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What if your two-income family suddenly needed to live on one income?
Could you do it?
Most people might panic at the thought of living on one income, but it could be one of the best money moves you make.
And it doesn’t have to mean eating Kraft mac n’ cheese in your parent’s basement.
We were forced to live on one income through unfortunate circumstances (which I’ll explain below) but in the process I realized why people actually choose to live on one income.
The thought of living on one income never occurred to me in ten years of marriage. In fact our thoughts were usually just the opposite… how can we increase our income.
With a mortgage, two kids, two car payments, credit card bills, stuff for the house… it was never enough.
But what also didn’t occur to me, is that we were living with a short-term outlook.
The earn, spend, earn, spend, earn, spend… “oh wait, did a decade just go by?” outlook.
When you’re so focused on keeping up with the Jones, it’s easy to lose sight of what you really want in life. The longer term stuff.
- Like walking away from work while you can still enjoy a few healthy decades.
- Or transitioning to another line of work that’d require some more school or training.
- Maybe investing in a few rental properties to start generating passive income.
- Buying your first home, or paying off your existing home loan quicker.
- Job security can dissolve in a heartbeat, so building a six-month money cushion would be nice.
- Or maybe you’d like to start a family and be able to spend more time with your kids.
- Or travel and experience life in other places.
Where do you want to be in 3 to 5 years?
In another career, a new business, traveling, starting a family, buying a home?
Assuming you get a cost of living raise, and make no changes to your lifestyle or spending, do you see yourself getting there?
Preparing to Live on Half Your Income
If you’re a two income family living paycheck to paycheck, then living on one income might seem laughable.
But think of it this way:
At what point would you be ready to focus less on acquiring things (and carrying debt) and more on your longer term wants?
For us, I’m not sure when that would have happened. Because until life smacked us in the face, we were knee-deep in debt and running the hamster wheel with no end in sight.
But in hindsight, the key seems to have been pretty simple.
- To agree on one, maybe two 3-5 year goals.
- To work backward and adjust your lifestyle to get there.
Here are 7 ways that’ll help you to live on one income and direct the other to what you really want.
1. What’s Your Why ?
“People who get what they want, tend to be the ones who make the effort to know what they want.” -Oprah Winfrey
Many of us realize too late in life, that time slipped by much faster than we expected.
- Maybe you spent two decades in a career that bored you because there never seemed to be enough money or time to make a change.
- Maybe you dreamed of standing in the Sistine Chapel, or sipping wine at an outdoor cafe in Paris. But neither ever materialized.
Just identifying and agreeing on your focus for the next 3-5 years is a big step, and will help you to prioritize your lifestyle.
2. A Budget Can be Your Road Map
Using a budget seems as obvious as wearing a seatbelt. But not many people actually make a consistent effort to track income and expenses.
Believe it or not, it isn’t the car repair, or the dental bill that traps us in paycheck to paycheck mode. It’s the thousands of dollars we let slip through our fingers each year on everyday expenses.
Just tracking and being more intentional about things like cable bills, food, subscriptions, insurance and shopping, can recover several hundred dollars each month.
Here are some free budget templates that’ll make it much easier to track expenses from month to month.
3. Build an Emergency Fund
Have you ever tried to budget, when a month or two into it a car repair or a $600 plumbing expense blows a hole in it?
For years, my idea of an emergency fund was keeping a cushion in my checking account. But emergencies never seem to wait until one is paid before the next one slaps you.
Trying to pay for emergencies with your checking account is one of the biggest budget killers, because budgets are for expenses that are predictable. And emergencies, by nature, aren’t.
Even if you aim for $1000 in your emergency fund, you’ll weather most emergencies and your checking account won’t skip a beat.
The two keys are:
- Have a separate account, apart from your checking account.
- To regularly drip money into it.
Here’s how we set up our emergency fund in about 10 minutes, to do both.
And since then, we haven’t paid for a single car or home repair from our checking account.
4. Pay off all Consumer Debt
Credit card debt is like a toothache. It bothers you, but sometimes you put it off and deal with it. And maybe you don’t realize how it’s affecting your mood, your health and even your relationships.
Until eventually, it becomes unmanageable.
Whatever your goal is… to pay off a student loan, pay off your mortgage early, fund an investment; carrying credit card debt from month to month is like running a race in wet boots.
And it could last for decades!
Here are a few ways to systematically eliminate credit card debt so you can refocus that money toward your goal.
