It’s not easy to live off one income, however, it can be accomplished, even if you’re surviving with paycheck to paycheck. The following tips will help you to cut down on your daily expenses and adjust to living of a single income.
Surviving on a single income isn’t an easy task to accomplish, and it may have you feeling like you’re trapped by your situation.
Most individuals dream of accomplishing different and new things with their lives, but since they can’t do without their monthly paychecks, they stick to their regular jobs (even when their earnings aren’t as much as they expected).
Furthering one’s education is a great way for you to further your dreams but going back to school can be a very expensive venture.
Surviving on one paycheck while supporting your loved ones is quite challenging, but can easily be accomplished, even if you’re relying on paycheck after paycheck.
Questions to Put into Consideration
Whether only two people are living in a home, or there’s just one (or more) people to cater for, there are a couple of things that need to be considered when you’re looking to start using a one-income budget:
- Do you have an emergency fund?
- How long are you and your family going to live off a single income?
- is your family willing to transition to frugal living?
- What is your family’s regular cost of living?
All the questions are very important that everyone should ask themselves before transitioning to a one income household. They help you know whether or not you and your family will be able to rely on a single income.
The transition may be easier on some families than others. Relying on one income can cause your family to live below the initial minimum expectation of your local region. This isn’t very unusual but your family may have a hard time trying to adjust to the new situation.
Living below your income and not going for your yearly vacation while you go back to school might have you stuck with a job you don’t like. In the long run, you’ll be making more money and working your dream job.
If you cannot survive on your current income, you can try taking on new roles at work so as to earn more money. If you and your family are ready and willing to sacrifice, below are some things that you need to consider.
How to Live on One Income When Money is Tight
1. Aggressively Clearing Your Debts
The first to put into consideration before you start living on one income is to pay down your debts. Avoid carrying credit card debts with high-interest rates, especially if there’s going to be sudden changes in your income making your financial situation worse.
Don’t use your credit cards frequently, especially if you’re not able to make the minimum amount on your monthly payments. Try not to carry the credit cards with you everywhere you go and only using them for emergencies. Use cash or a debit card to cater for your daily expenses.
Debts such as student and car loans and mortgages cannot just be paid off. However, it doesn’t mean that such payments can’t be refinanced or be paid down. Setting aside some money for your monthly mortgage payment – just the principle and not the interest – will help you reduce several years’ worth of a regular 30-year mortgage.
2. Start an Emergency Fund
Relying on a single income doesn’t necessarily mean living from hand-to-mouth. This can be avoided by starting an emergency fund for unplanned and unexpected situations.
Emergency situations vary depending on one’s life, but children, plumbing and cars require some kind of additional expenses. Don’t just create and emergency fund, also budget for setting aside an extra amount monthly for replenishing it.
3. Do Away with Unnecessary Expenses
If one of you stops working, all the money used to cater for their former employment expenses will either reduce or completely vanish. This includes gas, travel expenses, work clothes, wear and tear on the car, take out expenses and dry cleaning. Removing such expenses will help you cave some cash, but ensure you look for other means of reducing spending.
- Consider doing away with cable TV
- Refinance your student loans
- Look for a more affordable package for your cell phone
- Consider a better insurance plan for your car and home
This would also the perfect time to reorganize services like dog walking, house cleaning or landscaping.
If you used to order-in takeout instead of cooking at home, you’ll have to change that as well. Takeout and prepacked meals are pretty expensive. You can also reduce the amount of pricey processed foods and snacks. This will not only be pocket friendly, it is also a great way of ensuring that you’re living a healthy life.
4. Reduce Housing Costs
A large portion of a household budget is used on housing. Most people can’t survive on one income because of the mistakes they made when buying a home. Don’t become house poor.
Of course, everyone dreams of living in a nice neighborhood with a decent school system. However, when looking for the perfect home, go for an affordable house. Instead of a single-family dwelling, you may have to settle for a townhouse, but you’ll be purchasing an affordable home. There are several advantages of buying a smaller home; for example, you can convert the basement into a home office or a playroom for the kids.
If you already own a home that you cannot afford, it wouldn’t be a bad idea to downsize, even if it’s for some time.
Another option would be to refinance the house. There are couples who feel that such savings are very significant. Don’t buy a home because you feel like you need to compete with your family or friends. Short term sacrifices may lead to having a bigger and more beautiful house in future.
5. Eliminate Depreciating Assets
Depending on where you live, having one car can be the ideal choice. If you can’t work with one car, consider downsizing to on that is more fuel-efficient. Increasing your deductible means lower insurance rates. When shopping for a car, consider its use instead of how new it is.
Car savvy people have a better chance to save more money, especially if they buy from a private seller instead of a dealership. Ensure that the seller is okay with the car being examined by a mechanic before you can seal the deal. They should also be willing to deduct all the repair charges.
6. Try Surviving on a Single Income Before Quitting
Before you or your partner hand in your two weeks’ notice, try living on the income of the person who is going to be working.
During this trial period, use the other person’s income to increase your savings and clearing some debts. This will help you figure out the best way possible of living one a single income successfully.
7. Reduce Your Tax Bracket
If your home is running on one income, you might be eligible for a lower tax bracket. This entails having to reduce some unnecessary spending, which in turn will leave you with some more money every pay period.
This doesn’t necessarily mean that you’re going to get a huge tax income every year. It may only mean that you paid the IRS more money that you needed to.
8. Try Working Remotely
Nowadays most jobs don’t necessarily require their employees to report to the office as long the complete their daily assignments.
If the person who doesn’t work in the family spends a few hours every week to work in a remote position, you will be getting some extra earnings for your household expenses. It can also be a great way to discover new carrier opportunities in the future, whether in-house or remotely.