I enjoy watching financial shows such as Gail Vaz-Oxlade’s ‘Til Debt Do Us Part, Princess, and Suze Orman. Over the years of tuning in I have found that one of the subjects that seems to repeat itself is the financial troubles households get into when they shift from being a two-income household to a one-income household. The reasoning for the change in income ranges from becoming a stay-at-home Mom/Dad, a partner being unemployed, starting a business, taking care of an elderly relative, health issues, just not wanting to work (they don’t call the show Princess for nothing), etc. In each of the cases, the household typically does not flounder in debt because of the loss of money, but rather because the family fails to change their spending habits to reflect their new reality.
Changes to Our Household Budget
I am earning some income from my new full-time gig, so our household has not completely gone from being two-income to one-income. However, we decided to budget according to just one, steady paycheck in case I do not make any money. This will help us to not be caught unawares financially and to take some of the initial pressure off of me.
Even though my paycheck was mainly put into savings each month (we worked hard to pare down our expenses over the last several years), we had to prioritize our budget more specifically before I quit my job. While we have cut our ability to save dramatically, we decided that we cannot cut our retirement savings at all (this means we max out our two Roth IRAs as well as contribute 3% of my husband’s pay to fully take advantage of his company’s recently re-introduced 401(K) matching contribution). So in addition to the decrease in savings we had to make cuts elsewhere. We chose to cut each of our discretionary spending allowance (gas, medicine, a few household needs, and entertainment) by 30%. I am also attempting to cut our grocery budget by 16% to $250 using the grocery game. This will be a challenge with rising food prices, but it’s one I’m willing to take!
Changes to Others’ Household Budgets
I interviewed several friends and colleagues of mine who have chosen to go from a two-income household to a one-income household. I wanted to learn their reasoning and how they dealt/are dealing with their new financial realities.
- Edward Antrobus’s household consists of himself, his wife, and two roommates. Edward has been “serially unemployed” throughout their marriage, working a series of seasonal/temporary positions. Because of going back and forth from two paychecks to one paycheck, he and his wife have budgeted only using her steady paycheck with varying results. They attempt to build savings while Edward is working, and then when he is not, special purchases, Christmas presents, and other financial upheavals tend to whittle away their savings. He and his wife faced difficulty while attempting to secure a mortgage. The bank was looking for two years of continuous employment as well as a minimum credit rating that they could not meet. They were able to purchase a mobile home with a 25% down payment. They have since sold their home due to some issues and lost a good chunk of that down payment. Edward and his wife now rent a home. Edward says that over the past 3.5 years their net worth has been largely stagnant, and currently they have savings of just under $1,000. They plan to rent their current home for several years while finding Edward steady employment and saving up for a down payment for a mortgage in the $200-$250K range.
- Mike Collins from Wealthy Turtle has a wife and three children. Their initial plan was for his wife to continue working while his mother-in-law provided daycare. Unfortunately, health problems put a snag in this plan. Without Mike’s mother-in-law to offset daycare costs, they found that the cost of daycare would mean his wife was working to net only a few hundred dollars per month. They made the decision for her to stay home. Going from two paychecks to one and from no children to children meant that there had to be significant cutbacks to their household spending. Mike sold his car and purchased an old clunker for commuting purposes. They went without vacations for several years, and eating out at a restaurant was a treat instead of a routine. Mike also got a part-time job and began working on websites to develop additional income streams for their household. Still, expenses rose for the two of them in between having more children, such as purchasing a home and experiencing a sharp, unexpected rise in New Jersey property taxes. He and his wife ate through a chunk of savings during this time, but eventually were able to move to a different town with smaller monthly payments and a bigger house (for their growing family!). In the end, Mike says, “It hasn't been easy and we still face challenges and decisions that a two-income family wouldn't worry about. But we've stuck together and found ways to make it work. We made the right decision for our family.”
- Glen Craig from Free From Broke has a wife and two children. Glen’s wife decided to quit her job six years ago after their second child was born to spend time raising their children. The decision and preparation to do so started in the early months of her pregnancy, so they were able to gradually shift to spending less money before her paycheck came to a halt. They essentially lived off of one paycheck and saved the second one until their son was born, which provided a nice safety net. Without the cushion of two paychecks, they learned to cut back. They cut cable immediately and instead switched to a Netflix subscription. Going out to restaurants and movies was an easy place to stop spending because of having a newborn at the time. Glen admits that cutting out the luxuries took some getting used to; however, making the decision to instead consciously spend aligned with their priorities of having a parent home with the kids. All in all, Glen and his wife were successful at making this happen. They had planned to dip into savings from time to time as needed, but are happy to report that their savings have stayed intact!
- Jen: Jen has a husband and two children. She had been a working mother for several years, but felt that she wanted to quit her job to spend more time with her family. She and her husband discussed the financial implications of this decision, and set up a budget to see how their new situation would look. Unfortunately, they came up $100 short per month without her paycheck. Still, they prayed together about this and after an unfriendly working-mom policy at Jen’s job, decided to give it a shot. Since making this decision Jen began selling Scentsy products. Her husband’s career has taken off. Throughout the entire process, even when money was looking tight, Jen and her husband continued to tithe.
- Tom Drake from Canadian Finance Blog has a wife and two children. He explains that in Canada there is one year of maternity and parental leave that his wife took advantage of in 2009 after their first child was born. Once the year was up, they knew that they wanted to have another child and that her working part-time would only have covered the daycare costs. So she decided to stay home to raise their children. A cutback in income meant a cutback in spending in Tom’s household. They reduced their internet package and purchased groceries based on the weekly sales flyer. Also, spending on gifts for one another for birthdays and holidays was capped to a low limit. After their second child was born, money became even tighter. Since Tom’s wife had stayed home, the parental leave was available for him to take. He used six months of leave, which reduced their income. Tom returned last fall to his job and the two of them have been working to get back on track financially. All in all, Tom says they’ve been able to pull off one income instead of two, partly because Tom has been able to supplement the missing income with money he makes from blogging. Once both children are school-aged, his wife plans on finding at least part-time work so that they can increase their savings.
Each of these families had to make some sacrifices in order to take the leap from two incomes to one income, and several of them worked on finding ways to earn extra income on the side. There were setbacks, but once decided, each family found a way to make their priorities and income work for them.
Have you made a leap from being a two-income household to a one-income household? What were the challenges you faced, and were you successful?
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