How To Do Well While Living On One Income

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Hey there! Are you and your spouse planning to live on one income? Or do you live on one income already? Many families choose to have one spouse work while the other spouse stays home with the children. This is to help mitigate the rising costs of child care. There may be other reasons to have one spouse stay at home, including returning to school, starting a business, or taking care of other household needs.

In this post, I'm going to talk about how you and your spouse can do well on one income. We'll go over how to prepare for this and what specific steps you can take so that the two of you are successful while one of you works and one of you is at home.

Let's jump right in!

Be Prepared to Live on One Income

If you and your spouse are both currently working, then it makes sense that the two of you make preparations to live on one income before you actually go and do it. This involves determining how much income you'll need to live on a single income and which responsibilities each person will have when one person is staying at home.

You can think of it as: what will the person at home do to ensure that they're contributing in a non-financial way. This is most commonly taking care of the kids, but it could be taking care of a family member, starting a new endeavor, going back to school, and more.

Doublecheck your budget. Will you have enough to get by when you eliminate one of your incomes? Do you have enough money in your bank accounts to cover any short term expenses while you adjust to single income living? These are things to ask yourselves before living on one income.

Determine How You Will Manage Your Money

When you and your spouse decide that one of you will work and the other will stay at home full time, it's important to make sure you know how the two of you will manage your money. Becoming a single income family can change a lot in your dynamics. Being on the same page financially will help ensure a smoother transition from multiple incomes to one income.

I recommend automating your finances as one way to manage your money. That way, neither of you will have to micromanage. Your bills will be set to autopay, and you'll save and invest money with each paycheck that comes in.

Another step the two of you can take to do well on one income is to have the stay-at-home spouse take care of the finances. That way, while one spouse works, the other can be the homemaker and manage the money. One doesn't have to be a personal finance guru to manage the money, but reading personal finance books and blogs is a great way to sharpen your skills.

Create Your Budget Around One Income

If you've created a budget in the past, then creating a budget around one income will be somewhat easier, as you'll already have most of your income and expenses filled in. The first step to creating a budget for one income is to remove the spouse's income that will be leaving work.

This will give you new numbers. You'll likely see a sharp drop in how much money you'll have leftover each month. However, now you can start removing expenses that are a result of you both working. An example of this might be childcare costs, specifically, if the spouse leaving work will now be a stay-at-home parent.

Once you've come up with a budget where you know how much you're making and how much you're spending, tweak further such that you're still in the green each month. Ensure that you are, in fact, in the green before making the final decision to have one spouse leave work. If this seems difficult, then it's possible that one of the two of you could take on a temporary side hustle or part-time gig as you transition to life on a single income.

Live Within Your Means

Quite arguably, one of the best ways to become financially independent is to live within your means or far below your means. This means always spending much less than you are making. One strategy is to “live like you're broke.”

Living like you're broke means regardless of how much money you make, always assume you don't have any money saved and/or might not have money next month. This broke mentality means you'll maximize your savings because you assume you need to at all times.

Does this mean you can't have fun once in a while? Of course not. Once in a while, you and your spouse should have a date night, go on a vacation, or spend money on something that makes you feel good.

Living within your means simply means not swiping your credit card without thinking about it and not spending money left and right when you're only earning so much.

Increase Your Emergency Fund

Many experts agree that one's emergency fund should be three to six months of living expenses, saved in a high-yield savings account. When deciding to live on a single income, it makes sense to increase your emergency fund to six months' worth of living expenses to mitigate any financial issues that might come up, such as an unforeseen expense or in the event your one income is lost unexpectedly.

To increase your emergency fund to six months of living expenses quickly, live on as little as you can while you still have two incomes and use all of your extra money to boost your fund. If you and your spouse are paid biweekly, consider using one of the month's paychecks on bills and the other paycheck to boost your emergency fund.

Additionally, you can take on a temporary side gig to quickly add money to your emergency fund. The bottom line is, you want to bolster your way to six months of living expenses as quickly as possible so that when you live on one income, you're cushioned from a mishap.

Pay Off All High Interest Debt

Paying off high interest debt will help you maximize your savings and have more money left over each month. High interest debt especially includes credit card debt, but it may also include a personal loan or a high interest student loan or auto loan. I usually say high interest is anything above a 7% APR.

To pay off high interest debt, do similar as you did to build your emergency fund. Use one of you and your spouse's monthly paychecks to pay your bills and the other to pay down debt. In this situation, I recommend the debt avalanche method, which is when you first apply the minimum payments to each of your debts, followed by applying all of your money towards the debt with the highest APR.

Repeat the debt avalanche method until you can pay off your highest interest debts. You don't need to be debt-free to live on one income, but at least being out of credit card debt will make the transition that much easier.

