Do you dream of being a one income family with out having to worry about how you are going to pay your bills? It can be done, and if you have the chance to do some advanced planning it will be easier to achieve. Whether you are living on one income by choice or because of unexpected circumstances these ideas should help.
There are many reasons why families have to live on one income, a new baby, single parent, one spouse loses their job or simply because one of you wants to spend more time with your children. Whatever your situation is, living on one income can mean it’s time to cut back, or it can mean that now is the opportunity to reduce your spending, live a simpler and more frugal lifestyle with a few clever budget changes.
Determine You Income and Expenses
Start by looking at your monthly cash flow, what money is coming in and what money is going out. The first part should be easy, simply list all of your income that you receive on a regular basis every month. You might want to do this before you give up a second income to see if you can afford it. If you are currently living on a single income, now is a great time.
Next comes the more difficult task of listing everything that you are committed to spending every month, this includes your:
- mortgage or rent
- utilities – electricity, cable and water etc.
- health care
- vehicle payments
- Fuel, repairs and maintenance
- loans and credit card debt
- other essentials – personal care, toilette paper
- insurance – home, vehicle, life
- child care
- home maintenance and repair
Make this a complete list of everything that you absolutely must pay for every month. These are your essential monthly expenses.
Now make a list of all the other non-essential purchases and expenses you make each month, this includes your:
These are your non-essential monthly expenses. Add your essential and non essential expenses together to get your total monthly expenses.
Then simply subtract your total monthly expenses from your monthly income. The difference between these two amounts is you disposable income or how much you have to spend on everything else. If this amount is a negative amount and often it is for many families, you may suddenly realize you can’t afford your current lifestyle.
But don’t worry because there are lots of things you can do to reduce your monthly expenses. The first place to start is on the list of items that you made for your non-essential monthly expenses.
We all usually have a long list of essential and nonessential monthly expenses so if you can reduce your non-essential expenses to zero and each essential expense by ten or twenty dollars it will soon add up to make a significant difference.
Making One Income Work
You’ve set your budget of monthly expenses, now it’s time to reduce those costs.
First, go through your list of nonessential expenses to which things you can cut out of your budget all together. Entertainment is usually one the first places people look to cut expenses. Do you have any monthly subscriptions or memberships that you don’t really use anymore? Do you spend money on services or products that you don’t need?
Next, go through your list of monthly bills and see how you can reduce each one. If one of you will be staying home with your children you can cut your child care expenses altogether. Quite often you can call credit card companies and get a reduced rate. You may be able to switch cell phone providers or find a lower rate.
Most people don’t take advantage of offers that come through the mail for cheaper monthly cable or a lower monthly telephone service. Also, one of the easiest fixed costs that you can lower is insurance. Call all the vehicle and home insurance companies and get them to beat each others offers. As long as you are realistically lowering your monthly costs then you are going in the right direction.
Then take a look at your existing credit. If you have a good credit rating then you are in an excellent position to shop around for a better rate for a vehicle loan or a better mortgage. If your credit rating isn’t great then log onto the three credit companies, Equifax, Experian, and TransUnion. They will give you practical information on how to fix your credit rating so that you can get your monthly expenses down by either consolidating your debts or replacing them with loans over a longer lending period or with a better interest rate. Be careful so you don’t end up paying more.
Then have a look at all the things that can buy cheaper, like cheaper gas, less convenience and junk food. There are lots of ways to spend less on the things you buy on a regular basis by either finding sales, coupons or special offers or buying it somewhere else where it’s cheaper.
Once you have sorted all your expenses you should see if your monthly expenses both essential and non-essential are lower than your monthly income. If they are then this is great. You should pat yourself on the back for a job well done.
If they aren’t, and you have really tried to squeeze every last penny out of your expenses then you may have to reconsider your situation. You could either start cutting things out of the budget like using only one car, one cell phone, or go back to your income and find ways to increase what’s coming in by finding a better paid job or working part time from home.
Either way, try to be creative in thinking about the ways you could save money and be more frugal so that living on one income is a comfortable step and not a financial nightmare. With a little thought and planning ahead you may be able to get by easier than you think.