For many couples living on one income is a lifestyle choice while for others it is a necessity. For whatever reason you are wanting to learn about how to live on one income there are several steps that you can follow to get your family on track.
1. Get buy in from your spouse.
The first step that you have to undertake is to have a frank discussion with your spouse about your new lifestyle. Get your complaints out, discuss your fears, agree upon your goals, and try to get both of you on the same page when it comes to your money. This step may take a while, and it can bring out the ugly in one or both of you. It has to be done because any plans that you might make individually about living on one income will never work if both of you don’t come to the table with buy in.
2. Know where your money goes.
If you ask most people they say they have a general idea about where their money goes. However if you ask them about the nitty-gritty of their expenses, they tend not to know exactly how much money they spend on, for example, their kid’s school supplies. This can be a huge problem when you are attempting to live on less.
Now lets say that your budget is a can. Then you fill that can with water which represents your income. Now punch holes in that can which represents the bills that you have to pay. The size of each hole is based upon the size of each bill. But if you don’t know exactly what size hole to punch in the can you can end up with a hole that is either too small or too large. You either think that you have more money than you have or you think that you have less money that you have. Either option can be a disaster to your budget.
Before you jump on the living on one income plan, you have to start tracking your expenses in a very detailed way. Pull all of your bills, pull all of your receipts or credit card bills, and build a picture of your lifestyle, so that you know that you spend $147.50 a month on lattes. Once you do that you will more easily be able to plug your can’s holes appropriately.
3. Determine your financial goals.
No matter what reason you are living on one income the fact of the matter is that your financial goals will change with this lifestyle change. Ask yourself why you want to live on one income. Do you want to save your second income because you wish to retire early? Do you need to use the second income to instead pay for your kids’ college or do you have huge medical expenses that you have to pay off? Do you never want to get caught in the lurch again if you have recently experienced some sort of loss of income due to a job loss?
Once you know the reasoning behind living on one income it will be easier to create goals based on one income. After you have created these goals for yourself make sure that your spouse has the same goals, and then go back to these goals weekly to re-enforce the financial decisions you will be making together as you change your lifestyle. This reinforcement of your goals can serve as a weapon used to knock down emotional road blocks that you might have about money than can sabotage your dreams of living on one income successfully.
In this three part series, Steps to Living on One Income, we are exploring what it takes to get your family on track to successfully live on one income. Why do you want to learn how to live on one income?