Are you thinking of becoming a stay at home parent? Need a career change? Want to go back to school? Just want to save extra money? Learning how to transition to living off of one income can be valuable so you don’t have to worry too much about your financial situation.
Whether you need to start living off of one income immediately, or have a few months to prepare, these tips will help.
Before we begin, it’s important to note that it’s completely possible to live off of one income. While it might sound overwhelming to you, with the right amount of tinkering to your budget, anything is possible.
That said, it’s not for everyone, especially if you’re already in a tight financial situation. You’ll have the best chances of succeeding if you’re working your way out of debt (or are debt free) and have a relatively stable income to rely on right now.
Before making such a big decision, consult with your spouse or partner. You want to be on the same page before starting this journey. I’ve been in this situation before, and not earning anything can make you feel a bit inadequate. You want to make sure you have the support you need.
Evaluate Your Current Expenses
The first step is to take stock of your current expenses against the one income you’ll be living off of. How do you measure up? Is there money left over, or do you need to cut back?
Some of the biggest expenses to tackle are your mortgage/rent, any debt payments you have, entertainment expenses, and food expenses. These are the budget categories that have a tendency to creep up or be a little out of control.
If you seriously need to live off of one income, you might have to make a few adjustments. Obviously, if you’re adding a member to your family, downsizing your house may not be an option. If you’re renting, is a cheaper place possible in a different neighborhood? Can you move closer to work to cut down on transportation expenses?
If you’re becoming new parents, then you might not have time to eat out as much as you used to, or you may not be looking forward to as many date nights. Food and entertainment might automatically be cut from your budget.
Have debt? Create a plan to get out as soon as possible. This will free up some much needed space in your budget!
Overall, it’s safe to say you should learn to be comfortable with living simply. A one income lifestyle is typically not an extravagant one. Keeping up with the Joneses and getting into debt is counterproductive.
Create Several Income Streams
We’ve written before about the importance of having more than one stream of income, and it’s definitely true here. If you have other sources of income, such as real estate investments, dividend stocks, or other forms of passive income, this will make the transition much easier.
It takes the pressure off as you already have some money coming in.
Practice Makes Perfect
This is for those that have some time to get in financial shape before they go down to living off of one income. Practice truly makes perfect. If you have other aspirations that make it impossible to work, you need to make sure you can actually make do with just one income.
The best way to prepare is to practice and see what challenges you might face.
Ultimately, you want to start “ignoring” one salary by sending it entirely to your savings (or any other financial goals you have). Don’t allow yourself to rely upon it at all. Once you have your budget figured out, start living like you’re on one income right away.
It might be uncomfortable at first, but just remember why you’re doing it. If your dream is to stay at home with your kids, launch a new career, or save loads of extra money, then you have a strong motivator to make this happen. Hold onto that when times get a little rough.
It’s Not Always Black and White
Perhaps your current situation doesn’t lend itself well to completely living off of one income. Consider part time or temporary work while you make the necessary changes to make it a reality.
If you need more flexibility, consider a side hustle in lieu of a permanent job. Find one that allows you to work from home during any hours so you can focus on your main goal first.
Combining this with extra passive income streams will really help make your dream to live off of one income a reality much quicker.
Whether or not you actually have plans to be a one income family, being prepared and being able to survive off of one income has its benefits, especially in times of an unexpected job loss.
If you’ve properly insulated your finances with an emergency fund and don’t have any debt, then living off of one income + savings isn’t difficult. It’s not the best situation to be in, but at least you’re not at risk of going into debt.
Maybe you and your partner want to continue earning dual incomes, but simply want to save one salary to accelerate your financial goals. That’s a great method and a lot of people have success with it. You can pay off your debt, save, and invest for the things that matter most to you at a much higher rate!
Overall, learning to live off of one income, or even on a bare bones budget, has its perks. It pays to be prepared for such a situation as you never know when you might find yourself needing to cut back temporarily. Learn to be okay with less and prioritize the expenses that truly matter to you in order to maximize your finances and achieve your goals.
Have you ever lived off of one income before? How did you prepare? What are the challenges you faced?