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One of the biggest game-changers with our finances was shifting things so we could live on one income. However, that’s not always an easy thing to do.
Today I’ll break down strategies and tactics that we and other couples have used to make it easier!
Living on One Income?
I’m serious; if we had to identify the one habit that changed the trajectory of our finances, it’s moving finances in such a way that we could live with just one income.
Here’s the thing – when we started it was out of practicality.
When we were first married, our income was much tighter. My husband had his first post-graduation and I was wrapping up my final year in college. I was attending full time and I had a paying part-time internship.
Because of the nature of the internship, we didn’t know if it would be extended beyond the semester or not. We sat down and decided we needed to keep our essential expenses under his income.
My income would be used for building our financial cushion, paying off the debts we had, and yes, some fun money.
At that time it didn’t seem like a big deal, but that mindset and system was a tremendous help. We were able to goals like paying off debts. We were able to move to Raleigh when I got a job offer and having our expenses covered by it meant Rob could hunt for a job he was happy with.
When I began working for myself we had less stress because I could reinvest what income I was making back into the business. We were able to build up our down payment faster. When we became parents I had some flexibility in adjusting my work and yes, I took time off too.
We’re grateful for those opportunities and realize how fortunate we are to have made that decision early in marriage.
But even in those circumstances, it wasn’t easy. There were limits we had to place on our finances in certain areas.
Looking back though, we’re happy we did.
You may be in a situation where making this transition would be a real benefit for you.
Like us, it could be out of necessity or because of circumstances.
You may have seen a reduction of income either because your hours have been cut or you’ve been laid off.
It could also be a voluntary thing. When I asked in our Thriving Facebook group the main motivation for moving to a single income. The biggest reason was more time with kids.
I’ve seen families on the path to financial independence shift their finances so that they use one income to take care of the general living expenses and use the second to save and invest for goals.
So many couples and families can benefit from this mindset. I’d like to offer some help with getting started.
I can’t cover every single situation. For the purpose of this episode, I’m going to be focused on your single income stream being able your essentials, some savings, and enjoy a bit.
In this episode, we’ll go over:
- the process to scale back your expenses to fit under one income
- common challenges that can come up
- Benefits of living on one income
Ready? Let’s get started!
Resources to Shift to Living on One Income
Here are some resources to make managing your money much easier!
- Best Budget and Money Apps: Personal Capital, Tiller, Mint
- Free 401(k) Analysis: blooom
- Open Up Your Brokerage Account: Vanguard, M1 Finance, Fidelity
- Grow Your Stash Faster: High Yield Savings with CiT Bank
- Jumpstart Your Marriage and Your Money
- Before You Drop The Mic On Work, Here’s How To Decide If You Can Afford Living On One Income
- Why We Started Living Off of One Income
- The Completely Achievable Path to Becoming a One-Income Family
- Live on One Income, Have Fun with the Second
- Living Wage Calculator
- How to Get Cheap Rent: The Minimum Viable Apartment
- Use These Strategies to Seriously Save Money on Your Rent
Thank You to Our Sponsor Coastal!
Support for this podcast comes from Coastal Credit Union. If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today!
Before we wrap up, I want to focus on a few key takeaways I got from preparing this episode.
- Be clear on your motivation and goal. The better you define these, the easier it is to make the transition. You'll be in a better position to know which expenses to cut back first. Or even eliminate. And you can find ways to shore up your savings before you make this leap.
- Take it bit by bit. I know that they're going to be circumstances with some families where you have to make the transition as soon as possible because there is a ready reduction in income. But if you're doing this voluntarily, You don't have to rush this. Approaching it bit by bit allows your family to adjust. To the new finances. And hopefully, it makes it easier to stick with a plan.
- Have a plan for that second income. Even if you don't need it to survive. You do want to use that money wisely? For example, you can pay down your debts. Build up some savings for a specific goal, or if you want to save and invest it. For long-term goals, then you know, that money is right there for you.
This is definitely a topic that we can go more into. And if you're thinking about making the transition, come chat with me.
You can join us in the Thriving Families Facebook community. We're a fun and supportive group.
