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When you’re a one-income household, every penny counts. Families that want or need to live on one income might worry about feeling poor or broke, or worse, running out of money. These feelings are natural, but can be very stressful!
There have been multiple times in our life when our family had to live on one income, but because we were savvy about it, we never felt like we were being “too cheap” or missing out.
Let’s explore the ups and downs of one-income living and then you can learn ten practical tips to help you make the most of your money and live comfortably on one income.
What does “living on one income” mean?
Why do peoeple want or need to live on one income?
Common reasons include job loss, desire for more flexibility in schedule, children or aging parents that require more care, wanting to homeschool your child, and more.
There are also people who choose to live on one income while still earning two incomes.
This is an extreme budgeting method where you budget as though you are only earning a single income, but still have a second income flowing into your home. The second income is usally put towards paying off debt or placed in a savings account or the stock market.
Whatever your situation or money goals may be, there are plenty of ways to make single income living work your family!
Benefits of one income living
There are many benefits of living on one income. For one, it can be very freeing when one spouse can focus their attention on the family rather than working long hours. It also allows for more family time and can be less stressful overall.
It often means better and healthier food on the table and tidier house to come home to each day. 🙂
When both parents are working, it can be hard to coordinate childcare or take time off if your child falls ill. And that’s almost guaranteed to happen in a daycare, where they are exposed to many kids and therefore, many germs, throughout the day.
But living on one salary is not all rainbows and butterflies. It takes planning, committment, and the ability to problem-solve around any challenges that may arise. Here are a few tips to help you make it work.
10 Tips to live on one income
1. Make sure you have an emergency fund
Do you have an emergency fund?
Having an emergency fund is crucial when living on one income. Unexpected expeneses can pop up anytime, such as having your car break down or your roof spring a leak. If you don’t want to rack up extra debt, then obviously you don’t want to rely on credit cards or loans.
An adequate emergency fund will reduce anxiety living on one income, as it will protect you from unexpected events, such as major car repairs, medical bills, and house repairs.
A good rule of thumb is to have at least six months of reserves to cover living expenses; nine or 12 months is even better by the time you drop to one income.
2. Build a realistic budget
Having a sound budget is the key to living on one income. You will better understand your living expenses, which allows you to tweak them to fit your one-income household.
If you’ve never budgeted before, start by tracking your spending for at least one month, then break expenses down into categories, such as:
- debt payments
- and more (find out more about these categories here)
Once you know where your money is going each month, you can start systematically adjusting the areas where you can cut back.
For example, if you spend $100 a week eating out, that’s $400 a month or $4800 a year.
Could you cut back to eating out once every two weeks, which would save you $200 a month or $2400 a year? Do you need that cable TV package with 300+ channels? Sit down with your spouse and go through each line item.
It may not seem like much, but the little cuts here and there add up to a significant amount if you look holistically.
Here are more blog posts on this topic to help you:
- 10 Simple Minimalist Budget Tips to ACTUALLY Save Money
- How to Budget Your Money Like an Expert [GUIDE]
- Download the #1 FREE Budget Planner Right Now [PDF]
Need help with budgeting? Download this highly-rated free budget planner to help you manage your expenses [PDF]
3. Cut back on your expenses early
In order to make the transition to living on one income easier, start cutting back on expenses discussed in tip #1 as early as possible.
4. make plans to pay off debt
Debt doesn’t just go away if you become a single income home. Therefore, you need to have a solid plan on how you are going to continue to pay off your debt and still have the money you need to pay bills.
Here are two popular methods to tackle debt:
- The Debt Snowball – with this debt payoff method, you start by working to pay off the smallest debt first. Once you pay off that debt, you add the extra money to pay off the next highest debt. Therefore, you continue snowballing the extra money to pay off each higher debt tier, until finally all debt is paid off.
- The Debt Avalanche – with this method of paying off debt you start with the debt that has the highest interest rate; credit cards with high APY are a good example. After that, take the extra money and tackle the next highest debt and continue going lower and lower, until all debts are paid off.
No matter what debt payoff method you choose, just make sure you factor your debt payoff plan into your budget because you don’t want to end up with MORE debt!
