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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).
Or maybe more schooling will be needed to pursue further career dreams, but affording that is next to impossible.
Living on one income while trying to support others is difficult, but it can be done, even when a person is living paycheck to paycheck.
Questions To Ask Before Living On a One-Income Family Budget
Whether there are just two people in the home, or if there is also one (or more) little mouth 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 on one income?
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 OK, 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.
How To Live On One Income When Money Is Tight
To learn more about how to live off one income, check out the eight tips below.
1. Get out of 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 into 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 does not 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.
Here is a short video that quickly answers some commonly asked questions about emergency funds:
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.
Refinance any remaining student loans. Shop around for cheaper cell phone packages and think about getting rid of cable TV. Look for better rates on home and auto insurance.
This is also a great time to eliminate paid services like landscaping, housecleaning and even dog walking.
If you hadn’t done much cooking at home before, change those habits. Prepackaged and takeout foods can be very expensive. Try 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, high housing costs are the reason they can’t live on one income. Avoid getting caught in the more-house-than-you-need trap.
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.
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 big 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.
See Also: 100 Ideas to Boost Your Income
Frugal Living On One Income
Learning how to live off one income is definitely not impossible. It will just involve intentional, frugal living as well as monetary sacrifices, knowing that there is a light at the end of the tunnel – even if that light is two years and a master’s degree away. Frugal living on one income can be done by following the above tips and adjusting them to any particular circumstances.
Depending on the situation and the family’s preferences, living on one income could be just a means to an end. This might be a temporary situation that will be overcome in the years ahead.