We swap ideas, questions, stories, advice. When we try to help one another out with our family and financial goals.
We'd love to see you there!
How to Scale Your Expenses to Fit Under One Income
For most couples making this switch from depending on two incomes to one is not an overnight process. However there is a path that you can use to
Make it go much smoother. And it's basically breaking it down into three steps. The first one is define the lifestyle that you want to have on the single income. Get a snapshot of where you are now. And then optimize and scale back your expenses to your desired level. So let's break each step down.
Defining your single income lifestyle sounds pretty simple. Right?
But this isn't a step you want to gloss over the key things you need to figure out. Is your motivation for why you're doing this?
The second is what is a reasonable wage that you need to make for everything to work, where you can take care of your essentials, have a little bit of money in savings. And have a little bit of room for fun. And then finally what is your timeline for this transition
So why am I asking you to nail down your motivation or your why? Well, this has a big part on how successful you can be. As I point out in my book, jumpstart, your marriage and your money. One reoccurring pattern with financially successful couples. Is that they had a clear motivation. And a plan for their finances.
Recently I asked members in our thriving families, Facebook community. Who voluntarily switched over to a single income. To say, what was their main motivator? And by far. The biggest reason was having more time with the kids. And it's really good to nail down your motivation because it then helps you with this second step, which is.
Taking this goal that you have living on a single income and really defining what that lifestyle will look like. If you want to have more time with your kids. That's great but what are you thinking about your day to days what expenses do you plan on having.
Having more time with the kids may mean that you don't have to worry about daycare expenses, a huge savings. Or maybe you're looking at cutting back the hours at work, but you're still gonna need some childcare. Defining these things allows you to start coming up with a number that you can work towards. And that's the second part which is how do you figure out how much you need for the lifestyle that you're trying to go for
This isn't always so cut and dry because there's so many different factors that are going on. But one big one is where exactly are you living? What are the typical expenses? For the town or state you're living in. I found a really helpful tool called living wage. Calculator. And I'll link that in the show notes.
Where you could look at metropolitan areas just to get a ballpark figure. Of what to expect for typical expenses like housing, groceries, childcare, and so forth.
Now, of course you can always adjust this and I'm hoping as we go further in this explanation, you'll see that you can optimize your expenses further, but this gives you a ballpark figure to work with. And then finally let's look at that timeline.
Again, for this episode, I'm hoping that we're doing this voluntarily. That you have a plan. To wind down towards this
So what's the schedule you're going for? Are you hoping to make this transition in a year, two years, three years.
Well, I don't want you to drag this out. Coming up with a reasonable timeline can allow you to slowly step down your expenses. Which makes it less stressful on everyone.
Okay. Now we're onto the second part, which is getting a snapshot of where you are now. How close, or how far are you from? That target expense number that you're looking at. Now, if you don't already have the numbers in front of you, here's where I'm going to suggest getting out a spreadsheet or grabbing one of the money apps that I usually suggest on a shows such as mint, personal capital.
Or tiller to grab all of that quickly.
Some couples may see that they're not too far off from their goal. Especially if they're looking at cutting out daycare completely. They may only need to make
Relatively small adjustments, or you may see that it's a bigger gap than you imagine. Don't panic again, we can always revise that timeline. But knowing exactly where you are now can allow us to come up with a realistic plan. To getting you to your goal. So now we're on the meat. Which is optimizing and scaling back your expenses.
Optimizing and Scaling Back Your Expenses
If you’ve signed up for the 5 Days to $5K course, then you’ll be familiar with this. Your goal here is to find, save, and make some extra money to get yourself financially ready to live on one income.
Let’s actually start with the last piece – earn more. Is this episode about once income. Yes, that’s the goal, but even if you plan on living on solely on one income, I’ve noticed that most families need to either pad their savings or knock out high-interest debts before they make the leap.
The four main expenses that can make shifting to one income are:
We’re going to get into housing and debt a bit more when we go over some challenges that can come up, but for us, rent was one of those key decisions we made.
When we were first married, this was one of those big decisions we did have to make.
We had a choice of getting an apartment that was a fantastic location for both work and school, but. It was more expensive
We would have to depend on both of our incomes for that.
