Living on one income is a challenge, especially in times when prices of living are rising in a rapid phase. Before deciding on becoming a one-income family you have to come up with a solid plan. The strategies I’m sharing in this post can help you achieve financial success only on one salary. And it doesn’t have to be a 6-figures one.
Challenges of Living on One Income
There are a few cons associated with having only one income as a family:
- Financial setback in case of emergency or partner’s job loss. You can’t fall back on the other salary in those life events.
- Potential strain in the relationship. Money is one of the few main issues in marriages.
- Lifestyle adjustment. You may have to downsize, cut expenses, or delay your financial goals.
Benefits of Living on One Income
Despite its challenges, can also offer several benefits. Here are some of them:
- Better managing household budget and savings. You can focus on it, analyze your financial situation, and plan accordingly.
- No childcare costs. Weekly nanny cost in 2023- $736 and weekly daycare cost in 2023- $284(Source: care.com). It’s so expensive and prices only rise every year. So when one parent stays at home with the kids, there is no need to spend thousands of dollars on childcare.
- Simplicity. You have to make some adjustments to your lifestyle but when you start living with a minimalist approach you may learn that is beneficial for you. You will buy less, reduce clutter at your home, and focus more on what truly matters.
Before you Become One Income Family
1. Boost Your Savings
You can sell things you no longer need or find some side hustles to make extra cash. As a family of one salary, you need to prioritize building your emergency fund. I recommend using a high yield savings account to maximize your interest. Having savings will give you peace of mind and will be a foundation for achieving financial stability while living on one income as a family.
2. Prioritize Your Financial Goals
Financial goals provide a clear sense of direction and focus for your financial life. You may already have a few short and long-term goals. But when your household income is reduced by 50% you need to adapt and see what is most important. Is it building a buffer in your savings account, paying off a credit card debt, boosting retirement savings, or funding kids’ college tuition? What can be postponed? Maybe apartment improvements, new purchases, or home ownership?
Strategies for Financial Success While Living on One Income
3. Create a New Family Budget
You have to identify how much money is coming in and going out every month. A well-structured budget will help you achieve financial success.
3.1 Calculate your total monthly net income
This will include one salary and any additional sources of income that your family earns.
3.2 Make a list of your monthly expenses
Check your bank and credit card statements; review your bills and receipts. There are 6 categories of monthly expenses:
- Fixed costs that remain consistent throughout each month like lease or mortgage payments, car payments, or insurance premiums.
- Variable expenses that can change regularly like groceries, gas, medical bills, or transportation.
- Optional expenses where the cost will differ each month. It can be entertainment, dining out, or clothing
- Debt payments
- Savings
- Investments
3.3 Add up your total monthly expenses.
You have to make sure you are making enough per month to cover all of your spending. It will help you recognize areas that need adjustment to the new financial situation.
4. Inspect Your Spending Habits
Did you ever wonder “Where did my money go?” If you have a close look you may find out that you spend too much money dining out or maybe buying too many toys for kids. By analyzing your spending habits you can easily stay within your budget every month.
5. Reduce Unnecessary Spending
And it’s as simple as just “don’t buy things that you don’t really need”. Ask yourself a question if you really need something and if you can afford it. You can save for it or find ways to get it cheaper. Try:
- Buying secondhand. It’s not only good for your wallet but also environment.
- DIY (Do it yourself) you don’t need to be good at DIY projects. With many YouTube tutorials, you can become a pro.
- Swapping. Trading goods or services with others is a great opportunity to connect with the community and reduce waste.
6. Reduce Variable Expenses
You have to find ways to save money in everyday life. Small changes in your lifestyle and habits can make a change. Check out 50 Practical Money-Saving Hacks that will help you reduce spending and boost savings.
7. Prioritize Debt Payments
Find the best method that works for you and your family’s budget and you take control of your financial future. It can be paying the smallest debt as fast as possible and paying minimums on all other debt, paying off the highest-interest debt first while making minimum payments on all the other debt, or combining debts into a single account.
8. Invest
It’s also an important strategy in achieving financial success. It may be hard to contribute large sums from one income but even small amounts can add overtime. Even if you don’t know much about investing money, you can research and educate yourself. If you are more comfortable with professional help, you can always consider seeking advice from a financial advisor.
9. Earn Extra Money
There is only so much that you can do with one salary. Sometimes the money is just not enough to cover your family’s expenses. In this situation, you may need to start contributing financially. Check out profitable side hustles for stay-at-home moms.
Takeaway
Living on One Income in 2023 is harder than ever before. But it’s not impossible. You have to plan way before reducing your family income by half. Boost your savings, set short and long-term goals, create a budget, track your expenses, and make necessary adjustments. By following those strategies you can take control of your family finances and achieve financial success. Please let me know in the comments section “What has been your biggest financial achievement while managing one income?
