Have you ever felt trapped by your circumstances? You know, that feeling you get when you'd like to do something different with your life but you can't miss work because that means missing a paycheck (even if its undersized). Would you or your spouse like to go back to school but know that affording it is next to impossible? Living on one income while trying to support others is difficult but it can be done.
Whether its just you and your significant other or there are two (or more) little mouths to feed, there is a lot to consider when making such an enormous change.
- How long will I need to live off one income?
- Do I have an emergency fund already set aside?
- What is the cost of living in my state?
They're all important questions and they dictate whether or not you're in a position to go about living on one income. Even taking relocating to the same job in a different area may make all the difference in whether or not you can retire comfortably.
To give you an idea of just how much the cost of living varies on a regional basis check out the following infographic made available by the Economic Policy Institute (EPI):
And those budgets are merely the minimum necessary for families to “get by”. No vacations. No extra spending. Just the minimum amount to cover basic needs.
For some the transition will be rather easy. For others, not so much. Cutting out a source of income entirely could put you well below the expected minimum for your area. That's okay but not something you'd want to get used to.
Sacrificing a yearly vacation and living below your means while you pursue 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 in nature (and there is no monetary gain), being in a new job role can increase your quality of life significantly.
To learn more about how to live off one income check out our 8 tips below:
1. Get out of debt
Before trying to live on one income, you should first consider paying down your debts. It’s never wise to carry high interest credit card debt and a sudden drop in income could easily worsen your situation.
Think about using your credit card as little as possible – especially if you struggle with making more than monthly minimum payment – or worse, miss payments altogether. You might want to leave your credit cards home and only use them for emergencies. Pay your daily expenses with a debit card or old-fashioned cash.
There are some debts – mortgages, car and student loans, for example – that you can’t simply pay off. That doesn’t mean you can’t pay them down or even consider refinancing. Putting extra money into your monthly mortgage payment – for principal, not interest – can shave years off the typical 30 year mortgage.
2. Have an emergency fund
Living on one income cannot mean living hand-to-mouth. You need to create an emergency fund for, well, life’s emergencies.
Your mileage may vary on what constitutes an emergency, but cars, plumbing and kids themselves usually manage to throw a few needs your way on a regular basis. Not only establish an emergency fund, but 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, there are expenses that will go down or disappear completely. That includes commutation, work clothes, dry cleaning and ordering lunch out. That's all great for saving money but you also need to look for ways to reduce spending as well.
Look for cheaper cell phone packages and think about getting rid of cable TV. See if you can find better rates on home and auto insurance. Refinance your student loans.
You can eliminate services you now pay someone else to do such as mowing the lawn, cleaning the house or even walking the dog.
If you don’t do much cooking at home, change your habits. Prepackaged and takeout foods put a huge dent in your wallet. If you’ve been wanting to trim some fat, cutting out the snacks and pricey processed foods are healthy for your body and your budget.
4. Reduce housing costs
Housing usually accounts for the highest portion of any couple’s budget.
For many, high housing costs are the reason they can’t go about living on one income. Avoid getting caught in the more-house-than-you-need trap.
Sure, you want to live in a decent neighborhood with good schools, but if you are home shopping, aim for less house than you can afford. That might mean a townhouse instead of a single-family dwelling, but it also means you can afford it on one income. You might re-purpose part of a smaller house, such as making the basement into a kid’s playroom or parent’s office.
If you already have a house you can’t possibly afford on one income, consider downsizing. You can trade up with the other spouse eventually returns to work.
Another option to look into: refinancing your home. For some couples, savings are significant.
Don't feel compelled to compete with friends or loved ones. Sacrificing in the short term can mean more house in the near future.
5. Get rid of depreciating assets
Depending on where you live, you might want to consider getting rid of a second vehicle.
If that’s not practical, consider selling a gas guzzler and purchasing a used fuel efficient vehicle.
Lower insurance rates by increasing your deductible. When it’s time to go car shopping, think used rather than new.
If you’re car-savvy, you can save money by purchasing from private seller rather than dealers. Just make sure the seller agrees to have your mechanic examine the car before purchasing it. If there are minor repairs necessary, you can show the seller the estimate and deduct them from the purchase price.
6. Trial living on one income before quitting
Before one spouse quits work, trial living on the income of spouse who intends to 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 gives you a good idea of what you do and don’t need to successfully live on one income.
7. Lower your tax bracket
When you only have one income, it’s possible you’ll fall into a lower tax bracket. That means you might need to increase exemptions, giving you extra money each pay period.
You don’t necessarily want a big refund from the IRS each year. A big refund means you 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” spouse can spend several hours weekly working in a remote position, that’s some extra money for the family coffers. It can also lead to new career opportunities down the road, whether remotely or in-house.
Related: 100 Ideas to Boost Your Income
Learning how to live off one income isn't impossible. It just often involves making sacrifices knowing there is a light at the end of the tunnel – even if that light is 2 years and a Master's degree away.
Have you ever tried to live off one income before? What worked? What obstacles popped up along the way that you were forced to deal with? Let us know in the comments below.
His areas of expertise include CMS Support, Social Media Branding, Marketing and Advertising. In addition, Ben takes an active role in investment research and portfolio management.
He currently holds a BS from Virginia Tech and a BSN from Western Governor's University.
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