Preparing to go from two incomes to one – either because you need to, or because you want to? I'm going to share with you real life examples, plus how to go from two incomes to one.
Over the years of tuning into financial shows such as Gail Vaz-Oxlade’s ‘Til Debt Do Us Part, Princess, and Suze Orman, I've noticed a recurring theme: households getting into financial trouble when they shift from being a two-income household to a one-income household.
It's a very common budgeting mistake couples can make.
Here's the weird thing: regardless of why the household suddenly went down to one income — health reasons, one partner becoming a stay-at-home-parent, losing a job, etc. — the household typically DOESN'T flounder and find themselves in gobs of debt just because of the loss of income.
I know, I know. It seems odd to say that, because you and I both assume that going down to one income in a two-income world would be the obvious cause of financial troubles.
But I'm here to tell you that it's not true.
These households and others like them who suddenly go from two incomes to one find themselves in a world of financial trouble for two reasons:
- The family did not prep themselves for going from two incomes down to one
- The family failed to change their spending habits to reflect their new, 1-income-household reality
I don't want that for you. I want you and your partner to thrive as a one-income household.
But before I get into how to do that, let's take a look at the reasons for living on one income so that I can open your eyes to this type of lifestyle as a sound money strategy, and not just something you turn to out of necessity.
Reasons for Living on One Income in a Two-Income World
I first want to address the reasons for living on one income in a two-income world, because they might not be exactly what you think.
You see, all the info I'm about to give you on how to get down to one income from two can be used for a variety of ways to not only survive (in the event of, say, unemployment or health issues), but also to put your household in a better financial position.
Because if you LIVE like you only have one income (even though you have two)? You can then use that second person's income for something strategic and catapult your family into a greater financial position.
Reasons for living on one income that are OUT of your control:
- Health issues (either sudden or chronic) that cause one partner to not be able to work
- Childcare strategy and desire to keep one parent home to raise the kids
- Someone loses their job, unexpectedly (check out my guide on how to survive unemployment)
Reasons for living on one income that are IN your control:
- Living off of one income to use the second one to pay off debt (talk about gazelle intense!)
- To save the other person's paycheck (my own husband and I did this before our little guy came along — we used his paycheck to pay all our bills, and my paycheck was used for savings + to fund our retirement accounts)
- Going the Extreme Early Retirement, or FIRE (Financial Independence, Retire Early) route
- In preparation for when one of you becomes a stay-at-home parent in the future
- To start a business you've always wanted to
Now that you hopefully see the possibilities with living on one income in a two-income world, I'm going to show you HOW to do it (whether out of necessity or because you want to use it as your money strategy).
Preparing to Go to One Income – Your Prep Plan
So, you want to go from two incomes down to one. And you probably have a bazillion questions about how to do it (plus a little anxiety).
I totally get it. My husband and I did this about 5 years ago, and it wasn't because we were having a baby (which we eventually did) — I took the leap to self-employment, without my blog earning a full-time income.
It can be really scary to do!
Let's make it less scary by talking about preparing to go down to one income.
How did my husband and I prepare, and what can you do?
Two Incomes Living on One – How to Live on One Income and Save the Other
One of the best ways you can prep for how to go from two incomes to one is by conducting a little experiment. Can you live on one income right now?
Granted, you're not up against the wall right now. And we all know that when the going gets tough, you can make more sacrifices and deeper cuts.
But, can you do this as an experiment and see what it feels like?
When I was still working a full-time job, my paycheck each month mainly went into our savings.
This was great, although it's meant that while I've been working from home and raising our son, we've been able to save a LOT less money than before.
Still, practicing the lifestyle of living on just one income for awhile was super helpful in us making the leap for when I quit my job (early 2013) to work on my blog full-time, without it making full-time income.
What else did we do to prepare for a one-income household?
Use a “going from two incomes to one” Calculator
When all else fails, it's best to see the numbers in black and white.
Use this going from two incomes to one calculator to find out what things would look like for you if you chose to do this. This calculator assumes you're going to be earning some money at home, and this one doesn't make that assumption.
Do you have shortfalls? Do you earn enough?
How much is your shortfall?
Don't stretch the numbers to make them work for you, because the reality might be hard to look at right now, but you can work with it. Not only that, but you don't want to make an emotional decision and live with the uncomfortable consequences.
For example, if you have a $500 shortfall each month by going down to one income…you now know how much money you collectively need to bring into the household each month. Your next question becomes, how can you get that income from home, fast?
Make Changes to Your Household Budget, Now
When we went from two incomes down to one, I was 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.
Wow did that take the pressure off of me!
