Manage Your Life
Monday, November 23, 2009
How to determine if you can live on one income
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There are too many families
who were taken by surprise when one breadwinner suddenly lost his
or her job, but some couples might choose to give up an income for
one reason or another. Maybe one person was offered a job in
another city, leaving the other one without employment, the couple
wants one parent to stay home with the kids, one half of the duo is
miserable at work and wants out ASAP, etc. Before you make the
choice to live on one income, you need to find out if it's a
viable option by following these steps.
- Re-calculate Your Housing Costs - It's
likely that your rent or mortgage accounts for the largest chunk of
your expenses. Calculate what percentage of the household income
would go toward these costs. If it's a number that doesn't make
financial sense, ask yourselves if you're willing to move
somewhere less expensive.
- Get Your Financial House In Order - Before
making the decision to live on a reduced income, it's crucial
that you have a solid emergency fund and very little (if any)
credit card debt. You'll have less wiggle room after making the
drastic change, and the situation won't be so smooth if you go
into it with shaky finances.
- Experiment - While both of you are still
earning your regular salaries, put your wishes to the test and live
on one income for a month. Pretend the other salary doesn't
exist by directing those funds into a savings account.
- Track Expenses - While you're
experimenting with living on one income, track your spending so
it's clear where cuts could be made if needed. Both of you can
track your own expenses in a shared spreadsheet, or you can hook
your accounts up to a money management website like Mint that will categorize
your expenses for you.
- Repeat Experiment - Live for another month on
one income while earning two, but this time try changing your
habits based on what you learned from tracking spending during the
previous month. Spending smarter is good for your finances no
matter what, and will help you both feel more in control of your
money at a time when you're making big changes.
- Look Harder at Your Expenses - If living on
one income still seems out of the realm of possibility after
changing your spending habits, take a deeper look at your expenses
to see where else you might be able to cut back. Could you live
with one car instead of two, or find a cheaper one? Would you be
willing to reduce your cable package? Scale back your cell phone
plan?
- Communicate With Your Partner - Because one
person is going to rely on the other for financial support,
it's necessary for the lines of communication to be as open as
ever. If you're the one turning away from your income, ask if
your partner feels like there's too much pressure on him or
her. Just because you might be able to get by on one income
doesn't mean the other person won't feel additional stress.
The two of you need to discuss whether any sacrifices are worth it.
- Come Up With a Plan - Your previous ways of
managing money might have to be scrapped when you're living on
one income. Perhaps you used to have one shared account and a
personal account for each of you. That system might continue to
make sense, but it might not. The most important thing is that
you're both on the same page, so agree on how to manage your
money and stick to the plan.
Related Content:
5 Simple Steps For Creating a
Spending Plan
Tracking Your Budget Is Boring,
But It Works
Back to Basics: Balancing Love
and Money
Related: love and money, income, how to, family, budget
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Posted by sandraj6398 Mon Nov 2, 2009 8:02am PST
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Posted by km Tue Nov 3, 2009 6:13am PST
Here is the problem with the experimental month...you still need to pay for gas to commute to work even if you're putting the income into a separate savings. When one person is at home I suspect the utility bills will go up with increased usage. I would love to stay home but then my money wouldn't be my own, how do you surprise someone with a gift when you bought it with their money??? I think the best course of action if you're really serious about living on one income and not completely certain that you can is to meet with a tax specialist.
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Posted by km Tue Nov 3, 2009 6:14am PST
Here is the problem with the experimental month...you still need to pay for gas to commute to work even if you're putting the income into a separate savings. When one person is at home I suspect the utility bills will go up with increased usage. I would love to stay home but then my money wouldn't be my own, how do you surprise someone with a gift when you bought it with their money??? I think the best course of action if you're really serious about living on one income and not completely certain that you can is to meet with a tax specialist.
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Posted by Trish Thu Nov 5, 2009 9:33am PST
I am preparing to go back to school and my husband will be carrying the financial load. This is not something we are taking lightly. It is hard to live the life we want with two incomes, cutting back and making adjustments will not be easy but worth it in the end.
I think the trial month is to give you an idea, I think people are looking at it too literally. If you can't make ends meet on the trial it will be worse for the real thing.
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