5. Consider Working From Home to Save Costs
Even if your company doesn’t have an established work from home program, don’t assume it’s impossible. Most companies understand that retaining good employees means offering some flexibility.
And even if you can score part of the week at home, you’ll save hundreds each month.
When I initially went home, I immediately saved over $400/month on gas, tolls, wear and tear on my car, and food.
I estimate that over six years at home I saved almost 130,000 miles of driving! And assuming there are 20 work days each month, I eliminated the equivalent of 90 days in my car!
So regardless of which partner works from home, this can go a long way toward living on 50% of your income.
Here’s some info that could help you get the ball rolling on working in your PJ’s:
- Want to Work From Home? Here’s 4 Steps to Convince Your Boss
- 20 Legitimate Work from Home Companies Hiring Now
- 20 Side Hustle Ideas to Make $100 a Day
6. Check Your W4 Form for Additional Income
Ok, confession time. I’ve bought some nice toys, and booked a lot of trips in April.
Getting a refund check for $3000-$4000 dropped in your checking account can seem like a windfall.
But not if it’s your own money.
The average refund last year was $3068 and if yours was in that ballpark, it means you’ve lent Uncle Same around $255 interest free, each month.
Living on half your income (or lowering expenses significantly) is really about keeping more of your paycheck.
So dividing that windfall out over the course of the year – when you need it, can help you to live on one income.
Here’s a quick way to determine how to adjust your W4.
7. Try Downsizing
When you qualify for a mortgage, banks will suggest the maximum amount you’re qualified to borrow. And real estate agents work on commission.
So choosing a home where the mortgage and property tax are stretching you to the max, means much less flexibility in your life.
When you need both incomes just to survive, it’ll not only be hard to save or have a life, but things like fencing, landscaping and other improvements may never get done.
When we’re in our rockers one day, the things we’ll remember most are the experiences, not the square footage of our home.
What if You’re Single and Don’t Have a Second Income?
So far, we’ve focused on two income families, and how you can trim expenses so one income can be funneled toward your goals.
But what if you’re single?
What if you don’t have the luxury of directing one entire salary toward debt or savings? And you don’t have the option of drawing on that second salary if you need to.
The idea of living on half of your income might seem impossible without trading your house for a tent.
But chances are, there’s more breathing room than you’d expect.
We encountered this when my wife passed away at 44. Losing a partner through death or divorce is traumatic enough, but when you’ve built a life based on two salaries, and suddenly there’s one, it’s a big wake-up call.
At the time, my salary was decent but the reality of surviving on less, and providing for two kids, made me do what I’d been neglecting for a decade:
I finally wrote everything down and began to question every expense… food, car payments, clothes, pocket money, insurance… everything.
And I found that I was letting thousands of dollars – yes thousands, slip through my fingers throughout the year.
- I wasn’t using a budget.
- I had no emergency fund and just hoped I’d have enough of a buffer in my checking account.
- We spent over $900/month on various food costs for just myself and two kids.
- We were paying well over $200/month for cable TV.
- I had the same auto and home owner’s insurance for over 15 years.
- I was writing a monthly car payment check for $486.13. (See how it’s etched into my memory?)
- I’d withdraw cash every week “just to have”, and had no way to track what I was spending.
My point is, that we didn’t choose to start living on much less income, we were forced to.
But by taking a hard look at everything we spent, we not only survived, but we improved our finances.
If I had done the steps above and drilled down on our expenses 6 or 7 years earlier, who knows how our family would have fared.
We probably would have traveled more, skied more and paid off my wife’s student loan much sooner.
We definitely would’ve endured less bill paying stress.
Living as a couple with two incomes can lull us into a false sense of security. We think we’ll always have each other – and each other’s salaries. We’ll have time to payoff our cars, our pools, furniture, trips and everything else we want.
But nothing’s guaranteed.
And a decade can slip by pretty quickly before realizing that you’ve lived paycheck to paycheck, while your only goal was… to pay bills.
Creating a budget and questioning every expense isn’t being cheap. It’s about knowing where you’re headed, then being intentional about where you focus.
What’s your direction for the next few years?
Maybe you can’t live on one income and dedicate an entire second income to your goal yet. But maybe tweaking your budget can find 15-20%. And one of these side hustles can help to to generate another 15-20%.
The hardest part might be shifting your focus away from everyone around you and keeping it on the things you want.
We tend to notice our friend’s new car, or her remodeled kitchen. But we don’t notice that she’s been studying each night for two years for her nursing degree, or her real estate license.
What’s your why?
Where are you headed over the next 3-5 years?
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