We decided that we could not cut into our retirement savings at all (this means we max out our two Roth IRAs as well as contribute 6% of my husband’s pay to fully take advantage of his company’s 401(K) matching contribution).
So, in addition to the decrease in savings, we had to make cuts elsewhere.
We chose to cut the following:
- Discretionary Spending (Mad Money) by 30%: Each of us gets a little mad money each week to spend on whatever we would like. We cut that by 30% to make the numbers work.
- Cut Our Grocery bill by 16%: I cut our grocery budget, yet again, by 16%. It was a challenge with rising food prices, but one we were willing to take (here's the average grocery household bill for families of various sizes, in case you're curious how your own stacks up)!
- Gas Consumption: Since I wouldn't be driving to work 5 days per week, we cut our gas bill by probably $40/month.
- Entertainment: Don't worry, we stayed entertained. Like with these 74 things to do with friends without spending money, or 19 free printable board games for adults.
Now, I want to share with you real examples from others who have gone from two incomes down to one, and how that looks for them.
Tips for Living on One Income – Real Stories + Examples
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 all their tips for living on one income, as well as their reasoning for doing it.
How exactly are they dealing with their new financial reality?
1. 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 (here's an article on holiday budgeting), 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.
2. 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.”
3. 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!
4. 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.
5. 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.
Dropping from Two Incomes to One – How to Live Frugally on One Income
When adjusting from two incomes to one, and to maintain the ability for your household to live on jut one income, there's just one more REALLY important thing I want to talk about.
You need to work on beefing up your frugal resume.
There are millions of one-income households in the United States for any number of reasons: the head of household is single, one partner is starting a business, a parent is staying home to raise their children, medical issues, unemployment, etc.
This can put obvious strains on personal finances, but can also be a great opportunity for a person to become better stewards of the income that is being earned.
Now that I'm a work-at-home-mom, leaving my job for us to become a one-income household (and before my blog — you're reading it!! — starting really adding to our household income), I made it my second job to use my frugal skills to contribute to our household’s bottom line.
By polishing your frugal resume, you'll have a lot to offer:
1. Slow Consumer Pulse
Patience is not only a virtue, it is also a solid money-saving strategy. Patience allows you to postpone purchases for months when there is more income as well as to purchase items at a discount that impulsive shoppers or even normal shoppers will not find. This is because most items will go on sale over time, and the cost of many consumer items will decrease as the newness fades away (especially true in the electronics and video game industries). You can also take advantage of “consumer drafting” if you have patience, meaning you can purchase the newest books/clothes/and other products secondhand at great discounts.
2. Creativity beyond Driving to a Store
When a problem, need, or want arises in our household I take the opportunity to come up with alternatives besides purchasing something at a store. The first thing I ask is whether or not we have something at home that can be substituted. Next question is whether or not we can make something to accommodate the need. Then we look to borrowing, buying used, and waiting/postponing (patience!). Finally, if there appears to be no other workable solution, I try to use a free gift card in order to make a purchase. Going through this line of questioning over the years has created some interesting solutions, such as our Charlie Brown Christmas Tree.
3. Black Belt Shopper Status
While it’s nice to shop from our own cupboards whenever possible, our household has many purchase occasions throughout the year. These include shopping for gifts, groceries, insurance, etc. I’ve honed my shopping skills over the years, learning how to layer deals, shopping clearance racks/bins first, shopping out of season, learning how to play the drugstore game, buying discounted meats from the manager’s special section and freezing until needed, etc.
4. Ability to Stretch Resources
It’s not enough to be a Black Belt Shopper in a one-income household. Having the skills to stretch resources will ultimately expand our money supply and stretch the time in-between shopping as well. This includes using less meat in recipes (for example: buy two pounds of ground beef and divide it into three servings to use in recipes that call for one pound of beef), giving our cats a spoonful of wet food as a treat instead of an entire can, using dish towels instead of paper towels in most situations, etc.
5. An Established a Sense of Value Independent from Manufacturers
When you obtain items in ways different from purchasing them at full retail price (such as by borrowing, bartering, purchasing used, layering sales/coupons/gift cards/credit card rewards), you develop a sense of value that is much different from the value assigned by manufacturers and retailers. Having someone in the household with this kind of knowledge means that you can more easily say “no” when a bad deal presents itself because you know there is a much better deal to be had. It basically takes away the sense of urgency manufacturers like to create through their advertisements.
Earning money is only one part of the money management equation. Spending that money judiciously to maximize its potential and to safeguard your household’s savings account is just as important. After all, even someone who earns $1 million but spends $1,000,001 is broke.
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? Perhaps this is the first time you've looked at the numbers…do you need more time to figure things out?
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