Situations in life come up where you are forced to go down to one income. Are you starting a family and expecting a new baby? Maybe you got laid off.
Whatever the reason you’re going to have to find ways to survive on one income and deal with the stress associated with it.
Now let’s take a look at a step-by-step approach to help you survive on one income.
Step 1: Evaluate where you are financially
This must be done upfront.
What you need to do is determine:
- how much money you have coming in
- what your total debts are
- how much money is going out
- the amount left over to save and invest each month
Don’t forget look into the future for expenses that occur annually such as:
- property tax
- house or car insurance
- tax season fun
We always get hit pretty hard around tax season with a big bill to our accountant and/or the gov. Keep that in mind too. If you are running a business then remember that tax money collected is not your money. You need to save collected taxes every month in a separate fund so you are not hit with a gigantic bill you can’t pay.
You must plan for the future and make sure that you have enough money to pay all bills. The last thing you want to do is to to be forced to borrow money just to pay expenses.
In order to get your financial numbers, you’ll need some sort of personal finance software. If you don’t already have one, then consider some free software to help figure this all out such as:
GnuCash – an opensource software that you can download onto most operating systems.
Clear Checkbook – they also have a premium version with more features
Mint – an online tool.
Personal Capital – an online tool.
Step 2: Determine from step one whether you can pay your bills or not.
Sometimes the truth is ugly and we just need to know the answer.
If you can’t pay your bills – don’t panic. This just means you have to get creative, prioritize what is important, and make some sacrifices.
Step 3: Create a plan.
Based on where you are financially determines the structure of the plan you’re going to create. If you can pay your bills on one income that’s great.
But are you meeting your savings and investments goals?
Neglecting things like this can cost you dearly in the future. So, keep this in mind.
If you cannot pay your bills then you need to determine by how much. This value is critical for you to know so that you can set appropriate goals.
In either case you’re going to want to do three things.
1. Reduce your expenses
2. Bring in some extra money
3. Plan to have some fun
We’ll start with a budget and money saving tips.
Get serious about a budget
Budgeting is hard, but it’s even more difficult with a spouse. The reason being is that each person has their own view about spending money. Secondly, each person has their own needs, wants, and desires.
However, in a situation like this you really have to buckle down and make some sacrifices.
From the information you found from your evaluation process, identify the budgeting categories that are hurting your finances.
Look for some easy wins to save money and don’t worry so much about the nickels and dimes.
Some of the heavy hitters in your budget are going to be housing, food, kids, transportation, and household expenditures.
Reduce your food expenses
We all need to eat but let’s face it, grocery bills are one of the bigger expenses each month. Let’s see if you are optimizing your food bills enough to survive on one income.
Take a Hard Look A Dining Out
You’re probably going to have to take a serious look at how much you spend going out to eat. I know everybody needs a break but dining out it is expensive. This is likely the first thing you should cut back on because it’s an easy win.
The markup on prepared food is high so how can we compromise?
Tip #1. Order takeout.
The main advantage to takeout is that you don’t have to tip. That saves you 15% to 20% right off the top and no one is offended.
Tip #2. Split meals.
While dining in, pick larger meals that can be split and then ask for an extra plate. Result: 50% savings. Done.
Tip #3. Reduce occurrences.
Simply go out less according to your budgeting goals.
Stop Buying Processed Foods
The next thing you should take a look at is how much processed foods you buy. If you’re used to buying a lot of prepackaged food then think again.
This goes without saying that it’s a lot less expensive to cook your own food at home and it’s not that difficult.
You don’t have to eat boxed mac & cheese or Ramen to survive here. Take a look at some of our recipes to give you some ideas.
Increase plant based ingredients
Have you ever considered why Chinese food is so cheap but tastes so good?
Well it does not have some gigantic T-bone in the dish. What Chinese food has is a wide variety of plant based foods with some meat worked in here and there. That’s no accident.
The result is a flavorful dish where the meat is only an accent. A little goes a long way and the cost is kept in check.
The point is that you can apply this to your grocery shopping and how you cook at home. It does not necessarily have to be Chinese food, but you should shift your purchases to more plant based products and the result will be a reduced bill.
