Living on one income is hard, and it’s easy to feel trapped by circumstances.
Many people long to do something new and different with their lives, but they just can’t miss work because that will mean missing a paycheck (even if it’s smaller than they’d like).
Maybe more schooling will be needed to pursue further career dreams, but affording that is next to impossible.
Living off one income while trying to support others is difficult, but it can be done, even when a person is living paycheck to paycheck.
Consider These Questions First
Whether there are just two people in the home, or if there is also one (or more) little mouths to feed, there is a lot to consider when contemplating switching to a one-income budget:
- How long will the family need to live off of one income?
- Is an emergency fund already put in place?
- What is the cost of living in the area?
- Is the family ready to commit to frugal living?
These are all important questions that should be asked before making the transition to living on a one-income family budget. They dictate whether or not a family is in the position to live on one income.
For some, the transition will be rather easy. For others, not so much. Cutting out a source of income entirely could put the family well below the expected minimum for the local area. That’s okay, but not something that is easy to get used to – nor should it be.
Sacrificing a yearly vacation and living below your means while pursuing a degree could mean the difference between being stuck in a dead-end job or working in a field you love, making significantly more money. That’s quite the trade-off.
Even if the move is lateral (with no monetary gain), taking on a new job role can significantly increase a person’s quality of life. If you think you and your significant other are ready to make the jump, here are some crucial things you may want to consider first.
How to Live on One Income When Money is Tight
1. Aggressively pay down debt
Before trying to live on one income, first consider paying down debts. It’s never wise to carry high-interest credit card debt, and a sudden drop in income could easily worsen that financial situation.
Use credit cards as infrequently as possible – especially if you struggle with making more than the monthly minimum payment (or worse, miss payments altogether). Try leaving the credit cards at home and using them for only emergencies. Pay all daily expenses with a debit card or cash.
Some debts – like mortgages and car and student loans, for example – can’t be simply paid off. But this does not mean that they cannot be paid down or even refinanced. Putting extra money towards the monthly house payment – for principal, not interest – can shave years off the typical 30-year mortgage.
2. Have an emergency fund
Living on one income doesn’t have to mean living hand-to-mouth. To avoid this, create an emergency fund to have on hand to cover the surprises that life can hold.
Your mileage may vary on what constitutes an emergency, but cars, plumbing, and children all come with their fair share of extra expenses. Don’t only establish an emergency fund – also budget for putting a monthly amount away to replenish it.
3. Cut out unnecessary expenses to live off one income
If one partner isn’t working, expenses related to that person’s former employment will decrease or disappear completely. That includes travel expenses, gas, wear and tear on a vehicle, work clothes, dry cleaning, and ordering meals out. Eliminating these costs will help save money in the long run, but also look for other ways to reduce spending.
- Shop around for cheaper cell phone packages.
- Think about getting rid of cable TV.
- Look for better rates on home and auto insurance.
- Refinance student loans.
This is also a great time to eliminate paid services like landscaping, house cleaning, or even dog walking.
If you hadn’t done much cooking at home before, change those habits. Prepackaged and takeout foods can be very expensive. Trim some more fat by cutting out extra snacks and pricey processed foods that can be unhealthy for both the body and the budget.
4. Reduce housing costs
Housing usually accounts for the highest portion of any couple’s budget. For many, home-buying mistakes are the reason they can’t live on one income. Avoid becoming house poor.
Of course it would be ideal to live in a decent neighborhood with good schools, but when shopping for a new home, aim for less house than you can afford. That might mean a townhouse instead of a single-family dwelling, but it also means that the new place will be affordable on one income. Also consider repurposing part of a smaller house; for instance, turn the basement into a kid’s playroom or a parent’s office.
Couples who already own a home that they can’t afford could consider downsizing, even temporarily.
Refinancing the house is another option. For some couples, the savings that come with that can be significant. Don’t feel compelled to compete with friends or loved ones. Sacrificing in the short term can mean more house in the future.
5. Eliminate depreciating assets
Depending on the area, selling a second vehicle could be an option. If that isn’t practical, consider trading in a gas-guzzler for a used, fuel-efficient car. Lower insurance rates by increasing your deductible. When it’s time to go car shopping, think used rather than new.
Those who are car-savvy can save money by purchasing from a private seller rather than a dealership. Just make sure the seller agrees to have a mechanic examine the car before the paperwork is signed. The seller should deduct the cost of any necessary repairs from the purchase price.
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Buying a new car can be extremely tempting! But the truth is, it isn’t always the best choice. New cars can depreciate so quickly when they’re first purchased that it’s often a much better idea to buy a gently used vehicle. That doesn’t always mean less nice either. Look for certified pre-owned or cars that were leases if you want a really well taken care of car for a much lower price.
6. Trial living on one income before quitting
Before one spouse puts in his or her two-week’s notice, spend some time living on just the income of the individual who will remain employed.
During that period, use the income of the spouse who hopes to leave the workforce to pay off debt and increase savings. This experiment will provide a good idea of what is and is not needed to successfully live on one income.
7. Lower your tax bracket
Families living on just one income could possibly fall into a lower tax bracket. That means that they may need to increase exemptions, giving them extra money each pay period.
You don’t necessarily want a large tax refund from the IRS each year. This would just mean that your family paid the government too much money.
8. Try working remotely to ease living on one income
These days, it’s not necessary for people in a lot of fields to ever go into an office.
If the “non-working” member of the family spends several hours per week working in a remote position, that will put some extra money into the family coffers. It can also lead to new career opportunities down the road, whether remotely or in-house.