THINKING OF BECOMING A ONE INCOME FAMILY? HERE’S WHAT YOU NEED TO DO
Becoming a one income family isn’t an easy decision for most people because it involves a lot of sacrifice and some adjustments to your lifestyle.
Before making the transition, it’s really important for you to have a plan if your goal is to minimize the financial impact on your family.
We have been a one income family for many years now and I can honestly say that it isn’t the easiest thing in the world, but we have made it work for us.
Before I share the steps you can take to become a single income household, let me answer some of the most frequently asked questions around this topic.
IS IT POSSIBLE TO LIVE ON ONE INCOME?
The answer is yes. Lots of families survive on only one income.
It’s true that living as a one income family in a two income world is challenging, but it’s totally possible.
How well you live will depend on how good you are at managing your income and of course how much you earn.
HOW DO PEOPLE AFFORD TO LIVE ON ONE INCOME?
The way lots of people afford to live on one income is by managing their income and maximizing it as much as possible.
Some things they do to help them afford this lifestyle include: budgeting, living below their means, reducing their expenses and in some cases earning as much money as they can.
So the answer to the question: Can a family survive on one income? is yes, if they are really careful with their money.
I hope these answers have allayed some of your fears about becoming a one income family.
So if you’re convinced that you really want to become a one income family, here’s a six step plan you can follow to achieve your goal.
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6 SMART STEPS TO BECOMING A ONE INCOME FAMILY
1. MENTALLY PREPARE TO LIVE ON ONE INCOME
Are you mentally prepared to make some sacrifices and give up some luxuries to become a one income household?
As a one income household, having to say no to my kids more often than I’d like is probably one of the biggest challenges for me mentally and emotionally.
Many families who move from two incomes to one have to give up things like newer cars, bigger homes, new clothes, family vacations, eating out often and many other things.
This can take a toll on them mentally and emotionally, that’s why you need to be prepared mentally, and be ready to make some sacrifices.
Don’t underestimate the mental and financial stress of being a one income family!
What are you willing to give up? Is being at home with your family worth the financial sacrifice? That’s a question only you can answer.
Before you take the leap, make sure you and your spouse are in agreement and you’ve talked about how giving up some things may affect you mentally.
Mentally preparing yourself to become a one income family is the first step in your six step plan.
2. DECIDE WHAT YOU ARE WILLING TO GIVE UP
What are your priorities? What are the most important things to you?
My definition of the most important things are: the things you devote your time and resources to.
Before transitioning to a one income household, make sure you spend some time discussing your priorities to make sure you and your spouse are on the same page.
Having different financial priorities can lead to arguments and conflicts in the home. This can be avoided if you have this conversation in advance.
Discussing your priorities is an opportunity for both of you to know where you stand on certain things, and what each of you is willing to sacrifice.
For example, if having family vacations is important to you and not your spouse it may lead to money fights if it’s cut out of your budget.
Of course you should be willing to compromise, but it’s always good to have things out in the open so you can negotiate and avoid nasty surprises and arguments later.
3. ASSESS WHERE YOU ARE FINANCIALLY
Once you’ve identified your priorities, the next step is to analyze your finances.
Where are you financially?
Knowing where you are financially is an important step to becoming a one income family.
You need to analyze your income (that is, how much income you’ll have coming in when you go from two incomes to one), your expenses, debts, savings, any big bill or repairs you have coming up, taxes etc.
List all your sources of income and all your current (and future expenses).
How much do you have to work with?
How much are your expenses?
Will your future income be sufficient to cover all your basic expenses (remember your expenses include your usual contributions to your savings account, emergency fund, retirement accounts,mortgage or rent, car payments, student loans etc)?
Like most families who want to live on one income, your current expenses will exceed your projected income, and that’s okay.
But you have to figure out how you’re going to deal with that.
Once you’ve assessed your financial situation, the next step is to decide which expenses you can eliminate or reduce in order to balance your budget.
You can use the list of priorities you made earlier to help you make your decisions.
Remember, you have to be realistic about which non-essential expenses you can afford to keep, and be willing to let some things go.
