How to Live on One Income – Even if You Don’t Have To
August 27, 2013
Many couples and families would love the opportunity to be able to live on one income. At a minimum, a stay-at-home partner could go a long way toward minimizing so many of the stresses of everyday life. Let’s face it, with all the chores that it takes to run a household, to raise kids, to pay bills, and to write letters, emails, and make phone calls in order to straighten out whatever seems to go wrong in life, it can be a real backbreaker if each partner also has a full-time job.
If you have been thinking about switching over to living on one income, there are ways to go about it that will make it happen, even if it doesn’t seem possible with your current budget.
Why Live on One Income?
I just covered some of the stresses that a dual-income couple faces, but that’s hardly the only reason why you might want to live on one income. Here are some other reasons:
The birth of a child demands a stay-at-home parent. This is probably the most common reasons why couples shift from dual-income to single. It enables one partner to stay home and raise the children. Fortunately, there are some financial advantages to this arrangement. At a minimum, a stay-at-home parent eliminates the need for costly day care.
To get out of debt. If you have a substantial amount of debt, you can get out much more quickly if you can earmark an entire paycheck to paying off debt. If you live on one partner’s income, and use the other to apply toward the debt, you can get out much quicker than you could simply by cutting corners and making higher loan payments.
To fast-forward retirement savings and early retirement. Early retirement is a dream for millions of people. But in order to do that it requires an extraordinary level of savings. Dedicating one partner’s income to funding retirement plans and other investment accounts will make it happen much more quickly.
Any of these reasons and more could motivate you to want to live on one income. It begins with the ability to regiment your income – dedicating one paycheck to living expenses, and the other toward a financial goal.
But how do you make it happen?
Try Living on One Income
If you would like to live on one income, the best strategy is to take a dry run first. That means that while you still have two incomes, you test the waters with living on just one.
This will enable you to find out what works – and what doesn’t – before you actually get yourself into a situation where you have only a single income. More important, it provides an opportunity to find out if perhaps you will be unable to live on a single income.
It will be better to find that out while you still have the second paycheck coming in. In reality, for some couples living on a single income works – but for others, it turns out to be a financial disaster. You need to find that out before doing it for real.
Lower Your Standard of Living
It goes without saying that living on one income will require you to cut your budget, and probably drastically. This will require eliminating any expenses that are not absolutely necessary, and maybe even one or two that you now think of as necessary. Here are some examples:
- You may decide you no longer need cable TV – a Netflix subscription will have to do.
- You may have to cut your grocery bill drastically by shopping at a food warehouse, cutting coupons, and buying in bulk and on sale wherever possible.
- Thrift shops may replace the mall when it comes to buying clothing.
- A second car may have to be eliminated, or at least replaced by a used car that does not require a loan payment.
- Restaurant meals will need to be replaced by lots of creative cooking at home.
- Vacations may need to become more modest.
These are just some examples, but they can save you several thousand dollars per year. Examine your own budget closely, and look for areas where you can make cuts. The more expenses you can cut in your budget, the more likely living on one income is to be a success.
Get Out of Debt
Part and parcel of lowering your cost of living is getting out of debt. The loan payments that you have been making as a dual-income couple may be completely unsustainable once you go to a single paycheck. Each debt that you can pay off will bring you a step closer to your goal of being able to live on one income.
There probably isn’t much you can do about your mortgage, but that focuses the spotlight on any other debts that you have – car loans, student loans, credit cards, and even home equity lines of credit. The more of these that you can pay off, the more comfortable life will be on a single income. In fact, you may discover that once your non-housing debts are paid that the second income is completely unnecessary. Problem solved!
In addition, it should go without saying that you should avoid taking on any new debt once you shift to a single income.
Build Cash Reserves
If you have been living without savings as a dual-income couple, you’ll find that situation won’t work at all on a single income. A cash cushion will not only enable you to cover any budget shortfalls, as well as emergencies, but it will also help you to stay out of debt.
As a single income household having savings will be an integral part of your survival. Dual-income couples can often rely on each other’s paychecks whenever there is a cash shortfall. But when an entire household is living on one paycheck, having an adequate amount of savings will be the difference between financial survival and going perpetually deeper into debt.
Once you develop your single income budget, there should be a generous line item in there for regular savings contributions. With living expenses lowered, and debts paid, you should have adequate cash flow to keep your savings healthy and growing.
Can you think of any other strategies that would help a dual-income couple to live on one income?
All posts by Kevin Mercadante
Hi Ann – If you can live that way – and obviously you can – you’ll be ready for what ever life throws at you. You and your husband are actually a living example of this article! Thanks for sharing.
Another strategy that I can think of is what I call PUYOS (“Pick Up Your Own Sh*t).
At it’s most basic level it’s doing things yourself rather than outsourcing. That means NOT spending extra money hiring a gardener, sending your laundry out… making your own coffee rather than spending $2.99 every morning.
I think lots of people – if they scrutinized their spending habits/budgets – would be amazed at how much money can be saved by cutting out these PUYOS expenses. It’ll get you so much closer to being able to survive on 1 income (especially in high cost of living areas like Silicon Valley).
It also emphasizes self-reliance, something we’ve lost. I’ve heard the service economy as being an arrangement in which you hire others to do work you could do yourself, and I think it’s true. People get addicted to having others do everything for them (for a fee of course) and after a while they begin to believe they can’t live any other way. That’s the point where addiction sets in. A lot of people live that way now.
My husband and I are currently living on my income alone and despite the fact that he is bringing in income as well, we are only living off of mine so that we can save as much as possible. We would like to buy a house, so we are living frugally off of my income to avoid debt and save as much as possible. It is going well so far because we have been able to save a significant amount which we definitely would not have saved if we were not living below our means.