Going from two incomes to one? Here’s how to make it work.
As a parent of school-aged children, I know a lot of people who became stay-at-home parents once kids came into the mix. And while a number have fared well financially despite losing part of their household income, others have struggled.
No matter the reason, if you’re thinking of going from dual incomes to a single income, it’s helpful to approach that situation strategically. Here are a few ways to avoid a financial crunch when you unload that second salary.
1. Aim to have plenty of savings
Going from two incomes to one could mean cutting back on a lot of things — including saving money. That’s why, if circumstances allow, it’s crucial to have a healthy amount in savings before you make the switch. Ideally, you should have enough to cover three to six months of living expenses. That way, if money gets tight when one salary disappears, you have a cushion to fall back on.
2. Eliminate as much debt as you can first
A lot of people have monthly debt payments that eat into their earnings. You may be able to knock out a credit card or personal loan balance before your second income goes away, and shedding that debt puts less pressure on that one remaining salary.
3. Cut back on non-essential expenses
There are certain living expenses that are non-negotiable — you need a place to live, some means of transportation, and food. But there may be expenses in your budget that you can slash, and doing so will help you manage on a single salary when you’re used to two. If you have cable or an expensive streaming service, for instance, you can cancel it and replace it with lower-cost streaming. Cutting any optional smaller expenses you can find will no doubt be easier than resorting to drastic changes like downsizing your living space, so it’s worth trying them out first.
4. Eke out savings creatively
Working less could mean you free up more time to do tasks you might currently outsource. And that, in turn, could result in some savings and make it easier to live on a single income. Say your dual salaries allowed you to pay for a weekly cleaning service, and you ordered takeout twice a week because you never had time to clean or cook while you were working. If you can now do those things yourself, you’ll cut your spending.
When you’re used to having two incomes at your disposal to cover your bills, losing one of them can be hard. But if you have time to prepare, it doesn’t have to be. If you have control over the situation — meaning you choose to go from two incomes to one — then a little smart planning could help you adjust more easily to your new financial reality. If you don’t have control, then making these moves can help you adjust as quickly as possible.