Adjust Your Budget
One of the first things you’ll need to do if you become a one-income family is adjust your budget and create a workable family budget based on your family’s single income. Remember, you may need to cut corners to make your new lifestyle work—from cutting cable, to saving money at the grocery store, to forgoing eating out at restaurants. While some of these costs may seem minor by themselves, once you add them up over time, it makes a difference.
Don’t Stop Saving
Just because your family is moving to one income doesn’t mean you should stop saving altogether; you should make it an even bigger priority. Your rainy day fund—which is meant to pay for unexpected, one-off expenses—should also be well-funded. If your family is only living on one income, chances are you won’t have as much disposable income to put toward any unexpected expenditure. Your emergency fund should have a minimum of six months’ worth of expenses before you willingly decide to go to a single income. If you are living on one income and have a family, you’ll need an even bigger safety net in case the household’s only earner loses their job or has an unexpected emergency that prevents them from working. As a single-income family, you should also continue to make retirement contributions. If you plan to live on one income for the foreseeable future, you should also increase your retirement contributions because the breadwinner needs to compensate for the other spouse no longer making contributions.
Invest in Insurance
Many families make the mistake of not getting life insurance for both partners, regardless of who is employed. While you definitely need the breadwinner to have a good life insurance policy, don’t forget about the non-working spouse, as well. If the non-working spouse passes away or suffers from a serious illness or injury that makes them unable to look after the children, the working spouse would need to outsource those tasks, which could cost you big. That’s why it’s a smart financial move to have a life insurance policy on both parents in a family with children. In addition, consider purchasing disability insurance, either through your employer, an industry affiliation program or a private policy, to help cover expenses in the event of an unforeseen illness or accident that may affect your income.
Make the Transition Slowly
If you haven’t already leaped to the one-income lifestyle, start doing it in stages. First, adjust your lifestyle and budget so you can live solely on one income. This is an excellent opportunity to see if living on one income is realistic for you and your family. If you can live on one income while both spouses are still working, this is a good opportunity to save money, since you’ll be keeping the entirety of one person’s income. You can use this time to pay off your debt, build a substantial cash cushion, make massive retirement contributions, or save for your children’s college.
Target Your Major Expenses
For many families, too-big expenses include a mortgage that is too expensive, car payments, dining out, buying clothing, or credit card debt. If you can slash these expenses, you can solve a lot of your financial stresses and make the transition from two incomes to one a lot smoother. Declare a one-month ban on dining out. Commit to eating every meal at home for 30 days and see what a difference it makes to both your budget and, perhaps, your waistline. If you have an expensive mortgage, consider renting out a room to a housemate. If that’s not something that appeals to you, downsize to a smaller home. If you have an expensive car payment, try selling your car and buying a cheap, used vehicle with cash. Drive the same type of vehicle that a college student would drive. Don’t feel as though this is beneath you; think of it as a smart financial move. Examining your budget and cutting costs is never fun, consider it an investment in your family’s future.
