One of the biggest decisions couples face after having kids is whether to have one parent stay at home full-time or whether both parents should return to the workforce. Unfortunately, with rising consumer debt levels, record housing prices and stagnant wages, there are more families these days that are relying on two incomes just to get by.
Three years ago we decided to try and live on one income after finding out we were going to have our first child. I’ll be honest; I didn’t think it was possible at first. I knew we would have to make sacrifices in order for us to survive as a single income family, but when I crunched the numbers I realized that we could make it work. Here’s how we survived, and now thrive, as a single income family:
Live Off One Income While Still Earning Two
Since we had another six or seven months with two full incomes, plus a year of maternity leave benefits, we knew that we had some time to ease our way into living on one income. The key is to recognize this early and start preparing by cutting back on expenses and saving more money every month until you’re comfortably living on just one salary.
The benefit to preparing early is that you’ll start developing some frugal habits that won’t be so shocking to your lifestyle after the second income disappears completely. The extra money you save over that period of time can be used as an emergency fund in case something unexpected comes up after the transition to a single income.
Use a Budget to Track Income and Expenses
Using a personal budget is not for everyone and it can be tedious to track every penny you spend. That being said, you should monitor your income and expenses for a certain period of time after any big change in your financial situation. Becoming a single income family definitely qualifies as a major change.
To help us get a big picture view of how our financial situation would change over time, I created a spreadsheet to forecast income and expenses over a 12 month period, which showed how much we would need to reduce our expenses by to reach our goal. I also started tracking our monthly spending so we could get a good handle on our fixed and variable expenses.
Delay Your Big Purchases
It might be hard to watch all of your friends taking expensive vacations and buying the latest gadgets while you drive around in your 10-year old beater and consider camping for the long weekend as your summer vacation. With a bit of patience though, you can still enjoy the finer things in life.
We lived in a 2 bedroom, 1 bathroom starter home for over eight years and if we wanted to have another baby we would eventually need to upgrade our house. Rather than immediately jumping into a bigger home, we took our time and delayed our purchase by over a year. This allowed us to get more comfortable living on one income and gave us the opportunity to save for a larger down payment. After some serious saving, we ended up building a house.
Find Other Ways to Save Money
Having plenty of time to prepare for single income living, we were able to find several other ways to save money and reduce our expenses. Here are some tips to save money that help us survive as a single income family:
- Plan your meals – The single biggest money saver for us was planning our meals in advance and cooking at home every night. We were spending well over $1,000 every month on groceries and dining out, and were able to reduce that to $600 a month by meal planning. Not only have we saved money, we are healthier than ever and we’ve actually become pretty good cooks over the past few years.
- Shop around – We looked at all of our recurring monthly bills and decided to shop around for better rates. We were able to save on auto insurance premiums, save on cable and internet bills, and save on heating and electricity just by making a few phone calls and asking for better rates. If you make a habit of doing this once a year you can typically save at least 10% off your bills.
- Use rewards wisely – There was no point saving up all of our Air Miles rewards for a dream vacation. We started using our rewards cards points to redeem for products like groceries and gas. Between PC Points and Air Miles we are able to earn an extra $50 a month in free groceries and gas.
It’s not an easy decision to try and live on one income. The good news is that you usually have some time to give it a chance before determining that you simply can’t afford it.
After a few months of struggling to save money and reduce our expenses we eventually found our groove and are not only surviving, but thriving as a single income family.