Living on a Single Income – You can do it! Here’s how.
Posted: May 11th, 2008 | Author: Joe | Filed under: Debt, Lifestyle, Saving, spending | Tags: money, Saving, Single Income | 17 Comments »
Living on a single income is something a lot of families are having to do these days, and not through any choice of their own. Preparation and planning helps a lot, but that’s not always an option when living on a single income is forced by a job loss. In that case, it’s best to inform yourself of your options and examine the possibilities of reducing your costs. I hope this article will help.
I just read an article by Laura Rowley at Yahoo! finance, titled “Can You Live On One Income? It’s Worth a Try”
It’s a good article in which she examines the effect of woman entering the workforce, and the differences in working families from the 1970s through today. I felt the need to respond to some aspects of the article, because I happen to have some 1st hand experience on the topic.
“Is living on a single income possible for families with two incomes?”
Absolutely! My wife and I are living proof.
“You see lots of articles discussing ways to eliminate the second income — things like clipping coupons, buying second-hand clothes, and cutting out vacations and cable television.”
Yeah, we’ve done A LOT of simplifying and sacrificing. Just how much sacrificing a person is able to do has a lot to do with his standard of living and the cost of living. We made the conscious decision to start living on a single income because we feel that it’s more important that our kids have a solid home life -especially in their lives. We wanted our kids to have 1-on-1 time with their mom in formative years, not a stranger.
We’ve never actually done without cable television, but we have cut back on other non-essentials:
Cell phones. We used to have a costly $80 a month subscription to a big name provider. I realized that I really don’t like talking on the phone to begin with and the only reason I had a cell phone was in case I got stuck on my way too or from work. We canceled the service contract and went with a pay as you go service. We have the same cellular features we used with the other plan for $6 a month!
Vacations. We save up for vacation, and when we vacation, we go camping. It’s dirt cheap, gets us back to basics and out of the rat-race of modern life for a week. Plus it’s great for strengthening the family ties.
Buying second-hand clothes. We definitely have cut back on our clothing purchases. I’m down to 1 pair of jeans! I’ve only recently been wearing jeans to work, so for the most part I have other pants to wear but the fact remains – I haven’t purchased new clothes in 3 years! The clothes I have gotten in those years have been as gifts or purchased with gift cards.
Clipping coupons. My wife is the Queen of coupons, bless her soul. She saves boat loads of cash on groceries every week. It’s not easy, she spends a couple of hours every Sunday going through the various papers and planning meals based on what’s on sale that week, but it’s worth the effort. Trust me.
“But ultimately, paring those expenses isn’t going to cover the gap for most middle-class families living on a single income, because those aren’t the costs that drive them to the economic edge. The real problems are what Harvard Law professor Elizabeth Warren calls “the big five” — housing, health insurance, child care, a second automobile, and taxes. “
That’s true, but with some planning, forethought and financial literacy you can greatly minimize the impact of these.
Housing. Save up a sizable down payment to purchase the house, and don’t buy more than you can afford. My wife and I are currently in the process of buying a larger house. Despite the fact that it is a buyer’s market, we are have a very difficult time finding a house that we like in our price range. This is especially difficult because we see MANY houses that suit our desires and needs that are just out of our price range but we know they would be in our range if we had a 2 income household. It all goes back to priorities in life. Also, make sure your credit is in good shape before you apply for a home loan. This is a large part of your cost of living as well. We could never afford living on a single income if we lived in an urban area, so we moved away from the city and live in the country. I have a 50 minute commute, but it’s worth it.
Health Insurance. This is a tough one since so much of the cost is beyond our control. But even here, there are things that can be done. For instance, if your employer offers it, put aside money tax free in a flexible spending plan. If your employer doesn’t offer it, pester him until he does! And of course, exercise, eat healthy foods and generally take care of yourself.
Child Care. Well, this one goes away with a stay at home spouse. However, there is preschool to consider…
Second Automobile. Eliminate car payments. We have none. We realized that if we were going to be living on a single income, we had to pay off our car loans sooner, rather than later. So we made paying those off the 1st financial priority after we paid off our credit card debt. We also called around and found cheaper car insurance. I was able to shop around at 3 or 4 different insurers and cut my car insurance bill in half!
Taxes. We actually pay very little in taxes. No, it’s not because we evade taxes. This is because we studied up on taxes and got financially literate. I have 11% (plus another 5% employer match) of my income automatically put into my 401k. The effect is twofold. 1). I save for retirement, 2). It lowers my taxable income by 11%. We also get tax breaks on our mortgage interest (renters do not), and tax credits for each child. Also, that flexible spending plan I mentioned above is pre-tax dollars, so that lessons the taxable income as well.
