Part Two of our One Income series is all about the dollars & ¢ents. Since you are eliminating a large portion of your income when you transition from dual incomes to one income, you need to consider the impact it will have on your spending. Continuing to spend and save like you have the same income simply won’t work, so I’ll outline some ways to help you make the transition a relatively smooth one. You’re on your own with nighttime feedings though. 😉
Money Manager aka Family CFO
Who will be handling the bills? Assess this and make sure it is working well for both parties. Communication is key when it comes to money, you want to make sure that whoever is paying the bills is paying them timely and speaking up if things are tight one month. Setting up a weekly meeting and checking in daily about spending is always a good idea. If things are tight consistenty then it is time to assess the outgoing.
What bills that can be lowered to save on outgoing money? Start with your big expenses and work your way down from there. We cut cable back to basic, cell phones plans were cut back, and we purchased used cars to reduce monthly outgoing costs.
Some other ways you may be able to save:
- take the trash to the dump yourself
- turn off the cable
- reduce driving to reduce gas costs and wear & tear
- become a one car family
- reduce electric and gas usage
- slash credit card bills by paying them down quicker (or if you have no debt, paying them in full each month)
If you are going from two incomes to one it is essential that you create a new workable budget. Make sure you are accounting for groceries including feeding the extra mouth(s), gas, maintenance on cars, maintainace on house, and expenses for children including clothing, diapers, and formula. The budget should be flexible in the beginning if you are dropping one income and adding a ne member to your family you may not realize how your spending will change until you are in the thick of it for a couple of months.
Always include a cushion in your budget just in case you have overages in some areas. Adding this flexibility allows you to not worry about every penny.
Some ways to trim your budget:
- use coupons on everything from groceries to meals out for special occasions
- shop consignment
- swap baby-sitting with your friends
- reduce services you don’t use/need
- eliminate subscriptions
To live within the budget you need to make sure you are doing your part to spend less and cut costs were you can, but still allow room for fun and enjoyment. An allowance may seem like child’s play, but it can be a tool to make sure you and your spouse each have your needs and wants taken care of without resentments or overdoing it.
Set a reasonable amount for each person to spend each month and figure out how to allocate it. It may include necessities and wants. Consider it your opportunity to pick up that CD for your collection or get your hair cut and colored without your spouse criticizing your spending.
If you think an allowance is not and option for your family consider a cap amount. Set an amount that if you spend over that amount you need to discuss it with your spouse first. So let’s say any purchases over $100 beyond grocery or gas should be approved by both parties first. This gives you the ability to spend without the guilt that can sometimes surround smaller purchases.
Combine Allowance and Cap Amount
A more through solution is to combine the allowance and a cap amount. Say your cap amount is $100, but add an allowance of $300/person per month. Spending up to $300 is fine, but you need to check in when you have a $100 or more purchase. Once you reach $300 you don’t spend more, or you talk about each purchase since that money will be coming from the general budget instead of your allowance.
What are some strategies you have for managing your family’s finances on one income? Have you been successful becoming a one income family? If so, do you have any tips?