I grew up watching my mom work. She was either going or coming home from work or working from home. Since she’s a single mother, she lives on one income. And that got her a house, put my sister and me through school, and allows her to travel abroad two times a year.
As I got into personal finance, I kept on thinking about life on one income. Since my mother could do so much for herself and her two children on a single income, what’s stopping my partner and me?
Saving a big chunk of money is hard, so saving mine or my partner’s full monthly income might serve as a fast-forward button. Building the habit of living on one income gives you freedom. You can quit an unsatisfying job, stay home with your children, or get back to school.
I had a full-time job that paid well, but it left me tired and took up most of my time since it was shift work. I wanted to quit and explore a freelancing career, but I knew that we must prepare well if I could not bring home income on a regular. While we’re debt-free, we do have a mortgage.
Living on one income seemed tempting. At the moment, selfishness was way out the window; my partner and I were way past labeling our earnings as my money/your money.
The shortcut to living on one income and saving the other is to pay off debt, build an emergency fund, reevaluate your spending habits, make cuts where possible, minimize your household, and prioritize time over material possessions.
Why Live On One Income?
There’s no better feeling than being prepared for whatever life throws at you. A job loss, moving, or pandemic can happen out of the blue, as we saw in 2020. Being financially prepared sure takes a lot of the stress out of the situation.
As with everything in life, you must discover why you want to do it. Is it to secure a better future for your children or to be able to retire early and travel the world?
Living on one income doesn’t require any of the partners to quit their job. If you enjoy what you do, that’s amazing, and you should continue so. But saving one of the incomes will have you prepared for when you’re obligated to switch to a one-income family.
Living on one income will teach you mindfulness, how to spend time over money, and build a healthy relationship with money. Prioritizing savings and a debt-free future before one-off expenses is a crucial part of personal finance.
Determine Whose Income You’ll Save
Living on one income doesn’t mean you have to put your or your partner’s income towards savings.
Consider combining your finances if you haven’t already. If your partner makes double or triple your income, it’s easier to save your income and still live lavishly. But that’s not the idea behind living on one income.
Combining your salaries and living on 50% of that sum is practically living on one income. After you both get paid, you put half of the total amount towards savings and live as you have earned only half of the money.
If both of you make almost the same income, choose which one of you can automate a transfer of their paycheck towards your savings account each month.
Your Guide On How To Live On One Income
Before you jump on the bandwagon, look at all the things you need to do first. Starting and failing because of inadequate preparation is not as uncommon as you’d think. Saving one income is not as straightforward as you’d think.
Cutting half of your income might scare you, so start gradually to adapt almost seamlessly. Learn to live on one income before you actually have to.
Start by putting more towards savings and make it a challenge to save on a different category each month.
Make A Budget
After you determine what income you’ll live on, create a budget according to that amount. Creating and sticking to a monthly budget will help you examine your spending habits, hidden expenses, and give you an idea of where you could make cuts.
Set Up An Emergency Fund
I can’t count the times when an emergency fund has saved me. A huge vet bill, sudden car repair, unplanned laptop replacement, you name it. Having a money cushion makes any fall bearable.
Imagine living on one income and losing your job. Having an emergency fund that can cover 3 to 6 months of living expenses takes away the stress.
Pay Off Debt First
We’ve talked about the importance of paying off debt sooner rather than later, and living on one income is the time when you realize the importance. Being debt-free gives you the freedom to try out any personal finance challenge or lifestyle.
List out all your debt and start by paying off the lowest. You don’t have to classify your mortgage as debt, but it doesn’t hurt to look into refinancing before starting that one income lifestyle.
Explore Frugal Living
Living on one income is challenging – I won’t sugar coat it for you. It’s hard to accommodate your old habits with only one salary.
Living frugally doesn’t mean taking a shower in a bucket you’ll later use to water the flowers. It’s more about switching to generic brands when shopping for groceries, thrifting clothes when possible, cooking instead of eating out, and visiting admission free sights for fun.
Frugality has a bad rep because of some people that take it to the extreme. But it can be very beneficial for households switching to one income.
Cut Personal And Living Expenses
If each of the partners spends roughly $50 a month for haircut upkeep, cosmetic procedures, or spa visits now, imagine how that will affect your one-income household. Switching to a low-maintenance hairstyle and at-home spa days can save you hundreds in the long run. There are other free ways to spoil yourself.
Make energy-efficient updates around the house to lower your electricity bill.
Downsize Your Lifestyle
If you’re renting and not owning, consider how you can lower the rent. If rent takes most of one of your incomes, consider moving to a less expensive area or downsize to a one-bedroom.
One Income – One Car
Cars can suck your paycheck dry. If you track your gas, insurance, and repairs expenses for a year, you’ll see why sticking to one car will save you money. When switching to one income, you must adhere to one car too.
Communicate The Idea Of A One-Income Household With Your Family
There are different reasons you’d want to try and live off one income and save the other. Maybe you want to be a stay at home parent soon, save for a house faster, or plan to retire early. Whatever the reason, communicating the idea, and consulting your partner is essential.
If you have kids, transitioning to a one-income lifestyle can affect them too, so plan out how you can explain it to them.
Getting your family on board is the most critical step. Selfishness needs to get out of the window.
It would be best if you decided which one of you will take care of the finances. Living on one income requires more tracking and budgeting, so one of you has to micromanage your money.
Benefits Of Living On One Income
Living paycheck to paycheck on a combined income of $100,000 will leave you depending on an employer your whole life. Living on one income will change your entire look on money. Here’s what benefits I’ve experienced so far.
Living On One Income Ramps Up Your Savings
Other saving methods don’t come even close to living on one income. Whether it’s saving for a short-term financial goal like a big purchase, or a long-term goal like putting a down payment on a house, this is the fastest lane.
You Experience Financial Freedom
Having the luxury of ditching a job you don’t like, making a risky career change, or staying at home with your children is unprecedented.
It’s absolutely worth it to sacrifice smaller indulgences to be more independent and free financially. You won’t stress even if one of you loses their job- you’ve already adapted to living on one income.
(Re)Discovering Free Outlets Of Entertainment
Date nights, family time, or hanging out with friends can be fun at a low cost too. Cooking dinner at home, movie nights at home instead of at the cinema, renting or borrowing board games, and playing with friends are all great examples of quality and low-cost time.
You Get A Chunk Of Money To Invest
Saving half of a combined annual income of $100,000 leaves you with $50,000 in savings after only one year. You’re able to max out your retirement or HSA accounts.
Alternatively, you can make your money earn money by investing in stock, funds, or bonds. Keeping $50,000 in the bank will earn you little interest so consider at least short-term investments.
Discovering your guiding light towards the one-income lifestyle is vital. It can make your transition a fail or a success. It’s important to note that not every family can meet their basic needs if living on one income.
Living and working in these uncertain times can bring you stress and discomposure. Practicing living on one income when you don’t have to secures you a safety net and aids in reaching your financial goals faster.
While life is not about limitations, you must be prepared for the worst-case scenario as an adult. And when the time comes, continuing your living on one income will be easy as a breeze.
Would you ever try living on one income? Do you finding smart or too restricting?