envelope is empty, there are no more restaurant meals until the following month.

The strategy is a wise one, says Ruth Hayden, a financial educator in St. Paul and author of "For Richer, Not Poorer: The MONEY Book for Couples."

"It's not the mortgage or car loans that are the budget busters, but flexible expenses like eating out and groceries, because people don't budget for them," she says.

Using cash also helps cut spending. "When people rely on cash instead of credit, they're more aware of their spending and end up automatically cutting back by about one-third," says Hayden.

Cynthia, for example, has found that she spends about $40 a week less on groceries now that she's paying in cash. "I used to pick up the name brand without thinking, but it's amazing how much you save when you start paying attention," she says.

Cuts in discretionary spending alone, however, have not been enough to ease the strain for the Neffs. So MONEY asked a team of financial advisers to review their situation and offer other recommendations for boosting cash flow. The pros' advice:

• Refinance debt. Since the Neffs hope to move to a larger home in a few years, they can increase their current cash flow by replacing their 30-year, 6.375 percent fixed-rate mortgage with a 5/1 adjustable-rate mortgage, suggests Keith Gumbinger, vice president at HSH Associates, a financial publishing firm in Pompton Plains, N.J.

This type of mortgage locks in a fixed rate for five years, then converts to a variable rate adjusted once annually. At a recent rate of 4.87 percent on the 5/1 ARM, refinancing their $148,000 mortgage balance, with closing costs wrapped in, would reduce the Neffs' monthly house payments by nearly $185.

Gumbinger notes, "This would free up cash now, while still minimizing their exposure to rising rates during the period they expect to remain in the house."

• Adjust withholding. With Cynthia out of the work force, the Neffs will pay less in taxes. Stewart Welch III and Diana Simpson, certified financial planners in Birmingham, suggest that Tommy lower his W-4 withholding to $238 a month from his current $334, which would yield nearly $100 more in take-home pay.
• Boost deductibles. Welch and Simpson also suggest that the Neffs raise their auto insurance policy deductibles from $250 to $500 and decrease their liability coverage to $50,000 a person and $100,000 per accident. The savings: $35 a month.
• Become a part-time entrepreneur. Cynthia estimates that she could earn $240 a month by tutoring for two hours a week in the evenings, when Tommy is on Daddy duty.

For now, at least, that's about as much as Cynthia is willing to work. The rest of the time, she is content to revel in her role as full-time mom.

"Now that I'm with the girls so much, I see how they're like sponges in these early years, and that makes me even happier that I'm the one who's with them," she says. "I'm always calling Tommy to tell him something new that Hayden or McKenzie did."

Tommy also gets more family time because his new job allows him to work from home when he's not on sales calls. "Sure, the past few months have been difficult financially," he says, "but we know we're doing what's right for our family."

Planning ahead is the key to successfully transitioning from two incomes to one. Consider these tips from Mary Snyder, co-author of "You Can Afford to Stay Home with Your Kids."

Track expenses Before you quit your job, jot down everything you spend for at least a month to get a handle on your expenses.

"When you start seeing the big picture, you may find you're spending a lot to maintain a lifestyle you hate," Snyder says.

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Do a trial run Once you've identified expenses you could reduce, try living as if you were already down to one income. Direct the cash you save toward paying off your debts, especially high-rate credit-card balances, and to building an emergency fund.

Trade down Moving your family to a less expensive home could buy you the freedom you crave.

"The average home has doubled in size since the 1960s, but our families aren't any bigger," says Snyder.

Keep skills up The stay-at-home parent should try to maintain job skills and a professional network. Always keep the door open to resuming your career, in case you once again need that second income.