In an age of so many dual-income families, is it really possible to live well on just one income?
Absolutely! Trust me, I know. We are a family of six, living on one incomeâ€“a military income. After I enlisted in the military, we decided it would be best for my wife to stay home with the kids; thatâ€™s when we made the transition. Now we are happily a single-income family. Iâ€™m going to show you how we do it, and how you can too.
Why one income?
Families go to one income for all kinds of reasons. You may want one of you to stay home with the kids. You may have calculated the cost and realized it cost almost as much as one of your incomesÂ in daycare and travel expenses for both of you to work. You may want to live a more minimalist lifestyle and focus less on earning more money. Or you may not be a single-income family by choice. One of you could have been laid off, but the good news is that you can live well on one incomeâ€“it could have been a blessing in disguise.
No matter your reason, hereâ€™s how to make it work:
1. Stick to the plan
Planning is everything. You can live on almost any income if you budgetÂ and make aÂ plan for every dollar. And it can becomeÂ fun to see how far you can stretch it. So what does this mean?
- Set a budget. Yes, you need a budget. If you have one, stick to it. If you donâ€™t have one, it starts simply by tracking your purchases for a month, then setting each category. See where you can cut back. If youâ€™ve recently became a single-income household, you may notice that youâ€™re spending much less.
- Plan your meals. Meal planning is huge. You should know exactly what youâ€™re going to buy when you walk into the grocery store, and you should know exactly what youâ€™re going to make out of it. Itâ€™s surprising how much food we all have in our homes that we donâ€™t eat because we donâ€™t have a plan for it.
- Plan your vacations. If you go on an annual vacation, you have an entire year to save for it. Figure out how much youâ€™ll need ahead of time, and divide it by 12 months to get a monthly amount to save. Vacations donâ€™t have to cost a lot; our family usually spends less than $500 on each vacation we take.
Youâ€™ve heard â€œif you fail to plan, you plan to failâ€ and this couldnâ€™t be more true in your finances. Youâ€™ll be amazed at what you can afford if you plan.Joshua Becker says, when it comes to purchases, â€œask when and why, not ifâ€. Even on one incomeÂ there doesnâ€™t have to be trade-offs, but it is all about timing and planning.
2. Spend based on priorities
Are you trying to keep up with the Joneses? You shouldnâ€™t be, because the Joneses are broke. Donâ€™t make purchases to impress others, make purchases based on your priorities.
If you truly value family above materialism, do your purchases reflect that?
This is an important question for all of us to ask occasionally. Itâ€™s easy to get caught up in the consumerist mindset of earning more and spending more to be happy, but thatâ€™s a lie. Rich people arenâ€™t any happier than the rest of us. Thereâ€™s nothing wrong with having more money, but make sure your spending is lining up with your priorities. Just spend an extra few seconds thinking about each purchase to decide if you really need it. Youâ€™ll be surprised how oftenÂ you donâ€™t.
3. Cut the cable
Speaking of priorities, where is TV on that list? We cut the cable over five years ago and havenâ€™t looked back since. We spend more quality time together as a family. We spend more time reading, which has led to much financial success (finance books are my favorite). There are a thousand reasons to cut the cable, and I have yet to find one good reason to keep it. If you must watch TV, consider Netflix or keep some DVDs around.
4. Moveâ€¦or donâ€™t
If youâ€™re new to the single-income life, you may be ready for a downsize. We usually donâ€™t need as much house as we think we do; however, youâ€™ll want to calculate the cost first. Â Moving isnâ€™t cheap, so it needs to be financially worth it to really make the leap. That being said, if youâ€™re living above your means, consider moving into a more affordable house. It doesnâ€™t have to be permanent.
5. Learn to barter
What are you good at? Landscaping? Cleaning? Home repairs? Thatâ€™s as good as cash. Reach out to your friends and neighbors, and figure out where you can trade your services. Bartering is the ultimate win-win scenario. This works especially well for babysitting, whether you need a babysitter for a date night or for running errandsâ€“find someone to swap with. You both get free childcare, and you both get more done.
6. Use your resources
There are resources in your city, you just have to find them. It could be a local food bank that is looking for volunteers, and, in exchange, you take some food home. Or you could be in a place where you just need to go to the food bank and get some food. Thereâ€™s no shame in that; thatâ€™s what theyâ€™re for. From food banks to food co-ops to clipping coupons, know your resources and use them. The more resourceful you become, the more you will be able to live well on one income.
7. Dump your debt
If youâ€™re new to the single-income lifestyle, you may be wondering how you can get debt-free on less money than you were making before. Dumping your debt doesnâ€™t have to cost more money. Thatâ€™s right, there are ways to make an impact without spending more. For starters, you can call andÂ negotiate with your credit card companies to lower your interest rates and possibly even your balance.
If youâ€™re serious about paying off your debt, and you donâ€™t plan on going further into debt, consider a balance transfer to lower your interest rate. You must be serious about not incurring anymore debt or this just provides a way for you to go into more debt. But if you really are done with being in debt, a balance transfer can help. For example, if you can pay off your debt in 15Â months, the Chase Slate offers 0% interest rate for balance transfers for the first 15 months, with no transfer fee. But you need to be sure you can pay it off in 15 months or the interest rate will go back up to the standard rate.
8. Prepare for emergencies
Emergency funds are a better option than a credit card when disaster strikes. Even if you can only save $50 each month, start putting something away in a savings or money-market account for unexpected expenses. Ideally youâ€™ll want three to six months of living expenses, but $1,000 is a good starting place. Of course, $500 is better than nothing. The idea is to have some funds to dip into in the event of an emergency so that you donâ€™t get into a worse financial spot by taking out a loan or using a card.
9. Sell a car
Do you have more than one car? Do you need more than one car? Maybe you do, but maybe you havenâ€™t really thought about it. You may have needed two vehicles when both of you worked, but it could make sense to sell one now, especially if you have a car payment. Dave Ramsey always jokes that his show should be called the â€œSell the Car Showâ€, because of how oftenÂ thatâ€™s the most appropriate solution.
10. Save for big purchases
If you have to finance it, you canâ€™t afford it. Instead of taking out a loan for a car or other big purchase, why not make interest-free payments into a savings account right now? Think of it like a layaway plan; youâ€™re saving until you have the full amount. Then you can make the debt-free purchase. If this doesnâ€™t seem possible for some things, you may be living above your means. The bottom line is that credit card and loan interest will destroy your finances. Anything you can do to avoid interest will set you up for success.