Even when you have a fulfilling career, life is about so much more than work. The time crunch of two full-time careers may lead couples to wonder if—and how—they can live on one income, especially if they have young children or other hefty responsibilities.
Becoming a single-income family can introduce a need for careful spending, but it also frees up valuable time for managing the household, spending time with your children or taking care of family members. It also can remove the expense and mental burden of finding and paying for quality childcare and other assistance.
The ideal way to shift from two incomes to one is with a clear idea of what you want to accomplish and a firm financial footing. Taking these steps could lead to a purposeful and joyful transition, grounded in what matters most to you.
Fill in the budget gaps
While you're looking at the potential gains of one person giving up a paid job, you also have to keep the financial realities in mind. You'll want to revamp your spending plan to fit your single-income budget and anticipate how benefits or coverage might shift.
Some questions to tackle include:
- Will you need to change your health insurance when one person leaves their job? This could result in different coverage, higher premiums and higher out-of-pocket expenses, so ensure you're including these extra costs in your budget.
- Do you expect to face new expenses this year (i.e., a new baby, education costs, etc.)? Factor in buffer room to cover additional expenses that come with lifestyle changes.
- Should you refinance or alter debt payments or regular bills? While this may help you decrease spending on a monthly basis, also consider how this would impact any debt repayment long-term, in terms of interest and timeframe. In certain cases, it could be more advantageous to make a big push on any high-interest debt before switching to a single income.
- Can you forgo convenience costs or other lifestyle choices in favor of budgeting elsewhere? Depending on your circumstances, you could consider more budget-conscious meals, fewer transportation costs and fewer paid home care services like housecleaning or yard work.
Prepare for risks with emergency savings
Switching to a single income isn't without risks, and any safety nets you build in can go a long way. An
Gain protection with disability insurance & life insurance
On top of your emergency fund,
Consider how this changes your future goals & timeline
While you're working out the best financial strategy for your single-income household, you and your family still have future needs to consider. For instance:
Are you able to save for your children's future college education? Are you able to save for the retirement you've always envisioned? Will you still be able to build generational wealth and leave a purposeful legacy for your family? Are you hoping to donate more to causes you care about?
Realistically, single-income households often bring in less money, which can mean slower savings toward college education, retirement and charitable donations. You'll need to balance the potential payoff of a single-income lifestyle now with what it means for your family in the long run.
Perhaps there are just too many financial priorities given the amount of your single income. That doesn't mean you absolutely must remain a dual-earner family. There's more than one vision of an income-earning household. You may find you're happiest with essentially a "1.5 income" household, where one partner finds additional income sources that aren't as time-consuming as a 40-hour workweek. Perhaps this looks like passive income, like taking on a renter, or finding part-time work. For others, the financial realities may prompt the single earner to pursue promotions or apply for better-paying work.
Some families envision living on one income merely as a temporary measure. If you add in a side job, switch back to two full-time incomes or have other changes to your income stream, check in with your big-picture plans and readjust.
A partner for living your values
It takes courage to center your life on what's important to you first and then figure out how your finances support that plan. It's certainly not an easy decision and may not be the right move for everyone. For such a big life change, ensure you and your spouse have considered the arrangement from all perspectives.