When you decide to become a one income family, you’re basically agreeing to sacrifice some of your interests for the greater good or for a greater cause.
But, sometimes those sacrifices may still not be enough.
That’s why if after cutting some expenses your projected income is still insufficient to cover them, you’ll have to put on your thinking cap so you can come up with a solution and plan to deal with it.
Some things you can do include:
- Postpone your decision until you can save more money, earn more, get rid of debt or do something else that will massively improve your finances.
- The other spouse (probably the mom) can become a work at home mom.
- Downsize your home or move to a cheaper location.
These are just a few ways you can ensure your income is sufficient to cover your expenses
4. AGREE ON YOUR SACRIFICES
You know that list of priorities you wrote down, this is the time to bring it out and start negotiating.
What is mom willing to give up (if she’s the one staying at home) to stay at home with the kids? What is dad willing to give up to have mom stay at home?
This is where you compromise and negotiate your solutions.
Take a look at your expenses and how you currently spend your income, what are you willing to let go of?
For each expense, ask yourself the following questions:
- Do we really need this?
- Can we do without it or find a cheaper alternative?
- Can we eliminate this completely or find a way to reduce this expense?
Remember your goal is to balance your budget, which means your expenses should be lower (or at least equal) to your projected income.
Take the time to list all your expenses, go over them one at a time and analyze every single one of them to see where you can save some money.
5 CREATE YOUR PLAN
At this point you should have analyzed your expenses, assessed your potential income and agreed on a solution (what you are giving up to become a one income family).
Now the next step is to create a plan for living on one income.
Don’t even think of doing this without creating a plan.When I talk about a plan, I’m really referring to creating a budget since that’s the key to your financial success.
As a one income family, good money management is more essential than ever before, and your budget is the tool that you need to manage your money.
If you don’t have a budget, the first thing you will need to do is to create one.
All you need is a simple budget that shows all your income and expenses.
Once you have your income and expenses listed out clearly, the next thing you should do, is to take a second look at your budget and reallocate your income to the different categories.
Remember your income is based on the projected income of the breadwinner (meaning it’s based on one income, not two).
Go through every single item on your budget and make changes where necessary.
For example, you may need to slash how much you spend on groceries or reduce the amount you contribute to your savings or retirement account.
If necessary, you may have to reduce how much you pay on your credit card debt or other debt.
The reason why it’s important to allocate part of your income to every category is so everyone knows how much is available to spend for each category.
When you know you have only $200 to spend on clothes, it will help you make the best decisions and shop for bargains to get everything you need.
This is one way to avoid financial stress or money arguments since both parties know exactly what the financial situation is.
Having a money map is really key to becoming a one income family so make sure you take the time to create one.
If you need help with creating a budget, paying off debt or general money management, I recommend the following resources:
6. WORK THE PLAN BY LIVING ON ONE INCOME
Before you (mom or dad) quits her job, try living on one income for a minimum of three months to see if you have a workable plan.
During this period, save the second income or use it to pay off (or down) some debt.
Going on a trial run will show you where you need to do some more work or what changes you need to make.
If your trial run reveals that you can’t realistically live on one income, then you’ll have to decide the next step to take.
For example, can you find a way to increase your earnings? Can you decrease your expenses any further?
I know when one parent really wants to stay at home, there’s a temptation to be overly optimistic or think you can handle things when they arise, but I wouldn’t recommend this approach.
It’s always better to plan things in advance (to be proactive) instead of reacting to things especially when they are under your control.
So take the time to plan and prepare, make the necessary adjustment you need, and exercise patience until you can realistically become a one income family.
Don’t set yourself up to fail by rushing into things (of course all of this is assuming that you have the time to make a decision).
I know sometimes you can lose your job suddenly or some other crisis may force you to become a one income family, when that happens all you can do is try to make things work.
6 SMART STEPS TO BECOMING A ONE INCOME FAMILY
Becoming a one income household isn’t a decision that should be taken lightly.
Living on one income and staying home to raise your kids is a worthy goal and worth all the sacrifice, but it’s also much easier when you’re prepared.
So take the time to plan and put your plan to the test before you quit your job to avoid unnecessary financial stress or crisis.