The other one was. I'll kindly call it a shabby chic apartment across the street from the Chesapeake Bay. Slightly longer commute, but the rent was well within our budget.
We ended up going with the cheaper apartment and honestly, we enjoyed it. It wasn't the fanciest place.
But it turned out to be a real benefit to us.
By not being centrally located with shops and restaurants within walking distance. It kept us from overspending in our budget.
Don't get us wrong. We weren't completely out in the boonies. Actually, there were a couple mom and pop places that we would visit in our old neighborhood, but they were much cheaper than the popular chains. That were at the other apartment.
But by focusing on the big expenses. Like housing, we were able to have more money put towards the things that we're really excited about and really mattered to us.
And let's talk about food. I will say that this is one of our bigger expenses even after optimizing. And the reason is we enjoy having a good time. In food is a part of it. But we've learned to adapt the principles of being frugal foodies.
A big part of this meant stepping up our cooking game. And it doesn't have to be complicated. You don't have to be a chef. I do have some great resources on essential meals that you can learn and use in rotate into your menu. That will save you a ton of money. Meal planning and being more aware of how to use the ingredients we have in the pantry and the He
has cut down our expenses considerably. But we don't go just for cheap food. We look to see what produce is in season so we can get it fresh. And get it on sale.
I will not tell you not to go out to eat. I know now we're being extra cautious and trying to social distance ourselves properly. But you can still go to some of your favorite restaurants and take out just be more aware of when you're doing it and making sure that you know when the happy hour or special deals are available Let's talk about cars.
If you are carrying car loans and have payments. This can be a significant drain on your budget. Are there ways for you to better optimize your transportation? If you're both working from home, could you find a way to. Sell the second car
Or downsize to something more affordable?
Besides getting out of a car loan you might also
Save some money on insurance. Again, go ahead and run the numbers and see if this could be a significant one for you.
Now. Yes, you can go through every single expense and see if there are ways that you can cut back and save. But in terms of time and energy, I want you to focus on those bigger expenses. If you can save on your housing, if you can cut back on groceries and food transportation. And we'll talk a little bit later knocking out that debt.
Those are big wins that can allow you to have a little more freedom. With some of your other expenses. I don't want you stressing out over the smaller things.
based on your timeline, go at the speed. That makes the most sense to you. And then focus on one of those expenses at the same time
Many couples find it easier to stick with the plan when they focus on one thing at a time, see a win from it, and then moving onto the next expense. You can always go back and optimize again, but focus one step at a time.
This will hopefully make the transition easier and more sustainable
Common Challenges to Living on One Income
I wish every couple and family can make the transition smoothly, but the reality is that there can be some big challenges on the way.
Here are the three biggest ones I’ve seen and some ideas on how you can tackle them.
#1: Debt is making it impossible to shift down to one income.
Debt can suck your paycheck dry. Do me a favor. add up all of your monthly payments for your credit cards, medical bills, car, and student loans.
In many cases, couples see that if they didn’t have those debts, they’d be able to switch to one income right now!
That doesn’t mean you have to wait until all your debt is paid off. The two main ones I’d focused on are your high-interest credit cards and car loan if you have them.
If you two haven’t already, start a plan to knock out your debts, one by one.
#2: We live in a high cost of living area.
Here’s where I’m turning the spotlight on others. City Frugal
Housing is usually what drains a family’s budget when living in an HCOL area so optimizing this is going to be a big win.
I had an interview with [x] on how you negotiate better deals with rent. Also City Frugal has a framework for finding an affordable apartment.
On the flip side, there are some incredible advantages of living in the city.
Toni from Debt Free Divas has found ways to keep her family including kids entertained on the cheap.
Depending on where you live, public transportation may be another win in your column.
#3: Health issues are hampering us.
In this case, knowing what resources you qualify for can make a huge impact on whether or not you can make this transition.
The Freedom of Living on One Income
As you can see, there are no secrets to living on one income. It takes an intentional approach.
Using this mindset has helped us to
grow the gap between what we earn and what we spend.
It’s also given us more options.
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