To some, it may seem impossible to go from living off of two incomes to living off of one, but millions of Americans are living this way of life every single day. There are many reasons why families live off of one income – from someone losing a job to medical reasons to wanting to stay home with young children. Whatever your reason, it can be very advantageous to live off of one income instead of two, including having a better handle on your finances, eliminating items you don’t need (such as cable) and having more freedom in your family unit.
If you’re currently living off of two incomes but hoping to go down to one, here are five crucial steps you’ll need to take.
Step 1: Evaluate your budget in detail
Write down every single fixed and variable expense and take a hard look at what you can reduce or eliminate. After eliminating items such as cable, expensive cell phone plans and weekly trips to the coffee shop, see where you’re at. The harsh reality is that you may need to downsize your home in order to make the dream of living off of one income a reality. By downsizing, you’ll save in your rent or mortgage and your utility bills. This can be a savings as large as $1,000 per month or more. Get rid of the idea that you can live the same lifestyle off of one income. If you really want to live off of one income, you’ll have to be willing to cut expenses – both small and large.
Related: 15 Simple steps to creating a personal budget
Step 2: Pay off all debt
If you have loads of debt, it’s going to be much more difficult to live off of one income, if not impossible. Develop a plan to pay these off as quickly as possible. That may mean working overtime, taking on a side job, selling items you no longer need, downsizing your vehicle and more. Depending on your financial situation, you may be able to have some debt and still live off of one income, but strive to have as little as possible before making the switch.
Step 3: Have an emergency fund in place
The more money you can have in your emergency fund, the better. At the very least, though, have three months of living expenses saved before making the transition from two incomes to one. Living off of one income means your budget is going to be tighter all around. If an emergency were to happen or if expenses were higher for the month than planned, you’ll need to be able to pay for it without having to get back into debt.
Step 4: Consider a side hustle
Can the person who is planning on staying home do any sort of work from home in order to supplement some of the income loss? Side hustles can be a great way to make money and some people are even able to bring in a full time income from their home. You can freelance write, create a product and sell it, refurbish furniture or antique items, work in the customer service field (from home), take online surveys, be a virtual assistant and more. Any money made from the side hustle can be saved, invested or used to cover additional monthly expenses.
Step 5: Do a trial run
Finally, before taking the plunge and quitting your job to live off of one income, test it out to see if your budget and plan are going to work. Pretend like that second income does not exist and put it in your emergency fund automatically. If you can live like this for a few months, you’re ready to make the transition from being a two income family to a one income family.
No longer will you be able to keep up with the Joneses, and that’s OK. To live off of one income, huge sacrifices are going to need to be made. Ask any family who lives off one income and more than likely they will say that the benefits far outweigh any material possession. By being content with less, your dreams of being a one income family are more than doable.
Author Bio: Donny Gamble Jr. is founder of Personalincome.org, a published author, and investor. He graduated from The Ohio State University and has a passion for teaching others about alternative investment and retirement strategies. He is a contributor for Huffington Post & AllBusiness.com, along with other personal finance websites.
Image via StockMonkeys.com
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