Living as a dual-income family is a relatively new phenomenon. According to Pew, dual-income families didn’t become the norm until the 1980s. Today, more than 60% of families have both parents working. While one-income families are in the minority, it’s still very possible to live on one income. Maybe your spouse lost his or her job, or you had a new baby and decided to have one parent stay home to care for the child.
The move to being a single-income family may be scary, but it’s possible with proper planning. Here are some tips to help you do it successfully.
Establish a plan
Moving to a one income family takes work. You need a plan to hit the ground running while you’re making the transition from a two- to one-income family. If you don’t currently have a budget, now is the time to set one up. You may be surprised at how much it will help you monitor your finances.
“Look at all your expenses and be honest about whether you really can afford to live off one income instead of two,” says Joshua Zimmelman, President of Westwood Tax and Consulting. “If it’s close, consider which lifestyle changes are possible for you to make.”
Key in your planning will be beefing up your emergency fund. Living on one income means you may have less of a safety net, so building your emergency fund is vital.
“First of all, each of you need to write down all your monthly and annual expenses for the year. Then add on six to eight months of savings,” says Kelsey Zamoyski MOTR/L, CHT, CEAS-I, owner of Defy Therapy & Wellness in North Miami Beach, Florida.
Zamoyski and her boyfriend lived on one income while she launched her business. She recommends planning at least three to five months before making the plunge to living on one income to ensure you’re on the right track.
Identify easy ways to save money
Living on one income often requires finding easy ways to save money. Don’t overlook any opportunity to save. In some cases, you may even need to consider downsizing your house or car to help save on big expenses.
Zamoyski recommends some of the ways she and her boyfriend looked to save, such as:
- Sharing one car
- Not eating out
- Saving a certain percentage of each paycheck
- Meal planning
Each of these are great ways to help reduce costs and help you stretch your income. They may feel like sacrifices, and they are to a certain extent, but the goal is to keep your eyes on the larger goal of thriving financially.
This doesn’t mean you should cut everything. “You definitely don’t want to cut your health or life insurance because it might be more important than ever now. If only one of you is working, and tragedy strikes, you’ll need to make sure you’re covered,” Zimmelman says, pointing out that some expenses are necessary when living on one income.
One overlooked way to save is to assess your tax situation. Adjusting withholdings may allow for additional money in your budget to use for other needs.
You can use the IRS Paycheck Checkup for opportunities. Beyond that, creativity and self-sufficiency are key drivers to saving more money when living on one income.
Avoid debt at all costs
High-interest consumer debt can ruin any financial situation. Debt enslaves you to others, and this becomes increasingly problematic when you’re relying on one income.
Look for ways to live without taking on debt, and don’t be afraid to be creative. This may include driving an older car for a few extra years, waiting to make a large purchase or teaching yourself to do certain things around the house.
This may seem too sacrificial, but Zamoyski lists numerous benefits to adopting this mentality. “You have more time to focus your energy on either your children, friends, partner or business.”
Earn extra income or save the extra income
There are two types of families that live on one income. The first is when one spouse chooses or is forced to stay at home. The second is when both spouses work, and they choose to save an entire salary.
If you’re in the first situation, look for ways to monetize your free time. This may be as traditional as getting a part-time job to something more inventive such as using your skills to earn extra income. Just be mindful not to let it take away from the reason you’re staying home in the first place.
If you find yourself in the second situation, your plan of attack involves following much of the same advice: looking for creative ways to save money and committing yourself to avoiding debt.
Regardless of the reason, both allow you as a family to save more and improve your long-term financial health.
Living on one income as a family can feel scary, but it doesn’t have to be. With thorough planning and creativity, you can do quite well and still reach your financial goals.