“Despite the higher income, today’s families save less and carry more debt: In 1970, the one-income family saved 11 percent of its take-home pay and allocated 1.4 percent of its annual income to pay revolving debt, such as credit cards. In 2005, the two-income family saved nothing, and allocated 15 percent of its annual income to revolving debt, according to Warren.”
To me, this just re-enforces the fact that you have to pay down your debt, avoid accumulating debt (wherever possible) and save aggressively if you are living on a single income. Heck, these are sound financial principles whether you have 1 income or 2 or even if you don’t have kids!
“So is it possible to downscale to one income? It may be, for couples who are willing to make bold changes with their money and in their attitudes….”
Well this is it, isn’t it? “…willing to make bold changes…” That’s a significant obstacle in today’s society, given the sense of entitlement that abounds. It means you can no longer even entertain the thought of keeping up with the Joneses. It means saying no to a lot of things you never questioned when you had 2 incomes. But it also means a simpler, and more fulfilling life in many ways.
“…the stay-at-home parent takes on the additional job of planning ahead and investing the time to get the best deal. It’s going back to your true priorities, values and goals and saying ‘it’s the best choice for me, my family, and our future’ — not ‘we’ll be locked into a life of drudgery and we can’t do what we want to do.’”"
Exactly. Living on a single income isn’t always easy, but I think it’s worth the effort. It provides a more meaningful life for the entire family, and that’s a good thing in my book.
We could just about live on my wife’s income if we didn’t have our car payment. We recently paid off our credit card and that feels great. Like you we are going to attack our car payments and pay that off.
My employment situation is up in the air. Long story. But any money I can generate will be able to go into retirement if we are careful.
I enjoyed this post. It reinforced in me the need to stay the course.
Thanks Mark.
That’s great news about the credit card… I bet you sleep better at night just not having to think about it, I know I do. Car payments are up there with credit debt in my mind. I know they’re secured, and typically carry less interest, but they tend to be big payments and any time you can eliminate a reoccurring expense – it’s a good thing!
Once we got rid of our car payments our savings really took off. We’re just about where we want to be in savings, which is to say we can start investing more and actually buy things again like clothing and furniture!
[...] (and money). Don’t get me wrong, we wouldn’t have it any other way, but scaling back to live on a single income has meant making tough decisions about what is important enough to spend our limited financial [...]
You have giving me some great ideas.
Many Thanks,
Olivia
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Living off one income is hard but well worth it. I was a stay at home mom of 4 kids. One thing not mentioned is growing a garden and canning your own veggies, it saves money and tastes so much better. Also, now that my kids are grown I am back in the workforce…I spent so many years scrimping that i still do and most of my income goes to savings and the kids college.
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[...] I love this question because I think my story is a lot like the story of many people who find themselves in a financial bind and never really saw it coming. My wife and I were starting our family and had just moved to a new town, so she didn’t have a job and we were living on a single income. [...]
Don’t waste your money on preschool!! You are your kids first and best teachers! Don’t let the Joneses tell you that you have to put your kid in the best preschool in town. It’s another trap! I am a stay at home mom of 3 and it is the best decision I made. We actually were living paycheck to paycheck when I was working because we were spending more. When I came home our income was cut in half, yet we weren’t as stressed, because we learned to spend less. Tell your wife to check out grocerygame.com to maximize the coupon saving strategy.
My wife and I are getting ready to do this. We are going to have our first child and where we live it is 800.00 per month for child care. We have no family close by.
Luckily, I make good money as an IT Manager and we have no debt beside rental properties and a home.
It will still be an adjustment though, losing her income. Thanks for the great post and tips.
[...] Can You Live on One Income? [...]
What I would like to know is,how can it be done if you do have debt? We have put ourselves on a strict budget,no cable,cut all non essentials we could think of. Including selling our second car. I didn’t make much (about $400 a week) I’m now out of work. We need at least $200 a week to break even. How do we stay “afloat” while finding another job?
Lynne,
It’s much harder with more debt and probably impossible with too much debt. To live on a single income you either have to have a high income, or little to no debt. Even then, you probably need to cut back somewhere. Most people’s standard of living has just become unsustainable…
[...] Can You Live on One Income? [...]
Paying off the credit card debt must have felt like a huge achievement, which it is. Pre-kids we never had any debt and never saw it coming either and it takes up all of your time and energy, every waking moment the thought of it is hanging over your head. I hate it and am working towards getting it cleared up.
LYNNE, You can babysit, private sit at night for the elderly, when Your spouse is at home or find a product to sell at flea markets on weekends maybe.
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