How to Live On One Income
A lot of people think living on one income is a thing of the past or that the one bread winner of the house needs to make a 6 figure income.
The truth is anyone can do it, but they have to put the work in first.
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If my husband or I wanted to quit our job tomorrow, we could do it, but first we would have to make sure the following things were in order.
#1 ELIMINATE DEBT
Start by paying off your high interest debt, anything from student loans, to credit card debt, to car loans.
Getting rid of high-interest debt is a great way to create extra money.
When we were working to pay off our credit card debt, we reduced our savings rate so that we would have more money to put towards our debt.
Now the money that would have gone to our debt now goes to our retirement, investments, and savings.
#2 BUILD AN EMERGENCY FUND
If you want to live on a single income you definitely need to save a good sized emergency fund.
Because we are living on two incomes, our emergency fund is not that big. However, if one of us were to quit our jobs, I would want to have enough saved to cover 5 months worth of expenses.
The size of your emergency fund will depend on your expenses, job security, and current financial situation.
#3 BUDGET
The further we get in our financial journey, the more I realize how important it is to budget.
There are so many ways to budget and not all of them suck. (see cash envelope system)
You need to track your money so that you can tell it where to go and make it grow.
If you want to live on a single income you need to know how much money you have to spend.
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#4 CUT COSTS
Eliminate, negotiate, reduce and repeat.
If you can reduce your expenses and bills, you’ll be that much closer to living on one income.
We cut back on cable, cell phone bills, grocery bills, and every possible bill you can think of. (save on laundry, save money with kids, kitchen items to save money).
No we aren’t hermits.
We go on vacation several times a year, own three vehicles, a boat, a house, and a condo.
We learned to prioritize our spending and saving.
I want you to know we started at zero and had to make many sacrifices along the way. We are now at a point in our lives where we don’t have to be as mindful of our finances, but we choose to because we have more money goals to accomplish.
#5 CREATE PASSIVE INCOME
I can’t express to you just how important it is to make more money.
I’ve always harped on my husband that it isn’t about how much you make, but how much you spend. Although I still stand by this saying, if you really want to create wealth past being debt free, you need to create more income.
I was listening to a podcast about a woman who retired at 50 years old. Her advice was to always have more than ones stream of income. She had lost her job several times and having that extra income helped her reach her goal of retiring early.
Here is a list of some side hustle and passive income ideas to look into.
Our current side hustles of choice are making money blogging and selling “junk”.
Our side hustles have allowed us to go on more vacations, pay off our debt faster, and save more aggressively.
#6 LESS HOUSE
When my husband and I first started dating I moved in with him in his 400 square foot condo.
After we married we bought a house for $227k.
We had our daughter.
Before we had our son we moved into our current home which cost us $365k. That’s $138,000 more than our first home!
We moved because we wanted to be closer to family, be in a better school district and have more room.
Hindsight is 20/20.
Whether you rent or own your home, housing is one of the biggest household expenses.
I wish we had:
1) Stayed in the condo for as long as possible and saved, saved, saved.
2) Stayed in our first home a lot longer and saved, saved, saved.
2) Saved more for a down payment so we could pay our mortgage off a lot faster and save on interest.
If you truly want to become a single income family you need to make sure that the mortgage or rent can be covered on one income and that enough money is leftover to pay the remaining bills.
Don’t buy more house than you can afford.
If one of us were to quit our jobs we could still afford the mortgage on one income, but we would have to significantly cut our savings and investing.
I would consider buying a smaller home or paying off a big chunk of our mortgage before choosing to stay home.
We are working on paying off our mortgages and have successfully eliminated one of the condo mortgages. It had a 9.5% interest rate!
#7 CALCULATE COSTS VERSUS SAVINGS
When you become a single income family there are certain costs that you will be able to eliminate that would help offset the reduction in income.
Our commuting costs would be cut in half. This means a reduction in Ez-Pass (toll) fees, gas, and car maintenance.
If you have kids you would save hundreds in babysitting and child care costs.
We don’t eat out too often, but I know we’d save some money because one of us would have more time to meal prep.
#8 DO A TEST RUN
If at all possible do a test run.
Pretend you are already living on one income and put it into a separate account.
Are you able to cover the bills without tapping into that money? Do you need to make adjustments or reduce your spending some more?
A one income family budget thrives on minimalism.
For us I know the person staying home would still continue to side hustle and bring in some income. That money would be used for entertainment and fun and maybe the groceries 🙂 The benefit would be not feeling tied down to the traditional 9 to 5 job.
#9 LIVE WITHIN YOUR MEANS
You don’t need a huge salary. You just need to be able to live on less than you make.
You can’t put a price on freedom, being able to spend time with your family, and making memories you otherwise wouldn’t have made if you were tied to a job.
Be willing to make some sacrifices and changes.
For example. I only get my nails done once or twice a year for special occasions, but I have also learned to do them myself.
Always look for deals using these cash back sites. I’ve been able to get pampered more frequently at a fraction of the cost.
Pin for later 🙂
FINAL THOUGHTS
If you’re serious about staying at home and becoming a single income family, pay off your debt and free up your money.
Start by saving an emergency fund and learning to live on less.
When you feel ready to make the transition do some practice runs and make necessary adjustments.
Have you started working on becoming a one income family? What’s been working and where are you struggling? Share in the comments!
Hi Monica, you have explained very practical and actionable points to live on one income. I did not get your point on, less house as you mentioned you have multiple homes so how do you follow fewer house concepts? I strongly believe in building passive income streams to become financially independent and follow the budget to live below my needs to retire early:)
Hi Deepak, thank you for your comment. Let me clarify. When I say less house I mean your primary home’s square footage. The condo we own was not bought with the intention to make it a rental property, but unfortunately we are not in a position to sell it at this time. I mean, don’t buy a bigger house than you need. However, having multiple homes that bring you money is certainly a good thing.