Posted: March 5th, 2012 | Author: Joe | Filed under: Debt, Saving, spending | Tags: Income, money, Saving, Single Income, spending | No Comments »
How can $50,000 seem like minimum wage? According to the Social Security Administration’s National Average Wage Index, the national average income for the USA in 2011 was $41,673.83. That means that to half the country, $50,000 a year would be a $8,326 raise, and yet this woman says $50,000 feels like minimum wage !
Well, if you read her story it makes a lot of sense.
Basically, she went from working at home to a full time office job and once she totaled the change in her spending she realized she was making about $7.50 per hour.
Here are some of the things she attributes to lowering her effective income:
- Commuting costs – increased wear and tear on her car, the cost of gas, etc…
- Childcare expenses
- Eating out more – less time to prepare meals at home means eating out or buying take out more frequently, which is more expensive.
- Increase in clothing and personal care expenses (i.e. hair and nail care, proper office attire, etc..)
- Coping with stress by spending more on vacations, or entertainment.. buying more wants than needs.
Her change in lifestyle brought about a change in spending with no increase in saving. It happens to a lot of people and it’s not always easy or even possible to fix. She could do some things differently. She probably doesn’t need to spend $40 a week on clothes, and she could plan ahead to prepare more meals at home, but that takes work too.
This is the kind of situation my wife and I work very hard to avoid. We avoid debt whenever possible to keep as much of our income as possible. I work hard to secure a steady income, and she works hard (sometimes harder) to make that income go as far as possible.
She’s the coupon clipper and meal planner. She’s turned comparison shopping into a competitive sport. She scours thrift shops and consignment stores for children’s clothes, and puts a healthy low cost meal on the table every day of every week all year long.
It’s not easy, but it’s cheaper than if she went back to work full time. And we believe it’s better for the family. Living on a single income is not easy, but it is possible and I believe better in most cases for families. The key is twofold: 1) limit expenses as much as possible, and 2) increase income.
It’s really no different than what most people should be trying to do regardless of their employment situation, but as the Yahoo! article makes clear, it’s so much easier to lose control of your spending when both people work out of the house. Those little money leaks turn into an effective loss of income over time.
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Posted: October 22nd, 2010 | Author: Joe | Filed under: Debt, Tips | Tags: Debt, Employment, How To, Income, Saving Money, Single Income, spending, Tips | 4 Comments »
This year my wife and I are celebrating our 7th year anniversary of living on a single income. It doesn’t seem possible that it’s been so long. We had a beautiful newborn when we started out, and since then our family has blossomed to 3 wonderful children. My wife and I felt that our children would benefit more from having one of us as the caregiver instead of someone outside the family. So without much forethought, my wife left the workforce shortly before the birth of our 1st child.
In many ways, we were lucky to have been successful without much planning. Today, many couples and families find themselves living on one income out of necessity rather than choice. The Great Recession has left millions of people unemployed, and many millions more wondering if they could get by on one income if they had to.
The good news is that anyone can do it, but having a higher income may mean you need less planning.
Here are some lessons I’ve learned along the way that may help you, whether you’re thinking of life on a single income to help raise a child or you have to live on a single income because you have lost or may lose your job.
How to live on one income
Communicate. Being in agreement with your spouse or partner is absolutely essential to living on a single income. If one of you is not upholding your part of the arrangement, then both of you will fail. It’s important to talk about how each of you view your role, as well as your feelings and concerns along the way. It’s very easy for the bread winner to feel more important than the partner who is staying at home, but both have parts to play.
In our house, I’m the one who works to bring home a paycheck, but my wife views her role as making that paycheck go as far as she can. To that end, she clips coupons, only buys items on sale and looks to cut costs wherever she can. She makes her own bread, and cooks all the meals for the family. We simply would not be able to live on my income alone if she didn’t do those things. Living on one income is a team effort.
Keep a close watch on your spending. Some people create a budget and stick to that for all their expenses. Others simply automate savings plans and bill paying, while keeping tabs on their discretionary spending. Whatever method you use, you need to be able to account for all the money coming in and all the money going out. It seems ridiculously simple, but the truth is that the American standard of living is such that many double income families spend well beyond their means on an daily basis. That simply is not possible to sustain for very long on one income.
Trim more than just the latte. Cutting your expenses is a necessity for making the transition from a double income to single income, but skipping the extra latte alone isn’t going to make that transition happen. You’ll need to make a serious assessment of what is essential and what isn’t, and cut the extras. While you may get by without cable, you can’t do without other expenses like auto insurance for example. If you live in a state where insurance is mandatory, shop around and save on car insurance.
Wave ‘goodbye’ to the Joneses. I can say from experience that there is no way you will keep up with your neighbors spending while they are on a dual income and you aren’t. But the good news is that you will likely find yourself much happier, since you won’t be so focused on materialistic aspects of living. My family and I simply don’t have the extra money for the latest video games or movies, but we still have fun with things like family game night. And I think we’re much closer as a result.
Don’t trim too much. While it’s imperative to cut spending, you shouldn’t touch savings. You’ll still need to save for retirement, for example and you’ll find that saving up to buy that big ticket item is also a necessity when you’re living on a single paycheck.
Take baby steps. If you have the opportunity to take a trial run, then do it. Living on a single income is not a stress-free lifestyle. Some couples don’t get to make the choice. If one partner is laid off, then adjusting to life on one income is a new reality. My wife and I were fortunate enough to have had the choice. When our first daughter was born, unemployment in the U.S. was near 5% and I was riding the wave of yearly, automatic pay raises. These days, few people are lucky enough to be able to count on a yearly raise, and millions more can’t even count on having a job.
Lessons from living on a single income.
Even though my wife and I have to live on a single income, we still didn’t plan or prepare enough ahead of time. Another thing we’ve learned along the way is that most people really can’t afford the car they drive. Living on just my income has really driven that point home. We have a 2 year old minivan that we bought used when our 10 year old family car couldn’t hold 3 car seats, and I drive an 11 year old car to work every day.
Another sacrifice we’ve made is paring back our lifestyle. Most of our friends have flat screen, hi-def televisions sets, but we still have a 27-inch CRT television. We have used furniture that has been gifted to us by our friends (the Joneses) when they buy newer, more stylish models. Our kids know all about hand-me-down clothes first hand. Besides wearing their siblings used clothes, we’ve even purchased many clothes from consignment shops. All our kids wore generic diapers, and passed toys on to younger siblings.
The result of much of this has been that our kids view material things differently than other kids. They don’t think of things as disposable. They don’t expect to get the latest fad simply because “all the other kids” have one. Sure there are times when they shed some tears over not having the name-brand gizmo their friends have, but in the end I think they’re far less materialistic than their peers. Besides, they’re learning important money lessons that will serve them well throughout their lives.
Lastly, avoiding debt is a big factor in success. You aren’t going to be able to get ahead, much less stay afloat if a sizable chunk of your income is going to pay off something you bought yesterday or last year. You have to get used to living below your means, but once you make that adjustment you’ll find that saving, investing and reaching your goals is not only possible but much more satisfying. Living on a single income isn’t as difficult as it seems, but living comfortably on a single income is damn near impossible if you’re saddled with debt.
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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.
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