Last year my wife and I had our first child, our son Carter. The months building up until the day he was born were hectic – buying all the baby gear that we needed, setting up the nursery and just thinking about how life would be once we started living on one income, my wife planning on staying home with our son.
I’ve always read that living on one income before you need to is a good way to get a feel for what it’s like, so we decided to do just that a few months before our son was born. We started living on my income alone, banking my wife’s income into our savings. Whether you’re expecting a change in job-status or just trying to pay off debts, living on one income can be a great way to control your finances.
Why We Decided to Live on One Income
When we got married, we agreed that once we started having children my wife would quit her job, stay home with our kids and be a full-time stay-at-home mom (a job in itself!). While I realize it’s not possible for everyone – or even something everyone wants to do – it was something we felt strongly about.
Because we had made this decision we knew far in advance that this day would be coming, which allowed us to plan for it and prepare ourselves for the drop in income. The transition was still scary to some degree, but we were ready for the change.
The Transition to One Income
We had already lived on one income before: During Dave Ramsey’s Financial Peace University, we lived on my income while snowballing all of my wife’s income to pay off our debt. Because we found that lifestyle manageable, we continued living on one income and improved our retirement and savings accounts while putting cash away for our next car.
When we found out we were going to be having our son, we started planning ahead for life as parents and, for us, life on one income. We saved up for normal baby expenses, a 12-month emergency fund in case I am to be laid off, and saved a little extra cushion for unplanned expenses.
The Benefits of Living on One Income
My wife and I have noticed several benefits of living on one income, like:
- Having more money to pay-off debt.
- The ability to save for unplanned expenses, emergencies, and retirement.
- Easy to rebound from a job loss, as you’re already living on only one income.
- You’ll be living less of a consumption lifestyle, and growing wealth faster.
- Peace of mind from knowing you can live on less.
You Can’t Get There Without Sacrifice
Today, it isn’t uncommon for dual income couples to be living off both incomes. They may be buying homes that they can only afford with both incomes, driving new cars every few years and buying more than they should. Getting to the point where you can live on one income may require some sacrifices to lifestyle that you’re used to. You may have to downsize.
Examples of some sacrifices you may need to make:
- Is your house bigger than you need? You may need to consider downgrading.
- Have debts that aren’t completely paid off? Try to accelerate debt repayment.
- Are you a clotheshorse? You may need to cut back on how often you buy clothing, and how much you budget for it.
- Prefer new cars? Trying paying off your current car and keeping it for the long term.
The key is to figure out the reasons why you need both of your incomes currently, and look for ways to cut back on that spending. Once you find your problem areas and cut back, you’ll realize that your peace of mind – and bank account – are both improving in the right direction.
Have you ever had to transition from two incomes to one? What necessitated that change, and how did you deal with it? Share your advice, tips, and wisdom in our comments section below.