Money is an important part of our lives because of the opportunities and possibilities that it presents. Learning to live on one income can have a huge impact on you and your family – more so than many will ever realize.
- Reduced stress,
- more flexibility,
- better use of your money, and
- possibly even early retirement!
…These are all potential benefits when you learn to live on one income.
In today’s society most families live on two incomes. However, there are significant benefits to reducing your dependency to just one of those incomes. This article isn’t about why your family should give up one income, instead, this article is about living expenses and flexibility. Regardless of whether your family is a one-income or two-income family, using only one of the incomes to cover living expenses can be a great move.
Why (and How) Every Family Should Learn to Live on One Income
This article was written by Marc from Vital Dollar, where he helps people save money and make more money through his own personal experiences! Enjoy!
My wife and I have been married for 12 years. For the first 6 years of our marriage we both worked full-time. After our daughter was born about 6 years ago my wife left her job to become a stay-at-home mom (since then we’ve added a son as well).
For about the first 4 years of our marriage we relied on both of our incomes to cover our living expenses. We knew that we’d like to have the option for my wife to stay home once we had kids, so at that point, we made the decision to live off of only my income and save everything that she made. Fortunately, that gave us about 2 years to adjust before we actually had only the one income.
Although it’s what we wanted, it wasn’t always an easy decision.
My wife had been working at her job for about 7 or 8 years when she left, and she’d worked her way up to a pretty good salary. Despite the challenges, having the option for her to stay at home has simply been priceless.
Why Learn to Live on One Income?
Even if you don’t have any interest in staying at home, or don’t plan to have kids, there are still plenty of benefits from living on just one income instead of two. Here are just some of the reasons that it’s worth the effort.
1. Breaks the Reliance on Two Incomes
Possibly the biggest danger in living on two incomes is the fact that you will become dependent on both incomes. If you are spending everything you’re making, you won’t have much flexibility. You must be willing and able to break that reliance on two incomes. Once you have more flexibility, you will be able to be a stay-at-home parent, work part-time, or take a lower-paying job that you might find more fulfilling.
It’s very easy to get caught in the cycle of living a lifestyle equal to your income and needing all of that income to keep up with your lifestyle. Breaking that cycle can be an incredible move for your family.
2. Makes it Possible for One Parent to Stay Home with the Kids
If you already have kids, I’m sure you’ve thought about what it would be like for you or your partner to be able to stay home. If you don’t have kids yet, now is a great time to plan and prepare.
Maybe you don’t think staying at home with the kids is something that you or your significant other would like to do. But it’s very possible that your feelings could change when the time comes. I have several friends who changed their opinion once they had a child and faced the reality of going back to work. There are a lot of benefits to being a stay-at-home parent, including the reduced cost of child care. Even if you and your partner decide to both continue working after having kids, it’s still ideal to have the opportunity to make staying at home happen if you change your mind.
3. Allows Breathing Room for the Unexpected
If you’re a dual-income family but you’re only using one income, this gives you more room for flexibility in case of unexpected emergencies. If the unexpected occurs, it won’t be as big of a problem since you don’t need all of your income to pay the bills anyway.
4. Potential for Increased Savings Rate If Both Continue to Work
If you’re living on one income but you both continue to work, you’ll be able to drastically increase your savings rate and build up a nest egg quickly.
- You could save and invest towards early retirement, or
- simply save for a couple of years until one of you leaves the job behind.
5. Forces You to Be Disciplined with Your Money
Moving from two incomes to one is obviously a challenge. It can be done, but it will force both of you to be disciplined with your spending. If you don’t pay that much attention to your money, you can benefit from the forced discipline of dropping down to one income. Paying closer attention to how you’re spending your money will almost always lead to savings. Your eyes may be opened to certain things that can be easily reduced without a major impact on your life.
- Your grocery expenses
- Cell phone bills
- Insurance premiums
- The expense of dining out frequently
- And…all that crap that you’re buying on Amazon that you don’t really need!
If you’re a two-income family using solely one of the incomes, you would have a surplus each month to keep from going into debt. And while you’ve got both incomes you can use one of them (or part of one salary) to pay down and eliminate existing debt.
If you’re a one-income family, learning to live within your means will also help to prevent any future debt.
7. Prevents a More Difficult Transition Later
The whole point of this article is to show why you should learn to live on one income by choice. There may come a time when you don’t have a choice and you’re forced to live on one income (loss of a job, health issues, etc.). Making the transition now on your own terms will be easier than putting it off until some unknown time in the future.
