Going to one household income after relying on two can be a shock to your finances. This is especially true if you were living beyond your means. However, it is possible to live comfortably on just one spouse’s income if you remain mindful of how you manage your finances.
Blogger Abby Lawson said the secret to successfully living on one income for her and her husband was to stay away from credit-card debt. They resolved not to make any new purchases unless they could pay for them right away. They stuck with this even during their home renovation project. Lawson writes:
We don’t buy furniture or electronics if we can’t pay for them right then and there. I would have liked to have gutted our kitchen and rebuilt it from the studs up several years ago, but since that wasn’t in our budget, we gave the cabinets a coat of paint and lived without our dream kitchen until we saved up the money to afford what we want. Our goal is to have as little debt as possible so that we control our where our money goes and aren’t spending our hard-earned money on sky-high interest payments.
Are you and your partner about to make some big financial changes? Here are some tips for living on only one income.
1. Cut back
One of the first steps you’ll need to take is to cut back on your spending. Take inventory of your spending habits, and see where you can eliminate wasteful purchases. Being more mindful of your purchases will help you form and stick to better financial habits.
Minimalism expert Joshua Becker said he and his wife started living on one income after she gave birth to their first child. He learned cutting back usually comes down to a few common expenses many couples don’t think about.
“From my experience, there are only a small variety of expenses that keep families from living on one-income: too costly mortgage, car payments, eating out frequently, exorbitant entertainment expenses (tickets, vacations, and/or alcohol), and credit card debt. Start there and you’ll solve 85% to 90% of your financial problems,” Becker said on his website Becoming Minimalist.
2. Create a budget
Now that you know where you need to cut back, it’s time to decide how much money to allocate toward each of your expenses. Take time to budget for your new standard of living. Now that there is less money coming in, you’ll need to make some adjustments. The only way you’ll be able to keep from overspending is to keep a close eye on how much money you’re spending each month.
Money Crashers contributor Casey Slide says you can adjust your spending plan as needed:
A budget will allow you to understand where your money is going and enable you to adjust your spending by designating how much you can afford. Creating a budget is a good idea for everyone, but especially for families with limited income. Write down your budget, with specific categories of spending, and stick to it. Try using the 5S budgeting system to get started and stay organized. Or you can try out some of the great online budgeting tools available like Mint.com, You Need a Budget, or Mvelopes.
3. Add income
Until your partner can find steady employment, you’ll need to look for ways to supplement your household income. Your partner can help out by taking on a part-time job or looking for ways to start a side business. In addition, the whole family can pitch in by gathering old items to sell in a garage sale or online. Let your partner know he or she is not alone and that you are willing to lend a helping hand.
4. Fight fair
Transitioning to a single income can be stressful. You’ll most likely argue about the state of your finances from time to time, but remember to remain respectful. Instead of waiting until you’re both ready to explode, set aside a time when you can discuss finances calmly. You can even make the money talk more enjoyable by setting up a money date.
5. Downsize your home
Another area where you can save money is by downsizing your home. This makes even more sense if you have children who have moved out of the house, and you’re left with a spare bedroom or two. Downsizing will allow you to save on upkeep and lower your monthly mortgage. You can put the savings in the bank and build your emergency savings fund. You also could take some of that extra cash and pay down debt.
6. Rent a room in your home
If selling your current home and purchasing a smaller one is not an option right now, you can consider renting out the spare rooms in your home. This will create an additional income stream for as long as you have a tenant. Even after you return to a two-income household, having a tenant is a great way to build your emergency cash cushion and even boost your retirement accounts.
7. Barter services
Join forces with other families, and barter services. For example, instead of paying for a babysitter, work with neighborhood families to watch each other’s children. (Just make sure these are people you know well and trust with your children.) Child care is just one example, but you can barter just about any service that would normally put a strain on your budget.
8. Downsize the number of family cars
Does your family really need three cars? The answer is most likely no, so try relying on just one family car. Also, use public transportation more often. You can use the money you get from selling your car (or cars) to get a handle on household expenses or save for a rainy day.
9. Adjust your tax withholding
If you usually get a big tax refund each year, you might want to change that. Although it feels good to get a big check, you could use that money during the year. Why give the IRS an interest-free loan? Instead, fill out a new Form W-4 and adjust your withholding, so you can have a little more of a cash cushion.
10. Look for deals
Downsizing and cutting back are two great ways to save money, but there is much more you can do. In addition, make an effort to seek deals and use coupons whenever you can. A big part of getting a good deal is knowing when (and when not) to shop. Pay attention to store circulars and check out coupon websites, so you know when to snag the best prices on household items.
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