5. Become a one-car family
Now that one spouse doesn’t have to drive to the office every day, you may not need two cars. Consider living with one car and pocketing the monthly savings. You’ll save on gas, car payments, insurance, and maintenance costs.
According to recent data from AAA, the average ownership of a car is fast approaching $10k per year or $805 per month. Hence, cutting down to one car would make a huge difference in lowering your expenses.
Even if you can’t get rid of a car altogether, consider driving less and using public transportation, walking, or biking when possible, and plan your grocery trips on weekends. Less driving means less gas and insurance costs. You can find out more about driving less in this blog post here.
6. Cancel paid entertainment subscription
Spend quality time, not money.
There are many fun activities for couples with children that don’t cost a lot of money. There are always community events, festivals, and concerts that won’t cost you anything but time. Pay attention to the websites for your local museum and community centers for special “family days” where they have free or discounted rates.
You can also get creative at home. Having a picnic in the backyard is way more exciting than TV.
As far as exercise, do you really need that $100/month gym membership?
Utilize free workout programs and home workouts. There are so many great fitness bloggers and Youtubers that offer free workout videos. Going for a walk, run or bike will cost you nothing!
7. Use a shopping list
Meal planning and using a grocery list will help you save money. You are less likely to make impulse buys when you know what you need before going to the store.
You can also take advantage of sales by stocking up on non-perishable items when they are offered at a lower price.
Comparison shopping and price matching is another good way to save. There are always items on sale; groceries usually rotate their deals every week. And big stores like Best Buy will often match the lowest price price you find on competitors websites.
If you have the time, you can even try couponing!
Couponing takes a little bit of time and effort to get into, but it can save you a lot of money on groceries. You can find coupons online or in the Sunday paper. There are also apps available that can help you save while you shop.
8. Check your tax withholding
Now that you are on a reduced income, your tax bill should also come down. Make sure to adjust your withholding, so you are not giving the government an interest-free loan.
You can use the IRS Withholding Calculator to help you determine the right amount of tax to withhold from your paycheck.
Also, don’t skip on your 401k contribution of the working spouse, especially if your work matches contributions – it’s literally free money! Furthermore, there might be options to save for the stay-home spouse in a tax-advantaged IRA (you put after-tax money in, and all capital gains are tax-free when you withdraw at retirement).
9. Embrace a frugal lifestyle
If you haven’t embraced frugal living yet, now is the time. Frugal living is the process of being intentional with your spending and prioritizing your money toward things that matters most to you.
It’s not about living a life of deprivation but rather living a happy and fulfilling life within your means. You get to choose where you want save and where you want to splurge.
There are endless ways to live frugally, but here are a few family favorites; you can read more of the top frugal living tips to actually save money in this blog post here.
- Create a budget meal plan
- Shop seasonally and on sale to save money on groceries
- Cook most meals at home (make eating out a “treat”)
- Playing board games or watching movies at home instead of going out
- Join local Buy Nothing groups to swap free clothes, furniture, electronics, and more!
10. get everyone on board
Moving from two income sources to one is a significant change, and you need the whole gang to buy in if you’re going to make it work. Involve your partner early in the process, and decision-making will prevent disagreements when things don’t always go to plan.
If you have kids, involve them in the conversation and let them know that there may be some changes coming but that everyone will still be able to enjoy a good life – just maybe in different ways.
Walk the whole family through the plan and your thought process so they can see the positives in the path forward. Don’t leave anyone behind in the process; they need to see the big picture, which is to save money and spend more time together as a family.
Changing your household to live on one income is an evolving process. Not everything has to change on day one. Be understanding towards yourself and your family and avoid drastic all-or-nothing spending cuts.
Some changes will be straightforward, and others will take some time to ease into it. The key is you are moving in unity towards the same direction together.
As I have mentioned earlier, the process is not a straight line, you will experience ups and downs, and you might not see all the benefits from the getgo. Trust that you made the right decision; with a bit of time, everything becomes second nature.
Do you have any good tips on how to live off of one income? Drop them in the comment section below!