If you still have two incomes, now is the perfect time to transition to only using one of them for living expenses. The second income gives you breathing room and if you make a mistake or if the transition takes longer than expected, it’s not a problem. You can also save for the future while you have the extra money to do it.
Live on One Income: How to Actually Make It Happen
We’ve looked at some convincing reasons why you should live on one income, even as a dual-income family. Now let’s talk about how you can actually make it happen.
1. Plan Ahead
If you and your partner are making the decision to live on one income , it will give you the time to plan ahead. It’s best to give yourselves some time to work through it. This change does come with some challenges. Planning ahead can make the transition as smooth a as possible.
I highly recommend that you adjust to living on one income while you still have two incomes. The key is to save all of the second income and not use it for your living expenses.
There are basically two different approaches that you can take.
- The first option is to live off the higher income and save the smaller of the two.
- The second option is to think about which one of you would be more likely to leave their job first, and learn to live off the other salary.
For example, say you make $50,000 and your partner makes $65,000. But, your partner is the one who is more likely to stay home after you have a kid. In this case you may want to learn to live off the $50,000 income so your partner can comfortably leave his or her job.
There are also several factors that you want to consider if you’re planning ahead to become a single-income family.
- First, and possibly most important, choose a home that fits in the budget with just the one income. Housing expenses are a major part of the budget. If your housing expenses aren’t realistic for just one income it will be difficult or impossible to make the switch.
- Second, cars can be another big expense in the budget. If you’re looking to move towards living on one income avoid car loans or leases that will lock you into owing hundreds of dollars each month.
2. Max 401(k) Contributions
If you’re currently a two-income family, I suggest maxing your 401(k) contributions on both salaries, assuming a 401(k) is available. In 2018 you’re allowed to contribute up to $18,500, which would be a total of $37,000 for the two of you. Contributions to a 401(k) will reduce your taxable income, so the more you contribute to the 401(k) the less you will pay in taxes.
Much the same, contributions to a Traditional IRA will also reduce your taxable income. The limit for 2018 is $5,500 per person. Even if your move does nothing more than allow you to contribute a big chunk to your retirement accounts, it will still be a win.
Another reason I suggest maxing your contributions while you still have two incomes is because it will be harder to save and invest if/when you do drop down to just one income. Take advantage of the opportunity now while you have it.
3. Create a Budget Based on One Salary
After you’ve decided to use only one salary for living expenses, create a budget that will determine how you spend your money. This is something that the two of you should do together so you’re both involved in the decisions. If you still have two incomes you should have a lot left over to save or pay down debt.
If you’re not sure how to do this, see How to Create a Budget That Works.
4. Get Out of Debt
If you’re currently in debt (aside from a mortgage), getting that paid off should be a priority. Ideally, this can be done while you still have two incomes because it will be much easier and much faster.
If you’re currently making monthly payments on student loans, credit cards, car loans, or other types of debt, you’ll have a much easier time with the budget once those debts are eliminated.
Living on only one income usually involves some sacrifices. The key is to prioritize as a couple. Decide what is most important to you, and in what areas you’re willing to sacrifice.
Maybe it’s your priority to live in a certain school district, so your living expenses will be higher. But maybe you’re willing to sacrifice other things like eating at restaurants, or spending less money on vacations.
6. Consider a Side Hustle or Part-Time Work
Even after dropping down to one income there are still ways to make some extra money. A side hustle is anything that produces income outside of your job, and there are all kinds of possibilities. Many stay at home parents make money from things like babysitting, freelance work, or working as a proofreader. For lots of ideas see this list of more than 125 side hustle ideas.
The money you make from a side hustle may not replace your full-time income. But, even just making a few hundred dollars per month can have a big impact on the budget.
Another option is to work part-time instead of full time. Maybe your current employer would be willing to let you drop down to part-time hours. If not, there are always other part-time jobs that might fit your schedule.
I believe learning to live on one income is important, but sometimes it’s hard. Despite the challenges it’s a realistic possibility if you’re both committed to making it happen.
Commitment makes it easier to be willing to sacrifice, because you’ll have the bigger picture in mind. It may be hard to make some of the adjustments that are required, but it will be worth it.
What’s Your Experience?
Are you in a one-income or two-income family? If you’ve made the transition to live on one income, what was your motivation?
Feel free to share any tips or advice from your own experiences in the comments below!
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