Whether it’s due to one partner staying home to raise the kids or due to a job loss, households transitioning from two incomes to one may face a large financial challenge. Whether living on one income is your dream come true or a circumstance you hope to avoid, it helps to be prepared and think through your options. Here are seven things to consider:
- Run the numbers. Track your income and expenses on a monthly basis to determine if one income is enough to support your family.
- Review your health insurance options. Calculate the costs of health insurance if you or your spouse and children had to switch to a different health plan.
- Don’t forget life and disability insurance. The work of an at-home spouse (e.g., cooking, cleaning and caring for children) should be considered part of the household income.
- Downsize your debt. Try to pay off existing debts, especially high-interest credit card debt, before moving to one income.
- Size up savings. Try to save six months’ worth of living expenses in an emergency fund.
- Protect your retirement savings. Avoid dipping into retirement savings to make it on one income. Develop a plan to continue saving so both partners are on track for retirement.
- Keep a positive outlook. The changes you make now could reap powerful advantages in the future. In addition to gaining a better perspective on your personal finances, you may also realize just how adaptable, supported and strong you are.
Try Living on One Income
Not sure if you can make it on one income? Consider testing out living on one income before making the leap (if you have time to plan ahead). Transfer one partner’s paycheck into an emergency savings account and see how you do living on the other paycheck alone. If you overspend or emergency expenses pop up, consider ways to spend less in other areas to make it work.
Review Your Financial Plan
Need help running the numbers? Connect with your Seaside Client Advisor by calling 407.567.2222.
Single-Income Budget Boosters
Living on one income is a challenge — and giving up a latte here or there probably won’t make up for the loss of a paycheck. The following tips can help single-income families significantly reduce expenses.
- Sell a car if it’s not needed, especially if bus and rail transit are easily accessible.
- Downsize to a smaller home or apartment.
- Drop phone, internet or TV services that are not high priority.
- Plan shorter, less expensive vacations.
- Identify your family’s biggest spending holes (takeout food, digital streaming services, adventure gear, salon/spa, etc.). Cut them out or look for cheaper alternatives.