You don’t have to sell your car to cut down on transportation expenses. For example, by starting to carpool with one person you will cut your running expenses in half. That adds up quickly and you don’t have to give up too much.
If you don’t have anybody to carpool with then think about public transportation once or twice a week.
Couples with kids
Eliminate Daycare Costs – At Least Temporarily
One of the most significant expenses couples have is childcare. Depending on the circumstances you may be forced to cancel your childcare at least temporarily.
I realized this is the problem because many of the best day cares have long waiting lists to get in to them.
Unfortunately, this is a situation where you’re going to have to make some hard choices.
If you were laid off and have been unable to find a job then you will definitely need childcare when you’re re-employed. One way to solve this problem is to scope out several day care facilities and identify those with little or no waiting periods. These easy entry day cares can be used for temporary care.
Doing the homework ahead of time means that when you do land a job you can place your child in daycare and then get back onto the waiting list to your preferred facility.
One last thing:
Try to find a day care that has drop in service. You can use this when you have to go to an interview on short notice. When I was a hiring manager I actually had someone miss their interview because they couldn’t find a sitter.
It pays to be prepared.
Reduce Diaper Costs
Another option to reduce your expenses is to switch to the cloth diapers. We did this and we saved a lot of money. It’s really no big deal at all with today’s high tech diapers.
Washing them is a snap and your savings continue as long as you use them.
Make Your Own Baby Food
Consider making at least some of your own baby food like simple rice cereal. Baby food is really not that big deal to make it home. A lot of is just pureed fruits and vegetables that you can do with a simple hand blender. If you don’t have one, then the up front investment will pay for itself in no time at all.
Now let’s move on to increasing your income.
Increase Your Income
An easy win here is to get rid of some useless crap.
Liquidate any surplus items
I’m not talking about liquidating your assets, I’m talking about dumping some things you just don’t need anymore.
Now, if you have a storage unit then this is actually high priority. This situation happen to us. We were paying $100 per month because we simply ran out of room to store everything. We had to do something quick so we made a plan and started selling.
You know the drill. The usual outlets are eBay, Craigslist, and garage sales. Also consider selling your higher value used books at Amazon with their trade-in program. Some of the books only bring in a buck or so but the higher value books bring in a lot more.
Books that don’t sell can be donated to charity and then you can get a tax deduction.
Do whatever you can to get rid of the storage expense and then put that money to good use.
Work Overtime And Put In Extra Effort
This works not only for hourly workers but salaried too. Putting in extra effort at work will increase your chances of getting a bonus or a promotion. Both of which are money makers.
Keep in mind though that you need to communicate and proactively go after raises and promotions. They are never just handed to you on a silver platter. Talk to you boss about your hard effort and show how you add value to the company.
For hourly workers, putting in some overtime really pays off immediately and can make a big difference in your family’s bottom-line.
Get A Side Gig
For the person who is unemployed at the time, try to get a side gig. There are quite a few options out there from content writing to becoming a secret shopper.
Here are some resources to make some money on the side from The Penny Hoarder.
J. Money at Budgets are Sexy also has these tips for side hustles.
Both of these sites can help you get some ideas to bring in some extra cash.
Now that we’ve talked about budgeting and money saving tips, we need to consider mad money.
Don’t Forget About a Slush Fund
When times are good there’s little need to plan to have fun or worry about how to pay for it. However, when times are tough we can’t forget about consciously working in some serious fun time.
This is where a slush fund comes in.
A slush fund or mad money as my dad always used to say is guilt free – do whatever you want money. It just feels good to buy the most expensive beer or glass of wine you want and have some fun now and then.
How we achieve this slush fund is to set aside small amounts of money consistently. There are apps that can do this or you can use a simple mason jar. Personally, I like the mason jar method because I can actually see it grow.
When there’s enough in the jar to do what you want, then…go.
Surviving on one income is a challenge but you can overcome it. The strategy relies on an understanding of your current situation and a careful plan for how you’re going to handle your finances. In any event your goal is going to be to reduce your expenses and try to increase your income wherever you can.
Remember too that you are in this together with your partner and you need to work as a team. Talk to each other, create a plan you both can live with, then have the discipline to stick to it. Be flexible and work through any problems together.
You can get through this.