Save Money on Common Living Expenses

When budgeting to do well on one income, it makes sense to cut back on as many of your common living expenses as possible. Some of the most common living expenses that most families can lower include:

To give an example of how easily it can be to lower living expenses, take the following into consideration:

My wife and I had to go down to one income when we started The Dollar Blogger. I needed my wife to help with business startup tasks, so she left her job. Here's how we saved thousands per year on our common household expenses. We:

  • Saved $240 per year negotiating our internet bill
  • Cut $280 per year on our homeowners insurance by changing providers
  • Lowered our heating bill by $250 per month over the winter by changing our thermostat
  • Slashed our mobile bill by $40 per month by changing to a budget plan.

This, all-in-all, saved us over $2000 per year with just a few phone calls and lifestyle changes. Not bad!

If making phone calls makes you uneasy, use the app Trim to automatically negotiate your bills and cancel your unused subscriptions for you. Trim saved my wife and me $1200 per year after using the app for 20 minutes!

Use Discount Apps and Coupons to Save on Groceries

It never hurts to save at the grocery store. With the average family spending around $550 per month on groceries, we could also use everyday savings. An app like Ibotta can help you save on everyday purchases. Ibotta has regular specials at dozens of supermarkets and retail stores. You can check in advance to see where you can apply a discount, or you can scan your receipt after you shop. Ibotta will then give you cash back!

Also, consider using coupons to save money on groceries. You don't even need to clip coupons anymore. Most coupons are available via a coupon app like Ibotta or your store's website.

When you're looking to live on one income, cutting your grocery bill by even 15%, or around $82, can go a long way over 12 months.

Use Only One Car or Shop for Used Cars

One way to do well on a single income is to cut back on transportation costs. You can do this by owning one car or by shopping for preowned and used cars. You can save several thousand dollars by never buying a brand new car again. With cars losing up to 20% of their value the moment you drive them off the lot, it doesn't make sense to buy a new car often, if at all.

If you're living on a budget and a car purchase is coming up, consider buying a car that is 1-2 years old. You'll save money, and no one will know the difference. If you think about it, a brand new car becomes a used car the second you've driven it. So, what does it matter if someone else drives the first several thousand miles instead of you?

The average monthly car payment for a new car in 2018 was $530. Likewise, the average monthly car payment for a used car in 2018 was $381. Using averages, you can see that there's a savings of approximately $150 per month or $1800 per year.

Spend Time Together on Low-Cost Activities and Experiences

When you live with one income, it makes sense to spend time together on experiences more than spending money on things. Finding low-cost activities to do with one another and your family can be the perfect way to have fun while on a budget.

By spending time together on low-cost activities, you can reduce discretionary spending while still having family fun time.

Some great low-cost activities include:

  • Hiking
  • Board Games
  • Video Games
  • Reading
  • Cooking/Baking
  • Arts and Crafts
  • Watch Movies and Shows

When you find activities to do for fun and save money at the same time, you'll be much more successful living on one income.

Adopt a Frugal Mindset

Adopting a frugal mindset will help you do well on one income. This doesn't mean you and your spouse have to be cheap! Far from it. Being frugal means spending money on quality items that you need versus every little thing that you want. It means ordering less when you go out to eat but still tipping well.

When you adopt a frugal mindset, you're focusing more on your needs and less on your wants. You still make room for fun, but you're more aware of how much you're spending.

My wife and I lived on one income before our online business started making money. We adopted a frugal mindset by slashing our eating/ordering out budget and canceling several subscriptions we no longer needed.

Wrapping It Up

Living on one income opens the opportunity for you or your spouse to stay at home, whether as a parent, returning back to school, or to take care of something that needs to get done while the other one works. If you and your spouse can make it work, then why not?

Do you and your spouse live on one income? What have you done to make both of you successful in doing so?

If you and your spouse are both currently working, then it makes sense that the two of you make preparations to live on one income before you actually go and do it. This involves determining how much income you'll need to live on a single income and which responsibilities each person will have when one person is staying at home. Tap to learn more about saving money when living on one income!

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6 months ago

These are all very good tips for managing one income, as well as managing your personal budget. It’s good that you are addressing these needs in here, especially paying off high-interest debt. Thanks for sharing.

6 months ago

Yes, we live on 1 income currently. It definitely takes planning. Honestly the biggest thing that helps our grocery budget is ordering groceries from Walmart online. This way, we don’t go in and there’s no impulse buys. Plus, you can see what the total will be and cut anything to fit within budget.

6 months ago

“Adopt a frugal mindset.” There’s the rub. Sigh.

Joe @ Mini Riches
6 months ago

We’re a family of 7 and we’ve lived on one income for year’s. We do so by keeping A zero-based monthly budget each month, and also by living like we’re broke! We’ve also done several of the items mentioned here. Like you said, there’s a big difference between being frugal and being cheap!

6 months ago

This is a great post! We’ve been living on one income since 2017, with a few side hustles here and there, and what really helped us do this successfully is by always communicating. Money can be such a delicate topic for couples to talk about but it’s the only way couples can work as a team financially.

5 months ago

These are excellent tips and we are trying to implement as many of them as we can! It’s my mission in 2021 to get down to living and budgeting off of on income. With all of the uncertainty I truly believe it’s a survival technique at this point.

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